Economic Effects of Taxes on Land:

A bstract . Land taxes may not be neutral in their economic impacts due to liquidity effects. Liquidity effects of land taxes may be in the form of holding cost effects or capitalization effects. Holding cost effects may occur when land is being withheld from development for non-financial reasons, such as the direct benefits of landownership. Capitalization effects may occur when there are imperfections in capital markets which prevent the acquisition of land for otherwise viable projects. Contrary to the analysis by Bentick , no liquidity effects should be expected due to variations in streams of land rent generated by different hypothetical development projects for a given site. Bentick's analysis relies on a misunderstanding of the nature of land rent .