DC City Council Considers Esoteric Tax on Land Values in a Bid To Boost New Development

The District of Columbia could tax land and buildings separately, in a bid to encourage development as Congress tries to cut its ability to raise other taxes.Councilmember Brianne Nadeau introduced a bill last week to shift DC's property taxes to a land tax system. Under that system, the value of the land and the improvements upon it are taxed separately and at different tax rates.The Chicago Fed recently studied land value taxation, which is an uncommon system in the U.S. Proponents say taxing land separately would encourage owners of empty lots to build on the land. Otherwise, they have a tax incentive to keep the land vacant and avoid higher taxes. The Fed suggested a land tax system could also reduce the tax burden for homeowners.The DC Policy Center studied it, too, and found it could shift the tax burden to parts of the city with more amenities. The idea's been floated a few times before, but it could be tough to implement.Nadeau said in a note on the bill that it could encourage development in DC."A land-value or split-rate system would improve tax equity and affordability across the District, and—because new construction would not be immediately penalized with a higher tax ...