• the lowness of wages,
• the scarcity of employment,
• the fact that though labor is the producer of wealth, yet everywhere the laboring class is the poor class

Jeff Smith: 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.

Economic Problems to Solve
Taxing built-value penalizes construction and maintenance of buildings. This deadweight loss on the local economy constrains housing supply and raises land values, driving speculation. Fewer people can then own parcels for homes and businesses, and debt levels increase.

Environmental Problems to Solve
Rus (rural regions) provide resources as urbs (cities) provide services. Yet neither does so efficiently now. Allowed by a present property tax that takes aim at buildings while treading lightly on sites, owners of sites and resources both overextract and withhold appropriate land from use, speculating on a higher future return. Vacant and underused sites waste on the average about 22 percent of city surface. Using land less than optimally means more land must be used. Clark County, Washington, combines the empty storefronts, vacant lots, run-down buildings in Vancouver, the county seat, with one of the fastest growth rates in the nation. The inflated prices are hardly affordable by governments intending to purchase open space; hence parks are smaller and fewer.

Political Problems to Solve
To manage growth, counties adopt boundaries and other restraints -- which are neither effective nor politically stable. The once "green" Oregon legislature, for instance, in '95 and '97 (controlled by Republicans) passed over ten bills to drastically weaken long-established land use laws. Also under siege is the property tax, formerly the largest source of public revenue in the US (back when the federal and state governments were much smaller). Voters in many states have passed caps and rate reductions, spurring a search for alternative revenue sources.

Equity Problems to Solve
America is rapidly turning back the clock; we are on the path to becoming a two-class society struggling on a ravaged planet. For the first time since European settlers carved out their own country, tenants outnumber owners. Farm workers outnumber farm owners. Growers under dictatorial contracts to food processors outnumber farmers still calling their own shots. Tenants, as in Portland, Oregon, outnumber homeowners. That gulf widens dramatically when defining owners as those not under a mortgage. In communities of rapid turnover, crime invades along with government corruption.

Previous Reform Attempts that Failed
To bolster their local economies and fatten their tax base, local governments compete to attract large new employers. Hoping to recoup down the road when businesses pay full property taxes, elected officials offer such inducements as five-year abatements and low system development charges. Yet each locality must outdo others' incentives. Enterprise zones and tax privileges amount to major subsidies that would otherwise generate substantial tax revenues.

Already, Washington, Oregon, and other states employ a nonregulatory means to reward preservation of unbuilt-upon land. They assess farm and resource lands at current use rather than at market value to avoid pressuring owners to develop. However, as long as demand for land persists, and the more central locations are not offered in the market, then the temptation before farmers to sell out to developers also persists.

Our Different Idea
To send a clear message to new businesses that their growth will not be unnecessarily impeded, government can permanently shift taxes off sales, income, and buildings and onto land. Since taxing land lowers its cost, business could pay this greater land tax from what otherwise would be spent on purchasing land. This higher land levy would remain affordable as long as owners use their land efficiently.

Developers argue that abundant land lowers its price and thus the property tax burden. While true, newly-available land need not be current open space. Without baring the countryside to new development, both land price and the property tax can be lowered. The price of land drops when the tax rate on land is raised. And yet this higher rate, if coupled with a lower or absent rate on buildings, does not swell the property tax burden of most residents. Indeed, this property tax shift (PTS) is progressive, providing relief for most residents. And by taxing land, society impels owners who had been speculatively withholding or underutilizing theirs to develop or offer their parcels for development. Hence the newly-available land comes from recycled sites, not from open space.

The PTS not only lowers the price of land, it also lowers the cost of buildings. Untaxing structures, besides reducing their cost, also augments their supply. More buildings means lower prices and rents. As the prices of both buildings and land drop, more people are able to purchase a home, apartment, or condominium.

Ethically, the PTS simplifies the revenue system, leaving fewer decisions to be made by politicians in favor of their backers. All the essential facts are open to public scrutiny: the land's owner, value, use, and levy. And since mere speculation would no longer be profitable, owners would have less monetary motive to try to unduly influence the political process. ... read the whole article