What about different tax regimes? If we taxed things more efficiently (e.g. more property/land taxes and less income/wealth taxes), the Laffer curve should be less flat. And then we could 'raise' them higher and get higher revenues from higher taxation. Any suggestions for how much this would matter?
Even if land or property taxes have higher revenue-maximizing rates in isolation, the relevant Laffer curve is the combined tax system, not the marginal instrument viewed alone. Historically, new taxes layer on top of existing ones. Tariffs are the perfect recent example: pitched as an income-tax alternative, implemented as an add-on. Once you accept that political economy reality, the question isn’t “How much revenue could an LVT raise?” but “How much additional revenue can it raise before interaction effects kick in?”
We also have to consider how higher property/land taxes lower capitalized asset values, shrinking the income-tax base (capital gains, rents, business income). They also raise the effective tax wedge on investment and housing services, which feeds back into labor income and consumption. So even a “non-distortionary” base doesn’t sit in a vacuum.
A second possible issue with this approach is that property taxation is the core fiscal base of state and local governments—roughly 70% of own-source revenue once you include localities. That creates a classic vertical fiscal externality. In other words, the federal government doesn’t get to tax land “for free”, it’s dipping into a base already heavily claimed by subnational governments.
What about different tax regimes? If we taxed things more efficiently (e.g. more property/land taxes and less income/wealth taxes), the Laffer curve should be less flat. And then we could 'raise' them higher and get higher revenues from higher taxation. Any suggestions for how much this would matter?
Even if land or property taxes have higher revenue-maximizing rates in isolation, the relevant Laffer curve is the combined tax system, not the marginal instrument viewed alone. Historically, new taxes layer on top of existing ones. Tariffs are the perfect recent example: pitched as an income-tax alternative, implemented as an add-on. Once you accept that political economy reality, the question isn’t “How much revenue could an LVT raise?” but “How much additional revenue can it raise before interaction effects kick in?”
We also have to consider how higher property/land taxes lower capitalized asset values, shrinking the income-tax base (capital gains, rents, business income). They also raise the effective tax wedge on investment and housing services, which feeds back into labor income and consumption. So even a “non-distortionary” base doesn’t sit in a vacuum.
A second possible issue with this approach is that property taxation is the core fiscal base of state and local governments—roughly 70% of own-source revenue once you include localities. That creates a classic vertical fiscal externality. In other words, the federal government doesn’t get to tax land “for free”, it’s dipping into a base already heavily claimed by subnational governments.