Is it time for Providence to tax land rather than buildings?

August 19th, 2013 at 11:24 am by under Nesi's Notes, On the Main Site

Downtown Providence is dotted with surface parking lots and empty parcels, to the frustration of urbanists and Providence Mayor Angel Taveras, whose March economic plan specifically called for “a new citywide tax-stabilization ordinance designed to incentivize new development on Providence’s surface parking lots.”

Maybe Providence should take a page from the playbook of Altoona, Pa., and start taxing land.

Land tax – an idea with passionate supporters, inspired by Henry George – has a distinguished pedigree in economics if not actual policy implementation. The idea is to shift toward taxing the value of something whose supply won’t change due to tax rates – land – instead of the buildings and other improvements made there. The hope is that doing so would spur development, pushing those who own vacant land to do something with it.

Altoona just finished an eight-year transition from a property tax to a land tax, The Altoona Mirror reports:

This year, 72 percent of residential parcels – not including vacant lots – got a [tax] cut, according to the study. The biggest group got a $10 decrease approximately, the report stated.

Most of the “screaming” came from those with vacant lots, according to Baldner. Their properties were in the crosshairs of the increase.

Vacant lot owners have filed several tax appeals in each of the last several years, according to Baldner.

Taveras, however, apparently isn’t considering a land tax. The mayor told PBN’s Patrick Anderson earlier this year that “taxing land at a higher rate is not something we are looking at.” He didn’t say why.

• Related: Study: Providence commercial taxes again highest in the US (Aug. 19)

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12 Responses to “Is it time for Providence to tax land rather than buildings?”

  1. Maybe Taveras just thinks it sounds nicer to frame the change as a tax break on redeveloped vacant lots than to frame it as a reworking of the tax code–less chance of some one demagoguing it as a tax increase.

    In Philly, there was a lot of resentment for “opportunity zones” that were intended to spur growth. The lower taxes in those zones did actually spur growth, but then the resultant real estate boom made the tax assessments go up for the neighborhood, and since there were ten year abatements on the new (usually luxury) buildings, the burden fell on more modest residents who’d been there all along. Taxing land sounds like it would avoid that, but while also spurring growth and getting rid of lots.

  2. Sam Bell says:

    Land taxes are obviously a good idea. The real question is whether Providence can implement it without approval from the notoriously anti-growth General Assembly.

  3. Taxing land values does work in a setting that has lots of vacancy, blight and absentee owners. My organization has worked with many cities – including Altoona – to implement the land value tax after closely studying the tax rolls of a municipality. Allentown actually put the land value tax idea up to the voters and it was passed by a 2 to 1 margin. In Allentown, 85% of homeowners saw tax cuts, as well as taller buildings (like Providence’s Superman Building.

    In June Connecticut passed a law permitting up to three cities to use the tax on land values as a pilot program. The idea there is to help Hartford or Bridgeport to put the burden of taxation onto those who don’t “do” for the city – like surface parking lots – and reduce the burden of tax for those who build or renovate either with investment or sweat equity.

    Providence and its high tax burdens would likely be a good candidate for a land value tax: it has too much wasted land, too much tax exempt land, and too high a burden for to make it worthwhile for a building or neighborhood reinvest and reinvent itself.

  4. Scott Baker says:

    “Land Value Taxation works and works always” – Former Harrisburg Mayor Steven Reed (1981-2009). Harrisburg has a 6:1 Land to Building tax ratio. You can hear his entire speech extolling the virtues of the Land Value Tax here:
    https://vimeo.com/48735884

    Land Value taxation is perhaps the most established economic theorem in economics. The opposition is political, not economic. Tolstoy said “Those who oppose the Single Tax simply do not understand it.”

    Henry George’s great tome: “Progress and Poverty” was wildly popular, maybe second only to the bible when it was published in 1879, but in truth the principal of taxing locational values goes back to ancient Israel (John Kelly – “The other Law of Moses”).
    It is an idea who’s time has not only come, but who’s time MUST come.
    - Scott Baker, president of Common Ground-NYC – http://commongroundnyc.org/

  5. Dan Sullivan says:

    As a simple pragmatic matter, it prevents housing bubbles, promotes economic growth, shifts the tax burden from the poorest to the richest neighborhoods, and causes slumlords and land speculators to look elsewhere.

    Also, it is the only tax that doesn’t drive people away, because they can’t take the land with them.

  6. Billy Fitzgerald says:

    Why not create a special assessment district, levy a surcharge on the land values only and channel the resulting revenue into a specific project such as public transportation?

    It is the economic activity of the community that increases land values. Retaining the increase in land values for the benefit of the community rather than allowing privileged individuals to benefit is fair and just.

    The special assessment district can be time-limited, so that everyone has an opportunity to observe the results.

  7. Steven Cord says:

    ~~~~~START by reducing the tax rate on building assessments by 10% and maintain complete revenue neutrality by increasing the land-assessment tax rate.
    ~~~~~New construction & renovation will boom-boom because they will be taxed less and since land-sites will have to be used more fully so as to pay the increased tax. Win-win. Win elections by down-taxing most voters (even by down-taxing most landowners!)——————Steven Cord (I induced 19 jurisdictions to do this, always with an increase in building-permits issued and with most voters and landowners paying lower taxes).

  8. Steven Cord says:

    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~For more information on why Ct. cities should tax land rather than production, contact (at no charge or obligation) Dr. Steven Cord, professor-emeritus from IUP (15,000 students), winner of 2 university-wide research awards, 5400 Vantage Point Road, Columbia MD 21044,1-410-992-1155 (OK to reverse charges). See previous Comment.

  9. Edward Miller says:

    It is very simple.

    On the one hand, as with the current system, you can penalize people for keeping their property well maintained and reward those who keep land out of productive use.

    Or you can encourage those who are holding land out of use to be productive, and to remove the burdens placed on those who seek to improve the character of the city.

    Tax land values, and watch Providence prosper.

  10. Catherine Orloff says:

    Putting the property tax more heavily on land values will bring an economic boom to Providence! Just drive around and look at all the empty or near-empty sites, say on Cranston and/or Westminster Sts. between I-95 and Route 10. Same on Broad Street – little empty lots across from Classical/Central High that could be small businesses if only the land speculators would lower their prices.
    Land-value taxation will automatically lower them, while granting most homeowners – and productive businesses – lower taxes. Empty, wasted urban land is the “elephant in the room” that has gone unmentioned in virtually all recent public discussions about revitalizing our economy. But where are new businesses supposed to locate – up in the air? This could be Providence’s most positive historical happening since the arrival of Roger Williams.

  11. Mark Koerner says:

    There are two issues here. The most obvious one: is taxing land values a good idea in the abstract? The second issue: what alternative do those who oppose the land value tax have, really? In other words, do the opponents have any new ideas? Do they have any ideas that will not cost the city a considerable amount of money? Do they have any plausible ideas that have a reasonable chance of being enacted? If not, then perhaps the time has come to try a land value tax and see how it works. When you get right down to it, this idea is not really all that radical, as Providence already has a (relatively hidden)tax on land values. What Josh Vincent and friends want to do is eliminate the “building component” of the property tax and jack up the rate for the “land component.” There would still be a “property tax” in Providence–just a different kind of property tax.

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