For immediate release
Contact: Anthony Flint 617-661-3016 x116
CAMBRIDGE, Mass. (May 22, 2009) – The land value tax, an increased tax rate on land and a reduced tax rate on buildings and improvements, can spur urban development and help contain sprawl, but its implementation has been sporadic, according to a new book published by the Lincoln Institute of Land Policy.
Land Value Taxation: Theory, Evidence, and Practice, edited by Richard F. Dye and Richard W. England, includes a comprehensive review of theory and published evidence on the land value tax and explores the results of its implementation in the U.S., primarily in Hawaii and Pennsylvania, and abroad in Australia, New Zealand, Jamaica, South Africa, Estonia, and elsewhere.
“There has long been a need for a careful assessment of the statistical evidence on land value taxation,” said Gregory K. Ingram, president of the Lincoln Institute of Land Policy, a think tank in Cambridge, Mass., whose founder, John C. Lincoln, was inspired by the writings of the 19th century philosopher Henry George, an early proponent of land value taxation. “We wanted to learn why a form of taxation regarded as highly efficient by economists is often tried but then discarded, and whether it has achieved desired policy goals.”
As an alternative to the property tax, a land value tax increases the tax rate on land and decreases or eliminates the tax rate on buildings. A tax on land is often claimed to be very efficient and produce few unintended economic costs, to increase the density of development, to reduce speculation in land, and to speed development generally. The authors conclude that theory supports the first two claims and indicates that a land tax will lower gain from speculation though not eliminate it. Land Value Taxation: Theory, Evidence, and Practice suggests that a land value tax does not alter the timing of development.
In addition, the authors found that the implementation and political context for the land value tax has been challenging, often due to problems in assessment and issues that arise concerning fairness.
The property tax is an important source of government revenue in the United States and many other countries, but its unpopularity has led to a number of legal restrictions on its use and calls for further reforms, even total elimination. Land Value Taxation: Theory, Evidence, and Practice takes a new look at an old reform alternative that would keep what is good about the property tax—taxation of land value—and reduce what is bad—taxation of the value of buildings and other improvements.
In the volume, 12 leading scholars and practitioners examine the theory and practice of land value taxation and provide the most comprehensive survey of the literature to date. In Pennsylvania, the land value tax is in place in 14 municipalities, but was tried and discontinued in 7 others. Harrisburg, a distressed city in the 1980s, initiated the land value tax as a continuing part of its economic development program. In Pittsburgh, which began a land value tax in 1913, there was evidence of its favorable impact on building activity, but the tax became a scapegoat for poor assessment and rate setting practices, and Pittsburgh reverted to a traditional property tax in 2001. In Hawaii, the land value tax was blamed for overdevelopment in locations such as Waikiki, where singer Joni Mitchell was inspired to write the lyrics “They paved paradise, and put up a parking lot.” The land value tax was abolished there in the mid-1970s.
Much of the empirical work reviewed and summarized in the volume focuses on the evidence that a tax on land will increase the density of development or reduce sprawl. A majority of the studies do not meet the volume’s standards for good research design, effective measurement, or indication of causation. Some of the remaining studies find a measurable impact and others do not. One reason for the mixed results is that the relatively mild versions of the land tax actually implemented—often a modestly higher tax on land than on buildings—are likely to produce only small increases in development density that are difficult to measure. To be politically and economically successful, the authors argue, a land value tax must be accompanied by a sophisticated assessment system, frequent re-assessments, a nimble rate-setting process, effective land use planning, and ongoing public education.
Land Value Taxation: Theory, Evidence, and Practice provides guidance for additional empirical work by identifying areas where existing studies are weak or contradictory, and informs new attempts to implement land value taxation. It settles some debates about land value taxation and initiates new ones, including issues of fairness and equity in land taxation, winners and losers when a land value tax is implemented, and what political coalitions are likely to form in support of and in opposition to the land value tax.
The contributing authors include John E. Anderson, interim dean at the College of Business at the University of Nebraska, Michael E. Bell, research professor at the George Washington University, Steven C. Bourassa, director of the School of Urban and Public Affairs at the University of Louisville, John H. Bowman, emeritus professor at the Virginia Commonwealth University, ,Richard D. Coe, associate professor of economics at the New College of Florida, Riël C.D. Franzsen, director of the African Tax Institute, Jerome C. German of Lucas Assessment Research LLC, Wallace E. Oates, economics professor at the University of Maryland, Elizabeth Plummer, associate professor of accounting at the Neeley School of Business at Texas Christian University, and Robert M. Schwab, interim dean at the College of Behavioral and Social Sciences at the University of Maryland.
About the Editors
Richard F. Dye is professor at the Institute of Government and Public Affairs at the University of Illinois at Chicago and Ernest A. Johnson Professor of Economics Emeritus at Lake Forest College. He is a visiting fellow at the Lincoln Institute in 2008–2009.
Richard W. England is professor of economics and natural resources at the University of New Hampshire and visiting fellow at the Lincoln Institute in 2008–2009.
Land Value Taxation: Theory, Evidence, and Practice
Edited by Richard F. Dye and Richard W. England
2009 / 248 pages / Paper / $30.00 / ISBN: 978-1-55844-185-9
For review copies, please contact Anthony Flint at anthony.flint@lincolninst.edu. The Lincoln Institute of Land Policy www.lincolninst.edu is a leading resource for key issues concerning the use, regulation, and taxation of land.
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