[seoaeu]

Can you really call the results of Proposition 13 "property taxes"? If an owner is currently paying next to nothing in taxes on their O($10M) plot of land, then practically any sane tax scheme is going to be better.

I'd argue actually charging the owner of the shack $100,000/year in property taxes (~1%) wouldn't have a radically different effect than charging them a 2% land value tax.

[sagarm]

Under the property tax, they'd be penalized for developing the land. Their fallowing of the land would be effectively subsidized.

Under an LVT, the landowner contributes the same amount to their community regardless of their use of the land -- empty plot, slum, or well maintained building. This is good for the community overall.

So in your example the speculator sitting on an empty plot would see their carrying costs double. How could that not affect their behavior?

[seoaeu]

I'm arguing that a 10x increase in property taxes (or whatever 100k/year works out to) would already be enough to trigger the current owner to sell.

Once the property is sold, a developer will find that their profit from constructing a building is roughly proportional to the floor area regardless of whether there is a 1% property tax or not. This is because the profit they earn per-sqft is more than the resulting net present value of future property taxes on it. Therefore they maximize the density as allowed under zoning and we end up with an efficient use of the land.

(Of course dumb zoning laws messes everything up, but that's a whole separate topic...)