The Value of Land -- Cash or Home?

Bernie Hunhoff at South Dakota Magazine offers a great discussion of land values that helps explain why I hate property tax. Hunhoff asks whether increasing land values are a good thing:

...[I]t’s a good thing if you want to sell and move to Florida or Texas. It’s a bad thing if you want to start farming because 1) you can’t afford the land, and 2) you can’t afford to rent the land.

It’s a good thing if you’re a white collar hunter from Florida or Texas and you wouldn’t miss a million or two. It’s a bad thing if you’re a blue collar hunter from Mitchell or Huron and you don’t have a father-in-law who farms.

It’s a good thing if you’re a real estate agent and you get the commission on the sale. It’s a bad thing if you’re the tax assessor and you have to raise the farmer’s assessment 20% in one year. And it’s a bad thing for those of us who don’t plan to sell until after we’re dead.

[Bernie Hunhoff, "Land Prices: Good or Bad?" South Dakota Magazine.com, 2008.02.14]

Property tax -- especially a ramped-up property tax with a repealed 150% rule -- reinforces the idea that land is simply material wealth, an asset to be valued only as far as it can be exploited for profit. Property tax gives leverage to wealthy developers to drive up prices and drive out smaller farmers and other landowners who just want a piece of land to call home.

The right to own property isn't about doing what will make the market or a tax-hungry government happiest. The right to own property is about having some small realm of autonomy -- not complete freedom to do positive harm to others, but enough liberty to live your life pretty much as you see fit. If you want to build a 1200-square-foot house or a 500-square-foot cabin, great. If it takes a 4000-sq-ft McMansion or lakeside resort to make you happy, fair enough.

But when the government levies taxes based on how much land might sell for, it creates a system that favors the big builder over the simpler landowner. The big builder drives up land values and property taxes for all of his neighbors and creates pressure for everyone else to build big or sell out.

That's a restriction of liberty in personal economic choices that income and sales tax don't create. That's why you'll hear me supporting a complete repeal and replacement of property tax with a more rational and just system of taxation (your suggestions are welcome!).