If you take a deep research on property tax, you might find a term called land value tax. The concept of land value tax could trace back to the beginning of agrarian societies, when people decided to tax the landowners fairly for the benefit of the larger community. Similar to property tax, land value tax is also a type of tax related to the real estate. But it only assesses property taxes only on the value of the land itself and related improvements, instead of the structures built on the land.
Land value tax is also known as a site valuation tax, an example of an ad-valorem tax. This is the Latin phrase meaning “according to value.” The modern example of these could be found in the municipal land assessments homeowners receive annually, when their land is valued separately from the various buildings on their land. Although a homeowner can make improvements to the buildings on the land and change the total taxable value, the land itself tends to maintain the same value, which means the land value tax is still the same.
In order to change the value of the land value tax, we need to first let the building fall into disrepair. Under this circumstance, the overall property taxes paid to the community will be less than before, and thus the land itself will maintain less value than its original worth. This will be important when a potential buyer is considering their tax burden and the real value of what they are purchasing.
To be general, land value tax only focus on the value of the land itself instead of any buildings and infrastructures on the land. The buyer of the land usually will consider build something on the land and thus change the taxable amount of the property, but the value of the land usually maintains the same and therefore the land value tax is usually the same for a dozens of years.