Five Ways to Start Enacting Land Value Taxation
GroundSwell, March-April 2010]
Obey the law -- Land assessments are often assessed lower to
market value than buildings in violation of existing law, so obey
the law by assessing them both at the same ratio to market value.
Even better: legally require land assessments to be assessed closer
to market value than buildings.
(2) Establish a two-rate property tax -- Levy a higher tax rate on
land assessments than on building assessments, using these formulas:
(1) PBTR (proposed building tax rate) = 80% x CBTR (current building
tax rate); a percentage other than 80% can be used; decrease it in
later years. (2) 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. Or use this formula:
PLTR = Revenue - (BA x BTR)/LA.
(3) Reduce building assessments (perhaps by 20% or by $20,000) but
not land assessments, to be paid for by a property-tax increase
(preferably on land only) in order to achieve revenue neutrality.
Most property owners would pay less because their reduc tion would
exceed their higher property tax. All renters (both residential &
office) would pay less in the long run since the land tax cant
be passed on to them (read any economics text on this); the building
tax can be passed on to them, but it will be less.
(4) Establish a separate property tax on land assessments only in
order to fund a new or existing expense. Most voters will pay less
this way than with any other tax.
(5) Double the tax rate on vacant land, using the revenue to
reduce the property tax on new construction & renovation at
those sites. Be sure to popularize the likely increase in building
permits issued (for all the above proposals also).
Possibly specify that no property owner need pay more than 3% plus
the BLS inflation rate over what was paid in the previous year. For
more information, contact Steven B. Cord (Professor-Emeritus IUP),
now Research Director, Center for the Study of Economics, 10528
Cross Fox Lane, Columbia MD 21044, 410 997-1182,
In 1995, Professor Nicolaus Tideman of Virginia Tech University
and his graduate student, Florenz Plassmann (now a professor at the
University of Binghamton) completed a highly technical study of land
value taxation as used in all the cities in Pennsylvania using such
a tax; it was entitled A Markov Chain Monte Carlo Analysis of
the Effect of Two-Rate Property Taxes on Construction. It was
peer-reviewed and published in the Journal of Urban Economics (3/00,
pp. 216-47). It concluded (italics added):
The results say that in all four categories of construction,
an increase in the effective tax differential [between land and
buildings] (1) is associated with an increase in the average value
per permit. (2) In the case of residential housing, a 1% increase in
the effective tax differential is associated with a 12% increase in
the average value per unit.
From the 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.
This study confirmed all the Pennsylvania studies completed when
this study was done (then 15, now 20). Hundreds more empirical
studies are available for the asking.<<