# What is a land value tax? How it works in Denmark and Germany, and what it could do in Spain

> A land value tax is a recurrent tax on the value of land alone, leaving out whatever is built on it, so building more does not raise the bill. Henry George made it famous in Progress and Poverty (1879); Denmark levies a municipal land tax, grundskyld, and Baden-Württemberg has taxed land only since 2025. The OECD counts recurrent property taxes among the least harmful to growth and notes that taxing land more than buildings encourages building where it is needed, provided planning rules allow it. In Spain, councils could shift the IBI, which today taxes land and buildings together, towards the land component.

- URL: https://www.radicalcentre.eu/en/articles/what-is-a-land-value-tax
- Language: en
- Publisher: radical centre / centro radical
- Published: 2026-10-29
- Topic: Economy & work
- Author: radical centre
- Licence: CC BY 4.0

## Key points

- A land value tax charges the value of the plot alone; the building on it does not count, so building or improving costs nothing extra.
- Henry George proposed it in Progress and Poverty (1879) as a single tax replacing all others.
- Denmark's grundskyld is a tax on land value set by each municipality, capped at 30 per mille; Baden-Württemberg has taxed only plot area times land value since 2025.
- The OECD's Brick by Brick finds recurrent property taxes relatively efficient and says land taxes encourage building where it is needed if planning rules allow it.
- Spain's IBI taxes land and buildings together; a radical-centre reform would gradually shift its weight onto land and cut transaction taxes in step.

A land value tax is a yearly tax on what a piece of land is worth, judged as though nothing stood on it. The building is left out. Two neighbouring plots of the same value pay the same amount, whether one carries a block of forty flats and the other a car park. That simple design has made it one of economists' favourite taxes for well over a century, and it is one of the instruments this week's exercise asks us to use: cut housing costs by a quarter without handing windfalls to the owners of land.

## Henry George's idea

The name most tied to it is Henry George, a Californian journalist who left school at thirteen. In 1879, in the middle of a long depression, he published *Progress and Poverty*, which asked why poverty deepened in the very places where wealth and technology advanced fastest. His answer was land. As a city grows, the value of its well-located land rises, and the owners collect that rise whether or not they lift a finger. George proposed a single tax on the full value of land to replace every other tax, falling only on the value created by location and leaving buildings untouched. The Henry George Archives note that by the end of the nineteenth century the book had outsold every title except the Bible.

The narrower idea underneath the single tax, taxing land more and buildings less, is the one still in use today.

## Why economists like it

The OECD's housing report *Brick by Brick* (2021) sets out the case in sober terms. Recurrent taxes on property, it says, are relatively efficient and among the taxes least harmful to economic growth, because their base cannot move: people react only modestly when the tax changes. They link what owners pay to the local services they receive, and they tend to dampen swings in house prices.

A land value tax adds something more. Because the building is untaxed, putting up a taller building or renovating an old one adds nothing to the bill, while leaving a valuable plot empty or under-used costs the same as building on it. The OECD describes split-rate taxes, with higher rates on land than on buildings, as a way to encourage the development of under-used land, ease pressure on the countryside at the city's edge and bring brownfield sites back into use. Land taxes, it adds, encourage homebuilding where it is most needed.

It also sets a condition that matters for Spain. All of this works only if planning rules allow the extra building. Where height limits cap a built-up area, the report notes, a property tax does little to change how land is used. Its conclusion is that land taxes and split-rate taxes can foster denser development under certain conditions, and that their success depends on how they combine with land-use policy. A land tax and a planning reform belong in the same package.

## Where it exists in Europe

Denmark is the classic case. Its grundskyld is, in the words of the Danish pensioners' association Ældre Sagen, a tax on the land value: the market value of the plot as if undeveloped, at its best possible use, whatever is built on it. Each municipality sets its own rate, up to a ceiling of 30 per mille of the land value. Since 2024 the state collects it, spread across the year with other tax payments, and a deferral scheme for increases has become permanent, so pensioners can postpone what they owe and settle it later. Statistics Denmark put the average bill at 10,417 kroner per owner-occupied home in 2021, with large gaps between municipalities.

Germany has a newer case. In the country's recent property tax reform, Baden-Württemberg chose a land-only model, in force since 1 January 2025. The city of Stuttgart explains the arithmetic: plot area multiplied by the official standard land value gives the tax value; a basic rate of 1.30 per mille applies, cut by 30% to 0.91 per mille for mainly residential property; the council then applies its multiplier, which Stuttgart set at 160%. The building plays no role at all.

## Spain's IBI

Spain's main property tax, the IBI, is levied on cadastral value. The Cadastre law defines that value as the sum of two parts, the value of the land and the value of the buildings, and caps it at market value. In practice a new block of flats pays far more than the same plot left vacant, which is the opposite of what a land value tax would do.

That two-part structure makes a reform easy to picture. Councils could be allowed to tax the land component at a higher rate than the building component, shifting the weight step by step over a decade, with the total raised in each municipality held steady at first. The plots that would pay more are valuable and under-used: empty sites in high-demand neighbourhoods, low buildings on land zoned for more. The ones that would pay less are dense blocks of homes.

## A radical-centre version

The case brings together ideas that rarely share a platform. From the left comes the conviction that land value is created by everyone. When a council opens a metro station or a region builds a hospital, nearby plots gain value their owners did nothing to earn, and a land tax returns part of it to the public that paid for the works. From the market-liberal tradition comes the case for taxes that distort as little as possible. The OECD recommends relying less on housing transaction taxes and more on annual taxes on property, and our analysis of the [under-35 housing tax cut](/en/articles/housing-taxes-under-35s-spain-who-gains) argues that Spain should rely less on its transfer tax for exactly that reason.

The idea that fits neither camp is George's own, updated: tax the location and leave the effort untaxed. A Spanish reform along those lines would combine three moves. Councils would tax the land part of the IBI more and the buildings less, raising the same total at the start. As revenue grows, the regions would lower transfer taxes on first homes in step. And owners whose land values jump but whose incomes are low, retired people above all, would get a Danish-style deferral, settled when the home is sold or inherited. Combined with the planning reforms in our [exercise on cheaper housing](/en/articles/exercise-housing-25-percent-cheaper-build-more-faster), it would make holding good land empty expensive and building homes on it cheaper, which is the incentive Spain's housing market has been missing.

## FAQ

### What is a land value tax in simple terms?

A yearly tax on what the land under a property is worth, judged as if nothing were built on it. Two neighbouring plots of the same value pay the same, whether one holds a block of flats and the other a car park.

### Who invented the land value tax?

The idea is older, but the American journalist Henry George made it famous with Progress and Poverty in 1879. He proposed replacing all taxes with a single tax on land values, and his book became one of the best-selling of the nineteenth century.

### Which countries have a land value tax?

Denmark levies grundskyld, a municipal tax on land value set by each council. In Germany, Baden-Württemberg has calculated its property tax from plot area and official land values alone since 1 January 2025.

### Does Spain have a land value tax?

Not as such. The IBI is levied on the cadastral value, which by law combines the value of the land and the value of the buildings. Spain could move towards a land value tax by taxing the land component at a higher rate than the buildings.

## Sources

- [Brick by Brick: Building Better Housing Policies](https://www.oecd.org/content/dam/oecd/en/publications/reports/2021/05/brick-by-brick_eb010639/b453b043-en.pdf), OECD (2021)
- [About Henry George](https://hgarchives.org/about-2/), Henry George Archives (2024)
- [Grundskyld](https://www.aeldresagen.dk/viden-og-raadgivning/vaerd-at-vide/s/skat/ejendomsskat/grundskyld), Ældre Sagen (2024)
- [Stor kommunal forskel på grundskyld](https://www.dst.dk/da/Statistik/nyt/NytHtml?cid=34700), Danmarks Statistik (2021)
- [Fragen zur Grundsteuer](https://www.stuttgart.de/rathaus/finanzen/steuern-und-abgaben/fragen-zur-grundsteuer.php), Landeshauptstadt Stuttgart (2025)
- [Real Decreto Legislativo 1/2004, texto refundido de la Ley del Catastro Inmobiliario](https://www.boe.es/buscar/act.php?id=BOE-A-2004-4163), BOE (2004)