Taxes often seem like an imposing and complicated set of rules and regulations that are difficult to ascertain. Yet if there is one constant, it is the government's dauntless ability to collect money on everything that it can justify taxing. A betterment tax is one more of those allowances, though its definition is refreshingly straightforward.
Betterment, in the legal definition, is an increase in the value of real property through causes other than the owner's actions toward that property. For example, if the rezoning of an area from agricultural to residential causes the value of someone's property to rise, then that gain is classified as betterment. So, in lay terms, a betterment tax is a levy on private property owners whose lands have gained value due to public property improvements outside of the owner's control.
The betterment tax has been an issue for governments since the late 19th century. Often controversial, it is thought to have originated in America, although evidence suggests it emerged in England in the 17th century with the rebuilding of London after the Great Fire. More recently, since the idea of betterment spread from America in the late 20th century, the tax has conflicted with England's usual taxation of occupier, not owner, of lands.
The effects of a betterment tax become significant upon closer examination. Basically, the betterment tax raises other questions about the level of governmental responsibility for shifts in real property's value. For example, should the government be held accountable for a change made to public land that results in a lowering of private property value? If the government can tax private property if it builds a road that increases revenue to a business, should it be held responsible for building a new road that takes business away?
The definition of the term "betterment" becomes hazier since the agents of improvement might be the government or a tenant of the land; in either case, the government might tax the extra money gained from the improvement. Thus the tax frequently raises questions of governmental rights and its ability to assess betterment. For example, if the construction of a nearby airport raises property values in a neighborhood while air traffic disturbs residents, can the government classify that as "betterment?"
Some say, in the larger picture, a betterment tax helps to encourage government development, which in turn attracts further private investment and benefits all. While the application of the betterment tax is sometimes open to debate, several governments have implemented a graded taxing system that lightens the burden.