Land Value Taxation: The Basics Does anyone have critics of land value taxation ?
Charles Brown %%%%%%%% Land Value Taxation: The Basics The Proposal - Shift the property tax on buildings to land by taxing land assessments at a higher percentage than building assessments. Why Do It? - If buildings are taxed less, they'll be profitable to construct and operate, also more affordable to rent or buy; if land sites are taxed more, they'll be developed more fully. Therefore, a city will see more construction means more jobs as well providing revenue for local government (which will recoup the tax revenue lost by not taxing buildings because it will be taxing land more). What is LVT? LVT is a flexible form of the real property tax. In October, 1998 Governor Ridge of Pennsylvania signed a law that permits Boroughs in the Commonwealth the right to enact LVT In Pennsylvania, land and building assessments are determined separately. That means we have an opportunity to see how much tax falls on each component of someone's home or business. Steelton, Pennsylvania: A Case Study Let's look at Steelton, a once-thriving community that has lost population and has been threatened with losing it's entire massive steel mill complex. Steelton is becoming rife with land vacancy, thus making taxes for those who have kept the faith in Steelton rise. Steelton needs to take steps to re-develop what used to be, in order to save itself and save the countryside. In Steelton (with a rate of 9 mills) 17.7% of real property tax revenue comes from land. So what? That means that 82.3% of your revenue comes from buildings. In other words, if someone fixes up their house, their assessment goes up accordingly and their tax bill goes up accordingly. That's a disincentive to go ahead with such a project. If buildings are taxed less, the Borough will have more and better buildings. When LVT is used and promoted by a Borough, individuals take the plunge and maintain their properties. LVT is in accord with ability-to-pay Steelton has a population that is aging. LVT is far more preferable to senior citizens than the standard property tax. Since senior citizens keep up their homes, and since, therefore, most of their tax bill comes from the structure itself, they would assuredly see a decrease in their taxes with LVT. For families just starting out, a lowered tax bill means lower monthly mortgage payments. LVT attacks blight Harrisburg, Pa., has employed and marketed LVT to great success. They have pushed the idea hard, especially to homeowners and homesteaders. In 1982, Harrisburg had 4,200 vacant structures. Today, there are less than 500, with many re-habs coming in what had been thought to be residential neighborhoods beyond hope. In Steelton neighborhoods it is reasonable to expect that this process would be repeated. LVT targets land waste Steelton appears to have a lot of under-used, potentially profitable (for both business and government) land. A trip down Route 230 provides many examples of cross-roads under-development. A program of higher tax rates on land will provide an incentive to develop or to sell to someone who will. The situation is especially egregious when it is understood that the current Borough tax system does indeed: * subsidize private land banking for those from outside the community, * hike taxes for more productive citizens, take away development opportunities. * Encourage urban sprawl. LVT complements other incentive programs LVT is enacted within existing frameworks of planning, zoning and abatement/exemption programs, such as LERTA. The impact of an Enterprise Zone is magnified because prospective building owners outside the Zone and the program can take advantage of the improved business climate. For example, a program to exempt improvements to houses or factories for a period of years is a good one. Yet what if some homeowners have already fixed up their homes before the program takes effect? The possible resentment "missing the boat" can be lessened by a general (albeit smaller) program of tax reduction for improvements. Also, when the period of exemption is over, LVT will cushion the financial blow from a sudden increase in taxable building/improvement value. LVT will lower taxes for most people Although LVT should be (and has been) implemented with a slow, gradual shift to an emphasis on land taxes, homeowners and many businesses will see an immediate reduction in their tax bill. In our experience, those properties that do pay the most under LVT are absentee big bucks landowners. They have little or no stake in maintaining an attractive, economically competitive Steelton. LVT is the Right Thing to do This program is also an ethical (or, at least, MORE ethical) system of taxation. It's heartening to realize that many now agree that there is a sea change coming in the way governments at all levels raise revenue. As the buzz over the Homestead Exemption fades - for very good reasons - taxing jurisdictions have come to the conclusions that WHAT is taxed is as important an issue as to how MUCH something is taxed. >From a policy standpoint, an economic standpoint AND from an ethical standpoint, a >jurisdiction can do no better thing than to tax land values. --------------------------------------------------------------------------------
