Fred Foldvary had responded to my queries:

SC > If land and
> buildings are taxed ad valorem, that is based on
> that ability to produce rent, does the distinction
> matter?

Yes. Taxing buildings imposes an extra cost on
producing capital goods.  Taxing land does not do so.

SC > If buildings are exempt from taxation will
> the increase in land rent result in an offsetting
> increase in land tax revenue?  

Yes, over the long run.  But even in the short run, a
tax shift raising the tax on land and reducing the tax
on buildings can be made revenue neutral, thus with no
loss of tax revenue.



Scott queries again:  Fred I'm still unclear here.  I can understand that in the short term no tax on buidlings acts as an incentive because it may take some time for the revenue neutral land tax to catch up.  Something like an investment tax credit, but on property, not taken against ordinary income tax.  Econom,ic development programs frequently forgive or abate near term property taxes to secure long term tenancy by employers.  But if in the long term the entire package is revenue neutral where is the difference to the overall asset or investment?  As David Colander wrote. maybe "It is also very hard to clearly distinguish site value from the structure value in practice,"  It's not like Mother Earth or Gaia is paying the land tax and the building entrepreneur keeps the building revenue. The same revenue stream pays total of both revenue neutral tax bills...does it matter if one is zero?  Thanks for any insight.

Scott Cullen