Past experiences of LVT losing acceptance in some cities can be instructive. I’ve gathered a list of historic instances when implementation of this reform was cut short, accompanied by reasons for withdrawal. The list goes back several years, but the explanations are still relevant to us today. Also included in the list are the Schalkenbach popularity survey, and helpful sources from France and Germany. Together, these insights offer those of us lobbying for state and local LVT legislation some lessons on how to prepare our promotional strategies and avoid unforeseen pushback.
The Adoption and Repeal of the Two Rate Property Tax in Amsterdam, New York
Donald J. Reeb © 1998
Lincoln Institute of Land Policy Working Paper
Reasonable evidence indicated the two rate tax would provide property tax reductions for homes, reduce the negative effects from the general property tax, promote the construction of new buildings and encourage the birth of new firms. Amsterdam, New York would have likely received these benefits had they continued their use of the two rate tax.
What was the cause for the repeal of the two rate tax in Amsterdam?
Complications in the assessment system:
- Re-valuation necessitated by the change-over to the two-rate tax was confusing and burdensome
- Re-writing computer codes for computation of tax levies was burdensome.
- An under equipped and understaffed assessment office was not appreciated by elected officials
Changes in membership of City Council
- The composition of replacements favoring or against repeal changed
- Few members understood LVT and the complex amendments to property tax law
- Some were interested in the administrative problems of converting to LVT
- Others were interested in economic effects of LVT
Expectations of benefits unrealized
- Homeowners focused on their tax bill savings or lack thereof
- Concern at the outset that the two-rate tax might not produce savings for homeowners
- Failure to educate the Chamber of Commerce members, the City Economic Development Office, and community organizations who knew little about the two rate tax
- Lack of data demonstrating a significant increase in building permits and other benefits
- Taxpayers were told repeatedly that that there would be community and economic development benefits and homeowner savings, but did not understand how
The short life of Pennsylvania’s radical tax reform
Washington Examiner by Joseph Lawler, Policy Editor | February 13, 2017
In 2011, the City of Altoona began levying taxes solely on land value and not at all on property value – a 100 percent land tax. LVT was found to have provided relief for the vast majority of homeowners and businesses. Nevertheless, five years later the reform was rescinded.
What was the cause for the repeal of the two-rate tax in Altoona?
Matt Pacifico, the town’s mayor, blamed the land value tax’s political failure on two major factors.
The first was that the incentive effect of LVT was limited because the county and the school district were still subject to the conventional property tax system. The tax break for capital investments made up a small fraction of overall property taxes.
Another major problem was that the tax system was novel; residents and businesses struggled to understand the potential benefits of moving to or investing in the city. Many residents didn’t realize Altoona had a unique tax system that incentivized building construction and upgrading.
In some cases, businesses did not realize the high tax rate of tax on land was offset by no tax on structures.
Land value tax advocates didn’t have clear examples to point to of capital investments that would have been made without the tax system in place. [e.g., redevelopment scenarios]
Why So Little Georgism in America: Using the Pennsylvania Case Files
to Understand the Slow, Uneven Progress of Land Value Taxation
Mark Alan Hughes
© 2006 Lincoln Institute of Land Policy Lincoln Institute of Land Policy Working Paper
Pittsburgh began using the two-rate system in1913. it was an Allegheny County reassessment of property values in 2000-2001 that led to the split rate’s rescission. For years, Mayor Tom Murphy had derided chronic underassessments and claimed that appropriately increased valuations would demonstrate the effects of his LVT driven economic development policies, and generate increased revenues from the property tax.
In 1996, Republican County Commissioners Larry Dunn and Bob Cranmer ordered a five-year freeze on all property assessments in the county (and also fired 42 assessors in the county Board of Property Assessment). This created a conflict with Mayor Murphy, who had called for a comprehensive reassessment.
In March 1998, Sabre Systems and Service of Ohio was awarded a contract to perform the county-wide reassessment. Operations Manager George Donatello told city officials that land values in particular had been under-assessed at inappropriately low valuations. Over the ensuing months, Sabre reassessed all properties in the county. The land component of valuations in the city was increased more than the city had been told to expect.
The assessed land value increased 81 percent between 2000 and 2001 while the assessed building value increased 43 percent. Because the county assessor ratcheted up values for land, which is taxed at a rate roughly six times that of buildings, some city dwellers were in for an unpleasant surprise when their tax bills arrived.
Also, the method by which Sabre Systems estimated land valuations came under severe criticism for having differential impacts by neighborhood. In 1989, Ben Hayllar, finance director under previous mayor Sophie Masloff, produced a study that claimed the tax policy fell harder on properties in poorer neighborhoods. But land tax advocates who scrutinized the analysis contended Hayllar had made multiple errors in the study.
The properties burdened with higher land taxes in the neighborhood he looked at, they contended, were actually absentee owners of underdeveloped sites. Mayor Murphy claimed that “Generally, in lower income areas, the land values are not as high so you end up shifting values from higher income areas to lower income areas.” Unfortunately, complexity was not a welcome participant in the unfolding debate.
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The problems revealed in the Pittsburgh experience can be summarized as follows:
- Years of chronic underassessments
- Political interference in the assessment process
- Abrupt change in property assessments rather than a phase-in period
- Lack of analysis of tax shifts and horizontal inequities
- Danger of playing defense and offering justifications for unexpected outcomes
How Popular is Land Value Tax in 2024?
by Josie Faass RSF Digest Spring 2024
What are the greatest obstacles to supporting LVT?
- Concerns over the politics of changing people’s tax bills
- Lack of awareness of the new tax policy
- Concern about the complexity of LVT
- Concern about a change in property tax bill
- Dislike of property taxes in general
- The idea that LVT flies in the face of the American ideal of rentierism
- Those who had heard about LVT placed a much greater emphasis on its on-the ground effects than learning about how it works; e.g., production of affordable housing.
Public Acceptability and Land Value Taxation: An Experimental Economics Investigation
Lincoln Institute of Land Policy, Working Paper WP17JD1
One of the motivating aspects of LVT unacceptability was that it was a tax on unrealized capital
gains, and that this is very unpopular with many homeowners.
[Lessons from Paris’s Implementation of Congestion Pricing]
The New York Times – OPINION Jan. 5, 2025
The system is likely to remain in effect because:
- Mayor Hidalgo placed this policy in a broader story about equity, quality of life, and the fight against climate change.
- She built constituencies by weaving the advantages into the bigger story.
- She had the conviction that big plans can be more compelling than playing defense and making excuses.
- Visible results were seen sooner rather than later.
Two Cheers for the Property Tax
by Fred Thompson, Willamette University
I think that most objections to the property tax reflect a misunderstanding of how it actually works. Paradoxically, the people who have the worst understanding are the people who should be best informed — opinion makers, lawyers, judges, and other public officials.
If a land value tax is beneficial, why is it so rare?
Federal Highway Administration, Center for Innovative Finance Support
Value Capture
Frequently Asked Questions – Land Value Tax
Lack of Understanding
Most people think of the property tax as one tax. They do not realize that returning publicly created land value has significantly different economic impacts than taxing privately created building values.
The taxing implementation of densification: The missed
opportunity of the German land value tax
B E I T R A G _ A R T I C L E O P E N A C C E S S
Raumforschung und Raumordnung | Spatial Research and Planning
Cornelia Roboger Published online: 6 December 2023
Germany’s Federal Constitutional Court ruled that the property taxation system needs to be reformed by 2025. This paper explores the political motivations around this reform, based on an analysis of the political decision-making process during sessions of the Bundesregierung (German federal government) and the Bundestag (German federal parliament). The possibility of a land value tax was proposed as a reform measure. LVT was judged to have more hurdles than discernable advantages, such as:
- The high cost and complexity of reassessing values for taxation.
- Resistance from middleclass taxpayers who have a strong influence on policies and might fear being disadvantaged by the tax.
- Applying tax instruments that intervene in property rights is difficult due to the strong legal protection of existing private property rights.
- Policymakers do know about the link between property taxation and land use, especially about the possible utilization of LVT for its densifying effects. Yet, the use of land was largely disregarded by participants.
- Rather, the distributive effects of different property tax models were extensively discussed, such as which taxpayers would gain or lose.
- A lack of affordable and social housing are the “most common and most serious problems across the EU”.
- One politician stated that property tax reform should promote affordable housing, but did not specify how this effect could be realized.
- Densification is used as a strategy for addressing the issue of housing shortage by increasing supply. For LVT to promote densification, policymakers would need to decide on a rate that results in a tax burden high enough to have an incentivizing or pressuring effect on owners.
- But a high tax rate could affect asset rich and income poor owners who may not be able to bear the tax burden.
- Local policymakers will be more likely to support LVT knowing that the new tax is initiated by the federal government or states. This facilitates implementation because local policymakers do not appear as the source of the tax and can thus distance themselves from its impact.
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Major take-aways
- When explaining LVT emphasize the importance of accurate and current assessments.
- Consult with county assessors to understand the administrative measures necessary for conversion to split-rate applications, and offer help to facilitate the actions needed.
- When crafting implementation legislation, be sure to clear any and all legal hurdles in the state constitution, statutes, or local ordinances; e.g., uniformity requirement.
- Correct gross underassessments before applying the split-rate LVT. Avoid sudden increases; introduce the corrected assessments over a buffered phase-in period.
- Track changes in the legislative committees handling your LVT bill, and meet personally with new members; speak to their interests – equity or economic growth? Supply them with explanatory materials on LVT mechanics and expectations.
- When meeting with citizen groups, place LVT in the larger picture of tax reform, emphasizing problems with the current system – especially inequities in tax burden. Clarify that this tax policy doesn’t take away existing property rights. Explain how expected equity build-up (rentierism) is not genuine investment, but rather an unearned increment. Emphasize that the common good benefits everyone, vs. the negative consequence of ‘winners and losers’ and the passing on of higher housing cost to successive owners.
- Be sure to reach out to business organizations who often are skeptical of government intervention; offer to give graphic presentations such as an LVT Primer. Include in follow-up discussions common misconceptions about the effects of LVT.
- Have tax incident studies from your state or jurisdiction available to illustrate the kind of benefits expected, comparing LVT to existing property tax outcomes. Include images, graphs, and figures with before & after scenarios. Emphasize revenue neutrality, high land tax offset by low building tax.
- Given the urgency of the housing crisis, clarify at length how LVT can release speculative land holdings by raising the holding cost of vacant and underutilized sites. Contrast positive tax shift with lower tax bills on redeveloped residential sites.
- Craft your LVT implementation legislation to include a sufficiently large geographic area to produce robust incentive effects. Insist that all taxing districts are subject to the split-rate regime. Make LVT a local option, giving communities the choice to opt in.
- When presenting the LVT system to residents, contrast the positive incentive effects of LVT with the perverse and inequity effects of the existing system. Illustrate this with before & after redevelopment scenarios. Point to experience in LVT-adopting Pennsylvania cities.
- Explain that there are better methods of limiting property tax escalation than assessment freezes or arbitrary tax caps enshrined in the state constitution or statutes. Propose a method having the flexibility to respond to changing conditions – inflation, population growth, etc.
- Explain to resident citizen groups that tax bills will change with LVT, gradually. Try and convince them of a larger public good over personal advantage from low taxes. Explain that included in the transition are hardship mitigation measures such as homestead exemptions and deferrals.
- The phase-in of LVT is in tension with the desire to realize visible results sooner. Don’t oversell LVT with grand expectations; explain that LVT produces long term effects. Don’t get into the position of later having to defend or offer justifications for a lack of visible evidence showing promised results – economic development or lower housing prices.
Tom Gihring, Research Director
Common Ground – OR/WA
commongroundorwa.org