(Far far) Back to the Future
But it is not that way here. One thing I hear that that comes up repeatedly in the discussions of assessments is a straightforward argument. Lots of folks are looking at an increased assessment value that they feel, likely correctly, that the increased value is the result of their investment and improvements. Why, they wonder, should they be penalized for choosing to invest in their properties, makng them better and along the way improving our communities? That is what their core issue is with an increased assessment value, almost regardless of whether it will cause their tax bill to go up or go down. Their point boils down to an argument that they should not be taxed on the incremental real estate value they create. You might argue you really want to encourage investment in real estate because it is the type of invesment that results positive benefits for a lot more than just the individual property.
You know.. I agree. (with a !) Not only that, but there was a fellow named Henry George who argued that very point. His argument was that if tax was inevitable it should only be placed on the value of the land and that there should be no tax on the structures we build on the land. The argument was that such a tax encouraged investment, density. discouraged speculators, and kept land from being unused. George's Land Tax concept inspired a movement. It was the least objectionable way to tax, he argued, if indeed some tax was inevitable.
Of course history is strange. Most everyone in town** has already forgotten, but it turns out that the City of Pittsburgh actually implemented a George inspired land tax and was for the better part of a century the largest government in the United States that did so. Technically it was a tiered tax with not all, but most taxes placed on the value of land. Some, but a much smaller fraction of tax, was place on the value of built structures. The history of split tax rates locally is really why you see local assessment data broken out into the value of land vs. the value of buildings. In the assessment/appraisal models the breakout is always there, but in lots of jurisdictions they don't bother to even show you the two numbers, just what the total value is of a property. What was the impact of the split tax over the period from 1916 when it was put in place here, to 2002 when it went away, is a perpetual debate. At the core of that depate is whether the land tax had something to do with say the density of our Downtown and its ability to retain a concentration of large buildings that in a lot of other similar cities have diminished.
So I am not jumping on board all of a sudden. There really is little political will, or understanding to really go back to a complete land tax. Yet, there are some intermediate policies that are gaining traction. In Philadelphia there are folks who argue that a city abatement on residential investment has been responsible for population gain in the city for the first time in decades. One of those things that is virtually impossible to prove definitively given all that goes on in a city. Still, that abatement works out to be very similar to a land tax at the end of the day. While there is a limited abatement on similar investment in place for some City of Pittsburgh neighborhoods, it just isn't anywhere near the same thing. I have argued that we should follow Philly's example a bit more closely and implement a city-wide abatement on virtually all new residential invesment. It would make news. It would put the City on the map and might even be worth its own cost in sheer publicity value that could encourage investment. There just have to be a few investors out there who would be excited to pay taxes valued for a vacant lot on new apartment building, condo or home they invest in.
The strongest counterargument for doing something like that is that the city needs revenues and cutting out so much revenue will hurt the city's ability to function. Thing is, for the City of Pittsburgh there is no cutting out of revenues. Pittsburgh revenues from the property tax have been extremely flat going back many years. There are not a lot of reasons to expect property taxes to jump anytime soon. An abatement does not cut taxes, but abates future investment that has yet to happen. It is giving away future tax revenue that may never be coming, yet the payoff could be a spike in investment and a population reversion that is really what plague the City of Pittsburgh. Lots of good stories around the region, and in the city, but population trends are still down and you really need to encourage families to stay.. families who are the ones likely to be investing in real estate for the longer term. Given the minimal amount of new residential investment compared to what there should have, Pittsburgh may be a poster child for a place that has the most to gain, but the least to lose from a comprehensive residential tax abatement.
History is even stranger. If you think there is something at all to my abatement argument or go farther and really think the land tax is some antidote to the assessment miama that we currently endure... then it gets really strange actually. The demise of the land tax in Pittsburgh is really tied to the political anger that erupted upon learning the original Sabre Systems assessment numbers in 2001. The higher rate on land, and the adjusted land valuations meant that the sticker shock that is bad this cycle was far far worse for a lot of properties in the city back in 2001. It was easiest, and certainly politically expediant, to quickly end the split tax in the city of Pittsburgh. A century earlier it had been implemented after a public debate and analysis over years. It would go away in virtually hours without any analysis or debate. Folks had forgotten why it was there and the political costs of keeping it was far too much.
Still.. if you want more stability in your assessment values, want to incentivize investment and maybe at the end of the day get people to move into the City... could our problem be our solution.
and if that does not strike you as the way forward, there are other ideas. One local Georgist has a bit more creative solution to our assessment mess.
* I do have a US version of that graphic, but it is too big a file to do all that much with.
** Apologies to ADB