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Subject:
From:
[log in to unmask] (Fred Foldvary)
Date:
Sat Mar 22 12:04:25 2008
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--- Scott Cullen <[log in to unmask]> wrote:

> that the supply of land is relatively fixed
> (neglecting the likes of Dutch polder, a landfill
> Hong Kong airport and the new Islands of Dubai or
> the sand dunes of Cape Cod or the hillsides of
> Malibu sliding off into the sea).

"Land" in economics has in the history of thought been
defined as natural resources.  Improvements such as
landfill and the production of islands are capital
goods, not natural resources.  Space never gets
altered and is always land, but soil and rocks after
being altered by human action become capital goods.

> Is that an
> increase in the supply of "land" or an increase in
> its productive capacity? 

Greater occupancy produces capital goods and makes
more use of existing space.  Land remains fixed.
 
> 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.

> 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.

Fred Foldvary


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