u/Titanium-Skull

For those wondering:

The reason for this is that land is fixed in supply, it's finite; non-producible. When normal goods are taxed, their production is discouraged and, to make up for the lost supply, suppliers will try to raise prices to maintain the same profitability, which may or may not work depending on how consumers respond.

In contrast, because land isn't produced (reclamation is the closest thing and even then that’s just transforming pre-existing unusable land into usable land), taxation doesn't discourage its production or encourage prices to be raised in response to a loss in supply. To add on to this, the upfront sale price for land also drops in response to a LVT. So while future landowners will pay the ongoing tax burden while they hold a parcel, that cost is offset by lower prices to acquire the land in the first place (which also helps affordability because it means banks can’t attach loans to the land and cause what’s known as the land trap). If anything, LVT can reduce prices and help the economy by eliminating incentives to withhold the finite land and open up a greater supply to the people that was previously held off the market. Here's a good snippet from an article covering this idea

>Standard Impact with Produced Goods: When suppliers of produced goods abandon their (now not-profitable) businesses, less is produced in aggregate. The producers which remain are not only (1) already the ones charging higher prices, but also (2) now potentially have more customers from the previously-met now-unmet demand. The customers with unmet demand can (A) try to find substitute goods, (B) pay the higher prices from the remaining suppliers, or (C) stop buying the product. Increased competition among consumers (those remaining with the ability to pay^(5)) drives prices up.

>Different Impact with Land: However, when suppliers of land abandon their land, the government recycles it back into the market (provided they don’t leave real estate in their land banks for long), which increases aggregate supply available on the market. Consumers will not tolerate exploitative prices if they have viable alternatives (substitutes) available. Increased competition among suppliers drives prices down. In contrast, under status quo, keeping land cheap to hold encourages supply to be held off-market and unavailable to consumers. Increased competition among consumers drives prices up.

Right now we have a two-sided problem where we tax and discourage people from making goods and services, while letting people freely withhold finite resources for profit; the whole thing is backwards and the solution is simple: don't tax the goods and services people make, tax (or otherwise reform) the finite resources people take, most especially the land.

Taxing finite resources like land serve as the best wealth tax because they don't discourage any new production. Unlike the things we do produce, say buildings, increases in demand for something like land doesn't lead to an increase in new supply. Instead what happens is landowners can capture all the new demand for their finite bottleneck in increased prices and rents without any way for new production to come about and bring those prices back down in the form of new supply. Localities can annex new land or reclaim it from the sea but that's not making new land as much as it is repurposing preexisting land (outside of borders or underwater).

This all creates inequality between those who own the finite and those who are excluded, and also causes inefficiency since it invites people to withhold finite resources in hopes of waiting for their price to rise instead of actually engaging in productive investment. Add on that we currently tax the income of laborers while leaving the unearned incomes of the fully finite in the hands of their private owners, and naturally we get an economy rife with inefficiencies and inequalities.

It follows then that taxing land and other finite natural resources, and going even further broadly reforming (be it abolition, taxation, etc.) artificially finite privileges like patents/copyrights and limited licenses can reduce inequality while enhancing efficiency. There are a plethora of desirable things which are non-producible but are currently held privately without compensation, and if we can either recoup or remove their values we can have a stronger, more equal economy as well as getting the means to replace taxes on the work and investment of the people.

For anyone wondering why:

Land being fully finite means that, as demand goes up, supply doesn't go up to bring prices back down. Instead what happens is much of the benefit that would otherwise go to the landless to help them acquire parcels ends up working against the landless as land becomes more expensive to acquire. Be it housing (which broadly includes land and improvements) or agricultural, subsidies tend to reinforce the problem of the fully finite land being desirable and scarce instead of fixing it.

If we want to make land easier to buy, our best bet is, instead of subsidizing it, to tax those who own it as compensation for taking a finite resource from the rest of society and use the revenue to untax the things people actually produce using the land; discourage people from holding it out for speculation and stop discouraging people from actually trying to use it. This goes for all land that's fenced off, if someone wants that finite privilege they should pay society back, but they shouldn't have to pay for putting it to good use.