ABSTRACT
In June 2016, the finance ministers of the German states agreed upon a reform of the property tax base. The new property tax is revenue neutral, which means that the overall property tax burden not increases. Bavaria, for instance, proposes a property tax based on the physical size of the building and the plot without considering the value of real estate. Unlike a compound property tax, an land value tax (LVT) supports compliance with the land use plans: those who use the sites with lower intensity than determined in the plan have to pay the same as with an efficient use – in contrast to a compound tax base. Closer consideration reveals many advantages of an LVT compared to a compound property tax. Both a compound property tax as well as an LVT should be primarily considered as a fiscal tool and not as a steering tool. The German discussion on property tax reform focuses on social and distributional aspects.
