However, this doesn't apply to taxes on the scarcity value of natural resources. In the bottom graph, straight line A shows the effect of a land value tax where markets are perfect. That is a market where we all rent our property from a landlord.
Curve B shows the effect of the alleviation and elimination of deadweight losses, area C, due to the fact owner occupiers can impute their rent (thus over consume immovable property).
But what would happen to revenues after more than a 100% tax was applied to the rental value of land? How would you extend that line? Please share your thoughts.
Mark W adds: It's a straight line up to 100% with no Laffer Effects. At rates above 100%, first it would discourage new development, which might reduce the total tax base in the long run. Once the rate was so high that it exceeded the total rental value of land and buildings then people would abandon them, so total revenues would decline. It's not difficult to know where the 100% limit is, as long as land and buildings are being sold for rebuild cost/value or more, you haven't exceeded 100%. We can argue and bicker over what the rebuild cost/value is, but if similar buildings are being sold for similar amounts wherever they are - ignoring buildings in areas with zero land value - we know that we haven't exceeded 100%.