by Dr. Steven Cord, Columbia, MD
The Lincoln Institute of Land Policy sponsored a
Two-Rate Land Tax Seminar at George Washington University
on January 31, 2003. Amidst the 60 or so in attendance, it
was good to see so many practical Georgists (fortunately,
they were quite vocal but respectful of the speakers).
Professors Oates and Schwab explained their study
of how Graded-Tax Pittsburgh out-constructed and
out-renovated 14 other one-rate big cities (their
preliminary recommendations were published in "Incentive
Taxation" in October 1992, and although their final study
was not as supportive of Land Value Taxation as we would
like, it was still supportive enough). Their grasp of LVT
was primarily theoretical.
Then our personable Tony Coughlan, former city
councilman of Fairfax, Va., got up to speak. He clearly
gave the best presentation - he was able to explain how to
implement the LVT.
Professor Thomas Nechyba (Duke U.) was the luncheon
speaker. Those in the back of the room couldn't hear him
because he didn't talk into the microphone. His talk was
full of theoretical mathematical functions, or something.
Up spake Professor David Miller (U.Pitt) to explain
why he advocated the rescission of Pittsburgh's Graded Tax
when he was the city's Budget Director. He was full of
mis-information (such as what the last Graded Tax rate
exactly was) and he said most voters paid more with the
Graded Tax.
When we pointed out that a study just completed
showed that in a random sample, 54% of Pittsburgh's
homeowners saved with the 2-rate Graded Tax over an
equivalent-in-revenue l-rate property tax (he called it the
"single tax") and that every tenant per se saves with
two-rate (they don't own any land), he acknowledged the
study after it was pointed out that one of its co-authors
was a U.Pitt professor (Dr. Herbert Barry III);
nevertheless, he went on to state at great length that most
Pittsburgh voters paid more (he presented no studies).
The final speaker was Jerome German, Director and
Chief Assessor of the Lucas County Auditor's Office
(Toledo, Ohio). He averred that GIS and CAMA computer
techniques could make land valuation easier and more
accurate (somehow), and he was enamored of regression
techniques for assessing.
He said the separation of land and building values
can be done, but he stressed the difficulty in doing so.
Said he: "99%+ of assessors split building and land
assessments but felt the split was artificial" (practically
every assessment manual advocates the split; none oppose
it). He concurred that the building-residual technique
could separate land and building assessments, but regarded
it as only one technique among many (even though the other
techniques are wrong and will under-value land). "The
typical assessor has little information on land values."
He asserted that the voters were interested only in total
property value, not land value. He said two-land-value
assessment was possible (?). He also averred twice that
accuracy was inconsistent with equity (!). His defense of
this surprising statement was that equity was when two
equal side-by-side residences bore the same assessment
(even if those assessment differed).
A good time was had by all (but no LVT collection
was induced).
Dr. Steven Cord is the author of "Henry George,
Dreamer or Realist?" available from the Robert Schalkenbach
Foundation, www.progress.org/books, and author of "Society
at the Crossroads," available by emailing
aurorapress@hotmail.com. (See May-June 2002 GroundSwell.)
He is past president of the Henry George Foundation of
America, on which he presently serves as Secretary, and
past president of the Center for the Study of Economics.
Dr. Cord may be emailed at stevecord@hotmail.com.
PROSPECTS FOR LAND RENT TAXES IN STATE
AND LOCAL TAX REFORM
Comments by Richard Biddle, Plymouth Meeting,
PA
Prof. of Economics Thomas Nechyba (Duke Univ.)
presented at the Lincoln Institute for Land Policy Two Rate
Land Tax Seminar in Washington, DC on January 31, 2003. He
seems quietly intent on undermining Neoclassical Economics.
Here he's put land back in the equations as a primary
factor of production and has shown that land prices in fact
may actually increase under certain favorable scenarios
where the land tax is substituted for corporate taxes, I
believe.
"Prospects for Land Rent Taxes in State and Local Tax
Reforms", by Nechyba, Thomas J.
(published 2001, 78 pages, English, Inventory ID WP01TN1
"http://www.lincolninst.edu/pubs/pub-detail.asp?id=104")
Abstract
This paper develops a general equilibrium model of
an economy that produces output using capital, labor and
land as inputs. It further develops an approach that
allows specific parameters in the model to be matched to
data in such a way as to ensure that the model can
replicate important economic realities in different
settings and under different initial tax systems. This
model is then applied to the U.S. states. Each state's, as
well as an "average" state's, economic conditions and tax
system are thus formed into a separate model, and policy
simulations are performed for each of these models in order
to identify different conditions under which reforms of
different types are likely to succeed economically and
politically. Each reform that is simulated involves an
increase in taxes on unimproved land rents sufficient to
cover the shortfall in tax revenues from a decrease in some
distortionary tax on capital and/or labor.
Under plausible yet conservative assumptions, large
tax reforms that eliminate entire classes of distortionary
taxes are found to be economically feasible in virtually
all states, although prospects for such reforms are clearly
better in some states than in others. Generally, reforms
are most likely to succeed in states with high per capita
taxes, low per capita incomes and in which reforms
emphasize decreasing state and local taxes on capital
rather than on labor -- taxes such as corporate income or
property taxes.
In addition, the paper considers the political
feasibility of such reforms by focusing on the likely
impact on land values and thus land owners. Under
plausible assumptions, reforms that lower taxation of
capital result in either increases in land values or only
modest declines, while reforms that lower taxes on labor
lead to more substantial drops in land values. Finally,
reforms of this kind are shown to hold more modest promise
when states are assumed to conduct them simultaneously
rather than in isolation.
Richard Biddle may be emailed at
biddle19118@yahoo.com. Biddle is associated with the
Henry George School of Social Science in Philalphia, PA and
is an actively involved in promoting the two-rate tax to be
implemented in Philadelphia.