Land value taxation offers a viable approach to financing public transit systems, and places the tax burden on those areas that benefit most from such public services.

“Our theoretical view of local tax options suggests that LVT is a reasonably effective means of financing public transportation capital improvements by levying taxes on the portion of property value created by transit stations. This approach is mostly consistent with the fiscal equivalence condition, as value capture attempts to assign costs directly to beneficiaries. Since this type of financial instrument does not, however, directly influence the use of the infrastructure, land value capture imperfectly fulfills the efficiency criterion in supplementing current financing regimes. Value capture helps indirectly internalize certain externalities (e.g., positive externalities accruing to property owners as property value increments, perhaps reducing automobile congestion), but has limited value for others, such as congestion in the transit system. In theory, LVT can improve horizontal equity, at least in terms of assigning costs. As our implementation scenarios show, however, the type of administrative methods adopted carry trade-offs between administrative ease, efficiency, and vertical equity”