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Abatements
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. ... Partial Applications -- Abatements With first Spanish and then Mexican control, much California land had been pueblo, or public. Though very little of that pueblo land remains, some of it is still quite valuable. In the 1960s, various towns sitting on San Diego Bay designated their water fronts as the Port District. The Port Authority collects hundreds of millions of dollars of land rents each year and is one of few local government agencies with a consistently positive cash flow. Where does that cash flow to? While not into any bloated bank accounts of private owners, by law it can not flow back to the "pueblo." Instead, it must be spent by the Port Authority who tend to take numerous trade missions to exotic destinations and redecorate their offices each year. Benefits of the PTS have also been achieved with building tax abatements and by simply obeying assessment laws. During World War One, in New York City construction nearly ground to a halt. After the war, housing in the City was in short supply and the demand for new homes was doing little to relieve the shortage. Then, in 1920, despite fears of revenue losses, the legislature enacted enabling legislation so that NYC could pass an ordinance that exempted taxes for ten years on new buildings used only for dwellings. The City continued to tax land beneath buildings. Within two months of enactment, a building boom swept the city. Restored neighborhoods and public improvements generated higher land assessments. Housing became an attractive investment, civic panic faded, and municipal revenues rolled in. The boom lasted until builders saw the decade-long window closing. The law was not extended or expanded.
To arrest urban decay in the
seventies, reformers tried temporary abatements.
Peoria, Illinois, set up an enterprise zone that
granted a ten-year abatement on the value of new or
repaired commercial or industrial buildings. As land
values rose, the tax on land was allowed to keep pace.
Within three years, the dollar value of industrial and
commercial construction permits within the zone climbed
from eight to 21 percent of the city's total. The
maverick business leader behind the idea, John Kelly,
extolled the turnaround: "Enormous building
investments led to a consensus that this abatement of
taxes on new construction is the best development
program Peoria ever undertook." |
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