Abstract:
New infrastructure investments raise local land values. This paper shows how alternative taxes on land value increments (‘betterment taxes’) can be structured to fund an infrastructure development. It compares a standard land tax (on all land values), with a betterment tax (just on the land value increment) and with a capital gains tax. No previous paper had examined the relationship between betterment taxes and capital gains taxes in this respect. The paper shows the level of the benefit: cost ratio that is required in order for a betterment tax to be able to fully fund a project; and shows how the accrual nature of the betterment tax has some superior properties to a one-off capital gains tax that could also be used to fund the project.
