Eight Ways to Enact Land Value Taxation

Steven Cord


[ GroundSwell, September 2012]


We must admit that we Georgists have made very little political progress since Henry George’s time, even though he was 100% right philosophically. I think it is because we don’t realize how absolutely necessary it is for us to apply the single Tax gradually. It is most unlikely ever to be adopted all at once, although ethically and economically it should be.

In fact, the only LVT victories we ever have had in the U.S. have been because of gradual implementation. It will most unlikely be otherwise.

Fortunately, there are 8 easy ways to start Single Taxifying the nation and the world. These 8 ways primarily refer to cities, our easiest first target, but the states and federal government can also be graduallyLVT’d. Here are the 8 ways. Your comments are requested.

(1) Assess Land Closer to Market Value Than Buildings. Often the reverse is true, in violation of the law (and of ethics and economics.)

(2) Establish a Two-Rate Property Tax. Levy a higher tax rate on land assessments than on building assessments using these formulas (but never exceed political acceptability).

(a) PBTR (proposed building tax rate) = 80% x CBTR (current building tax rate); a percentage other than 80% can be used (go faster if you can).

(b) PLTR (proposed land tax rate) = CBTR – PBTR, x BA/LA, + CLTR (current land tax rate); BA is total building assessments and LA is total land assessments.

(3) Levy 3 Rates – A higher rate on residential land, lower rate on residential buildings and a third rate on commercial and industrial properties – that’s where our opposition is likely to come from; revenue neutrality must always be achieved. Set the third rate first (probably at what is is now), then decrease the tax rate on building assessments by no more than 20% per year while raising the land tax rate in order to maintain revenue-neutrality.

(4) Grant a $15,000 property tax reduction to all Building Assessments; maintain revenue neutrality (very important) by increasing the property tax rate, preferably on land only, in the years following, suggest building-tax reductions of 15%, 20%, 20%, 30%. These reductions, if revenue-neutral, would lower property taxes for most voters; all non-land-owning renters (both residential and office) will also pay less space rent (ask why).

(5) Establish a Separate Tax on Land Assessments Only for funding a current or new expense instead of either the current property tax or another disliked tax. Most voters and actual production will then get tax reductions (be sure to prove that beforehand).

(6) Tax-Exempt New Construction and Renovation (not the Underlying Land); achieve revenue neutrality by raising the property-tax rate on land assessments. Be sure to publicize the likely increase in building permits issues and the lower taxes for most voters.

(7) Apply #1-#6 Above in a Particular Ward or Other Section of a City. Then compare its economic growth to that of the rest of the city (as measured by building permits issued).

(8) Gradually Fund a Popular Project (maybe ecological, that sells these days) with #1-#7 above.

Then you absolutely must prove to the Council that taxing land assessments always lowers the taxes of most voters and booms the economy. Be sure to ask how to do that.

***


A Peer Review is an exact replication of the empirical research performed by someone who is at least as qualified as the original researcher, the intention being to determine if the research was accurate.

By 1995, I had induced 15 localities (now more) to tax buildings less than land while maintaining complete revenue neutrality and found that construction thereupon increased despite a searing depression in the U.S. steel industry in the 1980s and 1990s. Also important: most taxpayers paid lower taxes.

My findings were fully peer-reviewed and verified by economics professor Nicolas Tideman. See his peer review in the Journal of Urban Economics (3/00, pp. 216-247). He concluded: “The results say that in all four categories of construction, an increase in the effective tax differential (i.e., taxing land more than buildings) is associated with an increase in the average value per permit. In the case of r4sidential housing, a 1% increase in the effective tax differential is associated with a 12% increase in the average value per unit.

“From a perspective of economic theory, it is not at all surprising that when taxes are taken off of buildings, people build more valuable buildings. But it is nice to see the numbers.”



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