Best of 2019: Land Value Tax Series
In early March, we ran a five-part series on the land value tax (LVT). On the surface, the LVT sounds a bit wonkish. (The acronym doesn’t help.) What we wanted to do with the series is to show how simple the concept actually is…and how transformative it can be for our communities.
Unlike revenue streams such as sales tax and conventional property taxes, the LVT doesn’t punish the poor, incentivize slumlords and vacant lots, or pit communities against one another to use subsidies to lure big retailers. Quite the opposite: the land value tax encourages investment and incremental development while going a long way toward protecting the most vulnerable in our towns and cities.
In our series, we make an economic and a values-based case for the LVT. We demonstrate how conventional approaches to taxation de-incentivize the kind of growth our communities actually need. We present case studies of just how impactful the LVT can be on a city. And we lay out some practical next steps for people who want to become champions for an approach to taxation that deserves to be more well-known (and more widely implemented) than it is.
Our hopes for this series in December are the same as they were in March: to demystify the land value tax, and to encourage and empower local leaders to explore whether the land value tax is right for their communities too.
The land value tax series was made possible by the Robert Schalkenbach Foundation. We are grateful for their generous support.
— Strong Towns Staff
1. You Get What You Tax For
The Trulli of Alberobello, Italy. Image source.
by Charles Marohn | March 4, 2019
What is needed most today is an approach to taxation that allows cities to grow financially strong and resilient when property owners invest incrementally in their own neighborhoods. We need a taxing system that rewards neighborhood investments, discourages idleness, and closely aligns private gain with the public good. And a modern approach to taxation must encourage increasingly productive use of all the existing infrastructure, parks, and amenities local governments struggle to maintain.
Fortunately, there is such an approach. It’s called the land tax.
2. What’s With That Empty Lot in the Heart of the City?
by Daniel Herriges | March 5, 2019
Austin Parking Map. Image source.
Maybe you've wondered, "Why hasn't anyone developed this yet?"
Housing prices in these cities, as in much of urban America, soared over the course of the 2010s. Maybe you've thought to yourself, "If we have a housing crisis and there's all this talk about how we need to build more, how come we have all this land sitting right here that could be providing homes for people?"
The surprising truth is that sitting on a piece of land like this can be immensely profitable. The owners may be in no hurry to develop or sell. And a key reason for that has to do with the backwards incentives created by the way we tax property in almost every city in America.
3. Non-Glamorous Gains: The Pennsylvania Land Tax Experiment
by Joshua Vincent | March 6, 2019
Old Downtown Harrisburg, Pennsylvania. Image source.
The Case of Harrisburg:
The number of vacant structures in Harrisburg declined from over 4200 in 1982 to under 500 by 2001. The downtown—previously a ghost town—is alive, even at night. The number of businesses on the tax roll has grown from 1,908 to 8,864.
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The Case of Allentown:
After LVT was adopted by voters in 1996, 70% of residential parcels saw a tax decrease; importantly, in the most at-risk neighborhoods (older pre-war housing and factory blocks) upwards of 90% of homes had their tax liability reduced. Local business taxes were frozen by law at 1996 levels. Construction returned to the city: the number of taxable building permits surged past neighboring Bethlehem, market investment returned, and capital improvement reappeared in city budgets. Tax burdens on productive work and business declined. The losers in this trade were absentee owners of vacant lots, who had to shoulder much more of the burden.
4. Rewarding Neglect and Punishing Investment in Struggling Neighborhoods
by Daniel Herriges | March 7, 2019
Providence, Rhode Island. Image source.
Seth Zeren is a small-scale developer in Providence, Rhode Island, another of those high-tax legacy cities increasingly appreciated for its historic assets, but that still has large areas of poverty and blight. Zeren says:
"Land Value Tax [LVT] is a huge deal for the small developer crowd. If you want to make incremental improvements to a property, it makes that more viable. In regimes like the one I’m in, where we don’t have a system like that, most projects of any substantial scale pursue property tax abatement or stabilization. It creates a sort of gap where projects have to be so large to develop the political will. They have to be able to push through the bureaucracy to get the special treatment."
Removing much of the tax on building improvements would mean that you're no longer punished for investing in your neighborhood, but rather incentivized to do so, or at least to sell your property to someone who will. It would be a game changer for places on the cusp of a comeback.
5. If the Land Tax Is Such A Good Idea, Why Isn’t It Being Implemented?
by Rick Rybeck | March 8, 2019
Restoring an historic house. Image source.
Changing the tax system is hard. As much as people hate it, they are familiar with it. And people are nervous about change. As with most things, the devils (and the angels) are in the details. Therefore, if you want to push for this reform in your community, before going public with it, it would be wise to:
Find a public official to be its champion. The Champion can arrange for you to work with the local tax department to chart out the details: how assessments and appeals would work, and how existing benefits like widespread "homestead" exemptions would be applied.
Look into what classes of property and/or which neighborhoods are paying the most under the status quo. What about owners of surface parking lots, vacant lots and boarded-up buildings? Are there strategically-located parking lots, vacant lots and/or boarded-up buildings that are thwarting economic development? A universal property tax abatement would encourage development of such properties in prime locations.
How can rates be shifted off of buildings and onto land gradually over a 5-year period? This avoids creating windfalls and wipeouts. After all, speculators are simply playing by the rules. A gradual shift allows those who would be disadvantaged to change their approach to land management to take advantage of the new incentives without significant hardship.
For more practical steps on how to become a “champion for change,” read the full article…
Top photo of Harrisburg, PA via Wikimedia Commons.