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Pennsylvania has had the enabling legislation that allows municipalities to tax land and buildings at different millage rates for about 90 years, and about 17 cities and towns are using it, to good effect. Harrisburg is the most notable.

Pennsylvania's taxes are complicated, in the sense that the individual property owner receives separate bills for schools and for other taxes, and because other municipal costs account for less of the tax bill than do the school taxes, the fact that municipalities use this and have seen fit to expand it is particularly notable. In some municipalities, the tax rate on land is six times that on buildings.

Untaxing buildings leads to better buildings. Taxing land values more heavily nudges well-located land into better use, preserving the land on the fringe from premature development.

Land Value Taxation is an excellent example of thinking globally and acting locally.

Mason Gaffney:  Interview: Is There a Conspiracy in the Teaching of Economics and History within the American Education System?

TPR - What's your take on the Pennsylvania story? Are the landlords running scared from the new 'Whiskey Tax Rebellion'?

MG - Pennsylvania allows its cities what is called "local option" on property tax policy. This gives each city the option of down-taxing buildings and up-taxing land. An accelerating number of cities have chosen this option, the latest being Allentown.

Landowners can't run, not without leaving their land behind; and the idea is not to scare them, but show most of them they have more to gain from un-taxing buildings than they lose from up-taxing land. Un-taxing buildings encourages new building, with all the gains that brings. When a city gets old and rundown, a lot of people get the point.

The opponents have several points from which to attack. Now they are focusing on the State Legislature. As it happens, Harrisburg itself is one of the cities that has adopted the option of down-taxing buildings, and the good results may be seen by looking out the window; but many legislators get their ideas and motivations from elsewhere. The great danger to the movement in Pa. is that about when half the cities will have chosen to down-tax buildings, the legislature will follow the bad example of California and replace the property tax by raising state income and sales taxes. ... Read the whole article

Steven B. Cord: 22

I’ve got a dilemma: while doing research for a book I’m writing entitled The Golden Key to Continuous Prosperity, I have come across 237 bona fide empirical studies – 237! - showing that the higher taxation of land values (LVT) always produces:

  • Economic growth
  • Reduced taxes for most people (while govt. revenues remain constant).

There are other benefits resulting from land value taxation.

My dilemma is this: recounting 237 studies (more are coming) is mind-boggling and brain-busting. It will lead to e-g-o (eyes glazed over) among readers, so I am listing 22 brief summaries of them here. Anyone desiring all 237 summaries should write me for them (10528 Cross Fox Lane, Columbia, MD 21044; cost: $12). I did some of these studies myself.

These 237 studies come from a close reading of the back issues (from 1974 on) of Incentive Taxation, an eight times yearly newsletter reviewing empirical studies of the taxation of land values. Here are the 22 summaries mentioned above:

(1) The contiguous cities of Allentown and Bethlehem in eastern Pennsylvania
(2) Washington and nearby Monessen (both in southwestern Pennsylvania)
(3) Connellsville, Pa.
(4) Aliquippa, Pa.
(5) In 1989, Clairton, Pa., an industrial suburb of Pittsburgh,
(6) Let us now compare two-rate Oil City, Pa.
(7) The long two-rate LVT experience of Pittsburgh
(8) In other countries, there are many good studies of the effect of a building-to-land switch on construction.
(9) Then there’s the study by professors Wallace Oates and Robert Schwab
(10) In 1995, Professor Nicolaus Tideman of Virginia Tech University and his then-graduate student, Florenz Plassmann
(11) Harry Gunnison Brown, a leading economist in the 1930s, reported that suburbs of Melbourne, Victoria, Australia

(12) A Pittsburgh City Council study (1976)
(13) A Washington, D.C. council-authorized study done in the 1970s
(14) In 164 suburbs outside central Melbourne (Aus.),
(15) Twelve studies in rural Victoria found that LVT-only towns
(16) If you fall through the earth, you will emerge near Perth, Western Australia
(17) In North Dakota,
(18) California Irrigation Districts
(19) Malvern, Australia
(20) Tax defaults:
(21) According to a city-funded 1980 study in New Castle, Pa.,
(22) Assessment officials in both Pittsburgh and Scranton, Pa.

Jeff Smith and Kris Nelson: Giving Life to the Property Tax Shift (PTS)

John Muir is right. "Tug on any one thing and find it connected to everything else in the universe." Tug on the property tax and find it connected to urban slums, farmland loss, political favoritism, and unearned equity with disrupted neighborhood tenure. Echoing Thoreau, the more familiar reforms have failed to address this many-headed hydra at its root. To think that the root could be chopped by a mere shift in the property tax base -- from buildings to land -- must seem like the epitome of unfounded faith. Yet the evidence shows that state and local tax activists do have a powerful, if subtle, tool at their disposal. The "stick" spurring efficient use of land is a higher tax rate upon land, up to even the site's full annual value. The "carrot" rewarding efficient use of land is a lower or zero tax rate upon improvements. ...

For fans of democracy, the most recent victory of the PTS came about via the initiative. The votes were cast in Allentown (Pennsylvania is one of the few states that permits separate rates for land and buildings). A key local leader knew of the success that Pittsburgh, Harrisburg, and other Pennsylvania towns had had with the PTS and had the clout to make the shift part of a total revision of the city charter. When the revision passed, propertied opponents put the repeal of the PTS on the ballot separately. Advocates of the split conducted a typical grassroots campaign of phone banking while opponents relied on paid advertisements. Altho' the dollars spent during the campaign heavily favored repeal, the voters heavily favored keeping their new fiscal toy. ...

W.W.II, when its steel industry plummeted, Pittsburgh widened its two-to-one land-building ratio. The city watched 60 new buildings and skyscrapers, valued at $700 million then, stand up in industrial areas. This privately financed renewal brought 16,000 new jobs to an area that had employed 4,000. Then-Mayor David Lawrence, noting the power of the stick, said the higher rate on land "discouraged hoarding of vacant land for speculation." His successor, Mayor Joseph Barr, noting the carrot effect, explained, "Fine structures erected through private investment as part of the renewal program benefited by the lower tax rate on buildings." When many decaying cities were seeking federal aid, Pittsburgh's Golden Triangle brought the city national fame.

In 1951 the Pennsylvania legislature granted all cities the two-rate choice, omitting any ratio limits. Over two decades later in 1975, Harrisburg, the capitol, shifted its property tax landward. The value of its private real estate grew from $212 million in 1981, when it was cited as the second most distressed city in the nation, to over $880 million in 1994. Its mayor during much of this recovery, Stephen Reed, noted another benefit: "Many states try to save farmland by buying development rights. That's expensive. Without spending a dime, we can achieve the same goal with a two-tier tax. Unused urban land is what pushes development into open spaces. This tax, by assuring better use of unused land in cities and suburbs, will discourage the gobbling up of farms."

Ailing, small towns in distressed Appalachia passed the shift in the eighties: McKeesport, New Castle, Duquesne, Washington, Aliquippa, Clairton, Oil City. In 1990 Titusville chimed in. A year later Coatesville, DuBois, Hazleton, and Lock Haven followed. In 1996, after repeated vetoes by the mayor, Allentown came on board with its 100,000 residents. That makes 16 municipalities with the two-rate property tax. All of them are growing by densification unlike many of their neighbors.

In 1992, Uniontown reversed its adoption of the PTS. (It was one of the towns one of these co-authors lobbied. It seems he may have pushed to hard. They accepted a higher initial rate which spurred a backlash which scuttled the whole program. Damn eagerness!) Like many others in the region, this city of 12,000 needed help; 80 percent of downtown sites were empty. Their big mistake was to introduce the two-rate reform under 34 year-old assessments which underestimated the value of lots with abandoned structures. The few retailers left were hit with a drastic increase. Moreover, officials did not give out public information in advance. When people got their tax bills, they were angered and uninformed, causing the city council to revoke the shift.

While the 1951 law abolished ratio limits, it has been used only to increase the land portion. In 1979, Pittsburgh moved to a three-to-one ratio and in a few years moved to six-to-one. Six others have chosen five-to-one. In 1995 Washington, 30 miles from Pittsburgh, shifted to taxing land 11 times higher than buildings; Aliquippa to 16-to-one.

These spreads are diluted by overlapping counties and school districts which still levy property taxes of one rate. When the city, county, and school taxes are figured in, Pittsburgh is dampened to a 2.5-to-one ratio. To address this lack of uniformity, the legislature granted permission to school districts and boroughs the option to split their rates. So far, only two noncity jurisdictions have taken advantage of this option, totally 18 jurisdictions, including Pittsburgh, that have opted for a higher rate on land and a lower one on buildings. Across the Delaware River in New Jersey, officials recently held a public hearing on the PTS. ...

Eventho' almost everyone would worry about paying more tax, the PTS is inherently progressive. Studies of the towns in Pennsylvania that have shifted some tax from buildings to land show that about 75% come out ahead (nearly the entire bottom four quintiles of income earners), 20% break even and 5% pay more (together a bit larger than the top quintile of income recipients), who are usually absentee owners. ...

Starting in 1914, Pittsburgh and Scranton introduced "the graded tax." Over a decade they phased in a higher rate on land until it was twice the rate on buildings. Doing so gradually allowed residents and businesses time to adapt, giving the PTS political acceptability. Tho' this delayed benefits, land speculators offered little opposition since they did not face the sudden effects of the full shift. Such an approach is still prudent today. ...

A big problem needs a big solution which in turn needs a matching shift of our prevailing paradigm. Geonomics -- advocating that we share the social value of sites and natural resources and untax earnings -- does just that. Read the whole article

Mason Gaffney: Property Tax: Biases and Reforms
How about Pennsylvania? This state stands out for its efforts to reform local property taxation but, sad to relate, it ranks below the middle in the ratio of property taxes to all state and local taxes, at 29%. It is low in property taxes per capita, at $609, less than half the New Hampshire level.

Property tax reform in Pennsylvania is, therefore, heavily diluted. Add to that the problem of overlapping tax jurisdictions: when a city reforms its property tax, its county and school district carry on as before. What changes, then, is just 1/3 of 28%, or about 9% of the complex of state and local taxes. Federal taxes are totally untouched. Trench warfare in Pennsylvania cities is therefore inchmeal, and the results hard to measure. ... Read the whole article

Fred E. Foldvary — The Ultimate Tax Reform: Public Revenue from Land Rent

Many cities worldwide, including Johannesburg, South Africa and Sydney, Australia, have levied real estate taxes on land values only. Some cities in Pennsylvania have had a two-rate system, where land values are taxed at a rate higher than the tax on improvements.36 ... read the whole document

Jeff Smith: What the Left Must Do: Share the Surplus

Eventho’ its advocates must overcome the visceral dislike of the more familiar tax on both land and buildings, the proposal to collect ground rents has enjoyed popular support. In the mid 1990s, the people of Allentown Pennsylvania (whose sorry state inspired pop singer Billy Joel) voted twice to shift their property tax off buildings, onto locations. They had to vote twice because after expressing their preference the first time, the real estate lobby put the question on the ballot again, where it passed by an even larger margin. Since shifting its tax base, the town revitalized its center and neighborhoods, drawing praise from Richard Florida in his Rise of the Creative Class(2002). Allentown is one of 20 jurisdictions in Pennsylvania that levy land more highly than improvements. Read the whole article

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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper