Incentive Effects of Land Value Taxation in Metropolitan Portland Commercial Corridors (Working Paper)

Author(s): Gihring, Thomas A. and Kris J. Nelson
Publication Date: November 2005

77 pages; Inventory ID WP05TG1; English

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Abstract

Oregon state’s growth management policies and local land use regulations have had limited success in implementing goals to discourage the proliferation of commercial strips in favor of more concentrated patterns. Expectations are that a land value tax (LVT), by increasing the tax rate on land values and decreasing the rate on improvements, will stimulate more intensive development and discourage the over-consumption of land. This study is a static analysis of the incentive effects of the LVT on 868 parcels located in four ‘strip’ and two ‘ribbon’ corridors in the Portland metropolitan area. From simulated tax applications, differential-rate tax outcomes are compared to conventional tax outcomes to ascertain the direction and amount of tax shift that would occur in a transition to LVT.
The incidence findings support the expectation that low-density and auto-oriented land uses are likely to experience a positive tax shift, while building-intensive uses such as street-oriented retail and mixed-use apartments are subject to negative tax shifts. Under a redevelopment scenario, 547 underutilized parcels are redeveloped as mid-rise mixed-use buildings. By adopting the land value tax, a total of $32.5 million is shifted off of building taxes, resulting in a combined savings of $19 million to owners who undertake the site conversions.