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El impuesto sobre la propiedad es el tributo más impopular de los Estados Unidos. Los estados han respondido a esta oposición pública promulgando una serie de políticas de alivio fiscal, especialmente para propietarios de vivienda (Cabral y Hoxby 2012). Entre los programas más comúnmente adoptados se encuentran las exenciones para la vivienda familiar (en inglés, homestead exemption) y los créditos al impuesto sobre la propiedad; todos los estados salvo tres cuentan por lo menos con uno de estos programas. Pero a pesar de su uso generalizado y su impacto potencialmente grande sobre la distribución de la carga del impuesto sobre la propiedad, hay muy pocos datos disponibles sobre los ahorros tributarios generados por las exenciones y los créditos del impuesto sobre la propiedad.
Dos nuevos recursos, disponibles en Características significativas del impuesto sobre la propiedad, subcentro de la página web del Instituto Lincoln, comienzan a satisfacer esta necesidad. Estas tablas proporcionan información para cada estado sobre el porcentaje de propietarios elegibles para estos programas y el nivel de ahorros tributarios que reciben, además de un análisis de cómo la elegibilidad y los beneficios varían en función de la distribución de ingresos (ver recuadro 1, pág. 32). Este artículo utiliza estos recursos para proporcionar el primer estudio nacional de exenciones y créditos del impuesto sobre la propiedad, con estimaciones de los ahorros tributarios obtenidos de estos programas. Con esta información, los dirigentes políticos cuentan con una herramienta fundamental para evaluar y mejorar la efectividad de sus programas de alivio del impuesto sobre la propiedad.
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Recuadro 1: Detalles por estado de exenciones y créditos del impuesto sobre la propiedad
El subcentro del sitio web del Instituto Lincoln Características significativas del impuesto sobre la propiedad proporciona tres recursos clave de información sobre las exenciones y créditos del impuesto sobre la propiedad en los 50 estados de los EE.UU. Se puede acceder a este subcentro en www.lincolninst.edu/subcenters/significant-features-property-tax.
Ahorros tributarios por exenciones y créditos de impuestos
Este archivo Excel en línea incluye estimaciones de ahorros tributarios por programas en cada estado (ver el ejemplo abreviado a continuación) más tablas resumen que facilitan la comparación entre estados. El archivo proporciona estimaciones sobre la cantidad de propietarios elegibles y la mediana del beneficio para cada programa, así como un análisis distributivo por quintil de ingresos. Esta es la primera vez que se dispone de datos detallados para la mayoría de estos programas.
Tabla resumen de exenciones y créditos
Este archivo Excel incluye un conjunto de tablas de 167 programas que muestra el valor de las exenciones expresadas en términos de valor de mercado, criterios relacionados con la edad, discapacidad, ingresos, condición de veterano de guerra, el tipo de impuestos afectado (es decir, impuestos escolares o de condado), si la pérdida de recaudación tributaria es absorbida por el gobierno estatal o los gobiernos locales, opciones locales, etc. La tabla resumen permite efectuar fácilmente un análisis cuantitativo de estos programas o comparar rápidamente un estado con otro. La información de estas tablas se usó para generar las estimaciones de ahorros tributarios.
Alivio del impuesto sobre la propiedad residencial
Esta sección del sitio web Características significativas incluye descripciones detalladas de las exenciones y créditos del impuesto sobre la propiedad que se usaron para crear la tabla resumen sobre exenciones y créditos. También describe otros tipos de alivio del impuesto sobre la propiedad, tales como programas de desgravación y de prórroga tributaria.
Notas: Los ahorros tributarios totales de la exención del impuesto sobre la propiedad por vivienda familiar para adultos mayores y discapacitados (US$392 millones) es menor que el total combinado de los programas para adultos mayores (US$378 millones) y discapacitados (US$22 millones), porque los propietarios que tienen más de 65 años y están discapacitados no pueden reclamar la exención dos veces. La tabla resumen en línea muestra que la exención para adultos mayores y discapacitados es de US$25.000 para propietarios que tienen más de 65 de años de edad o están discapacitados; los dos programas retroactivos son exenciones porcentuales del 2,5% y 10% para todas las residencias ocupadas por sus dueños. Fuente: Instituto Lincoln de Políticas de Suelo (2015).
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Cómo funcionan las exenciones y los créditos del impuesto sobre la propiedad
Los programas de alivio del impuesto sobre la propiedad adoptan diversas formas. Las exenciones por vivienda familiar reducen el valor de la propiedad sujeta al tributo, ya sea por un monto fijo en dólares o por un porcentaje del valor de la vivienda. Los créditos del impuesto sobre la propiedad, en contraste, reducen directamente de la factura de cobro un monto fijo o un cierto porcentaje.
Como se ilustra en la tabla 1, los programas diseñados para proporcionar beneficios idénticos a propietarios de viviendas de US$200.000 tienen un impacto muy distinto en los propietarios de viviendas de alto valor que en los de viviendas de bajo valor. Dada una tasa tributaria del 1%, una exención de importe fijo de US$20.000 reduce el impuesto sobre la propiedad para cada hogar en US$200 (US$20.000 x 1%). Este programa tiene un impacto progresivo en la distribución del impuesto sobre la propiedad porque las unidades familiares de menores ingresos tienden a tener viviendas de valor menor, y la exención representa un porcentaje mayor del valor de sus viviendas. En este caso, la exención de US$20.000 reduce el impuesto sobre la propiedad un 20% en una vivienda de US$100.000, 10% en una vivienda de US$200.000 y un 5% en una vivienda de US$400.000.
Una exención porcentual, por el contrario, proporciona la misma reducción porcentual en el impuesto para los tres propietarios del ejemplo: 10%. En dólares, sin embargo, las exenciones porcentuales favorecen a los propietarios de viviendas de mayor valor: una reducción generalizada del 10% reduce el impuesto sobre la propiedad en sólo US$100 para una vivienda de US$100.000, pero US$400 para una vivienda de US$400.000.
En el caso de créditos de importe fijo, los propietarios con viviendas de menor valor en general reciben los descuentos tributarios mayores en términos porcentuales. Por el contrario, el crédito tributario porcentual proporciona al propietario de una vivienda de US$400.000 el mayor descuento tributario al calcularse en dólares.
Una característica importante de las exenciones y los créditos porcentuales del impuesto sobre la propiedad es que la reducción en dólares (pero no la reducción porcentual) del impuesto aumenta con las tasas tributarias. Por ejemplo, si las viviendas de la tabla 1 fueran objeto de una tasa tributaria del 2%, el ahorro en dólares para sus propietarios sería el doble bajo la exención de US$20.000, la exención del 10% y el crédito del 10%. Si bien el ahorro en dólares de los créditos de importe fijo no varía con las tasas tributarias, el ahorro porcentual para los propietarios disminuye a medida que crecen las tasas tributarias.
Características esenciales de las exenciones y los créditos
El diseño de los programas de exención para viviendas familiares y créditos del impuesto sobre la propiedad varía significativamente en los 50 estados. La figura 1 hace un resumen de la cantidad y el porcentaje de programas estatales con las siguientes características claves.
Cálculo del beneficio
Quizás la característica más importante de los programas de alivio del impuesto sobre la propiedad es cómo se calculan los beneficios. En 2012, el 59% de los programas estatales proporcionaban exenciones de importe fijo, el 19% proporcionaban exenciones porcentuales, y el quinto restante usó créditos del impuesto sobre la propiedad u otras fórmulas más complicadas para determinar la cantidad de alivio tributario para cada propietario.
Si bien los programas funcionan de manera similar, sus efectos difieren considerablemente. Como se muestra en los ejemplos de la tabla 1, las exenciones y créditos de importe fijo hacen que la distribución del impuesto sobre la propiedad sea más progresiva, mientras que las exenciones y los créditos porcentuales no lo son. En consecuencia, para proporcionar un cierto nivel de alivio tributario para la mediana de propietarios, las exenciones porcentuales son más caras que otros programas porque se traducen en descuentos mayores en el impuesto sobre la propiedad para los propietarios de viviendas de mayor valor. En vez de cambiar la distribución del impuesto sobre la propiedad entre los propietarios, las exenciones porcentuales son principalmente una manera de desplazar la carga tributaria de los propietarios, como grupo, a las empresas, los inquilinos y propietarios de más de una vivienda.
Financiamiento estatal vs. local
El impacto final de las exenciones y los créditos del impuesto sobre la propiedad en las facturas de cobro depende de cómo se financian los programas. La figura 1 muestra que en 2012 sólo el 28% de estos programas recibía un reembolso íntegro por parte del estado para cubrir las pérdidas de ingresos locales, mientras que en el 57% de los casos los gobiernos locales tenían que absorber las pérdidas de ingresos. En el 15% de los programas, el gobierno estatal y los gobiernos locales compartieron las pérdidas de ingresos de alguna manera. (Los programas generalizados para todos los propietarios o todos los adultos mayores tienen una mayor probabilidad de recibir financiamiento estatal que los programas para grupos más pequeños, como los veteranos de guerra o los discapacitados. En 2012, el 43% de los programas de alivio tributario para todos los propietarios o adultos mayores fue financiado por el estado, el 48% fue financiado localmente y el resto dividió la pérdida de ingresos [Instituto Lincoln de Políticas de Suelo, 2014]).
El argumento principal a favor del financiamiento estatal de las exenciones y los créditos del impuesto sobre la propiedad es que pueden ayudar a mitigar las disparidades de riqueza inmobiliaria entre distintas localidades. Las comunidades más pobres y aquellas sin una base tributaria significativa tienen tasas normalmente más altas de impuesto sobre la propiedad, y estas comunidades reciben más fondos por propietario de los programas financiados por el estado. Sin esta ayuda, las comunidades con mayores tasas tributarias experimentarán una pérdida mayor de ingresos debido a los programas de alivio tributario, a menos que aumenten sus tasas tributarias aún más.
Adultos mayores vs. grupos de todas las edades
Ciertos estados proporcionan alivio del impuesto sobre la propiedad a los adultos mayores. En 2012, más de un tercio de los estados favorecieron de alguna manera a los adultos mayores: siete tenían programas estatales exclusivamente para este grupo, mientras que 11 cubrían también a propietarios más jóvenes, pero proporcionaba más beneficios a los propietarios adultos mayores. Otros estados o bien proporcionaron la misma cantidad de beneficios a propietarios de todas las edades (15 estados), o bien no tenían programas generalizados (18 estados).
Los argumentos más comunes para beneficiar a los propietarios mayores son que el impuesto sobre la propiedad consume un porcentaje más alto de sus ingresos y que los gobiernos locales gastan menos en los adultos mayores que en propietarios más jóvenes con hijos en edad escolar. Si bien es cierto que el impuesto sobre la propiedad representa un porcentaje más alto de los ingresos para los adultos mayores que para los propietarios que son trabajadores activos, los dos grupos dedican una proporción casi idéntica de sus ingresos a gastos totales de vivienda, porque es mucho menos probable que los adultos mayores estén pagando una hipoteca (Bowman et al. 2009, 11). Además, el impuesto sobre la propiedad es un pago por servicios públicos, no un arancel de uso (Kenyon 2007, 36). Los hogares compuestos por personas más jóvenes sin hijos en las escuelas públicas no se benefician del alivio del impuesto sobre la propiedad bajo estos programas. El tratamiento tributario preferencial de los adultos mayores puede reflejar simplemente que los hogares formados por personas mayores forman un grupo políticamente poderoso que tiende a votar masivamente.
Estimación de los beneficios de exenciones y créditos
Para estimar los ahorros tributarios de las exenciones de la vivienda familiar y créditos del impuesto sobre la propiedad, el primer paso fue crear la Tabla de resumen de exenciones y créditos en línea, que describe las características clave de cada programa (ver el recuadro 1 para una descripción). Estos datos se extraen casi por completo de la sección Programas de alivio del impuesto sobre la propiedad residencial de la base de datos Características significativas del impuesto sobre la propiedad del Instituto Lincoln.
El segundo paso fue combinar esta información con los datos a nivel familiar de la Encuesta de Comunidades Americanas (American Community Survey o ACS) de 2008–2012. Esta encuesta nacionalmente representativa tiene datos sobre más de 6,5 millones de hogares en los EE.UU., incluyendo las características de las familias que determinan su elegibilidad para el programa (edad, ingresos, discapacidad, condición de veteranía de guerra, etc.) y el nivel de beneficios recibidos (valores de las viviendas y montos del impuesto sobre la propiedad). Para una explicación completa de la metodología utilizada para estimar los ahorros tributarios de exenciones y créditos, ver Langley (2015).
Es importante hacer notar que las estimaciones registradas aquí son ahorros brutos en el impuesto sobre la propiedad. Los programas de alivio tributario frecuentemente resultan en un aumento de las tasas del impuesto sobre la propiedad, sobre todo en los programas financiados localmente, en los que las jurisdicciones aumentan las tasas tributarias para compensar la pérdida de la base tributable debida a las exenciones. Las estimaciones de ahorros netos en el impuesto sobre la propiedad serían menores en aquellas comunidades, debido a que las mayores tasas tributarias contrarrestarían parcialmente el alivio tributario directo debido a las exenciones y créditos.
La figura 2 (pág. 35) muestra que el alivio total del impuesto sobre la propiedad debido a las exenciones de vivienda familiar y créditos del impuesto sobre la propiedad varía mucho entre estados, pero en general es pequeño con relación a los ingresos totales por ese concepto. En 14 de los 45 estados que tienen estos programas, los ahorros totales son menos del 0,5% de la recaudación total del impuesto sobre la propiedad; en 27 estados, los ahorros son menos del 2,5%. Por otro lado, los ahorros tributarios en nueve estados son mayores o iguales al 10% de los ingresos totales del impuesto sobre la propiedad. El programa de Indiana es particularmente generoso, ya que ofrece a todos los propietarios una exención de US$45.000, y después una exención adicional del 35% para los primeros US$600.000 de valuación fiscal y una exención del 25% para las valuaciones que superan los US$600.000.
Ahorros tributarios por distintos tipos de programas
La mayoría de los estados tienen más de un programa de exención o crédito del impuesto sobre la propiedad, dirigidos a distintos grupos de contribuyentes: normalmente, a todos los propietarios, a los mayores, a los veteranos de guerra o a los discapacitados. La figura 3 (pág. 36) presenta estimaciones de la proporción de propietarios elegibles para estos programas, junto con el nivel de ahorros tributarios que reciben.
Propietarios
En 26 estados hay programas que cubren a la casi totalidad de los propietarios, pero en general están limitados a la primera vivienda ocupada por sus propietarios. En los programas para un estado típico, la mediana del valor que cada propietario recibe es un descuento del 12,5% en su impuesto sobre la propiedad. En el extremo superior, sin embargo, la mediana del descuento del impuesto sobre la propiedad fue de al menos un 25% en más de un cuarto de los estados que tenían estos programas.
Adultos mayores
18 estados cuentan con programas de alivio del impuesto sobre la propiedad para propietarios mayores (normalmente a partir de 65 años de edad). Estos programas son mucho más generosos que aquellos que cubren a todos los propietarios, con una mediana de reducción tributaria de casi el 30% en un estado típico. Más de la mitad de estos programas proporcionan una mediana de descuento de por lo menos el 25%, y sólo un sexto de ellos tienen una mediana de descuento de menos del 10%.
En la mediana de los estados, el 19,6% de los propietarios son elegibles para los programas, pero las tasas de elegibilidad varían mucho entre un estado y otro, dependiendo de si hay un límite de ingresos. En los siete estados que proporcionan alivio del impuesto sobre la propiedad a los adultos mayores sin tener en cuenta el nivel de ingresos, normalmente un 25–30% de los propietarios son elegibles. Pero en siete estados con programas sólo para propietarios de bajos ingresos (límites entre US$10.000 y US$30.000), sólo del 5 al 10% de los propietarios son elegibles. Los otros cuatro estados con programas de alivio del impuesto sobre la propiedad para adultos mayores no se pueden clasificar en ninguna de estas dos categorías, porque marcan un tope de ingresos, ponen límites estrictos de riqueza u otros criterios de elegibilidad.
Veteranos de guerra
Los programas estatales para veteranos de guerra están más extendidos que para cualquier otro grupo de propietarios, aun cuando la elegibilidad frecuentemente está limitada a los discapacitados. En efecto, sólo 10 estados proporcionan exenciones o créditos del impuesto sobre la propiedad para todos los veteranos, incluso a aquellos sin discapacidades. En la mediana de los estados para estos programas, el beneficiario típico recibe un descuento en el impuesto sobre la propiedad de sólo el 3,2%.
Hay 31 estados que proporcionan exenciones o créditos al impuesto sobre la propiedad a veteranos de guerra con discapacidades relacionadas con su servicio en las Fuerzas Armadas. Debido al requisito de discapacidad, la mayoría de los veteranos de guerra no son elegibles para estos programas. En efecto, sólo el 15% de los veteranos de guerra son elegibles en el estado típico. En general, sólo el 0,6% de los propietarios son elegibles para estos programas en la mediana de los estados.
Más aún, la mayoría de los 31 programas determinan la elegibilidad y los niveles de beneficio aplicando la graduación de discapacidad del Departamento de Asuntos de Veteranos. Sólo siete estados tienen programas para todos los veteranos parcialmente discapacitados, y aquellos con un grado de discapacidad menor normalmente reciben descuentos tributarios modestos. Por otro lado, 18 estados restringen la elegibilidad a veteranos de guerra que sufren discapacidad permanente y total. Estos programas benefician a una proporción muy pequeña de veteranos de guerra, pero en general les proporciona una exención completa del impuesto sobre la propiedad.
Discapacitados
23 estados tienen programas para los propietarios discapacitados, pero en realidad están dirigidos a dos grupos distintos: los propietarios discapacitados y los propietarios invidentes. En 2012, 12 estados tenían programas para propietarios discapacitados, siete estados tenían programas para los invidentes y cinco estados cubrían a ambos grupos. Los programas para discapacitados normalmente exigen que los beneficiarios tengan una discapacidad permanente y total, pero los criterios exactos varían. En la mediana de los estados, el 2,3% de los propietarios son elegibles para estos programas y reciben una mediana de descuento en el impuesto sobre la propiedad del 21%.
Conclusión
Las exenciones para vivienda familiar y los créditos del impuesto sobre la propiedad son una parte importante del sistema de impuestos sobre la propiedad. Estos programas se usan en casi todos los estados y pueden resultar en una distribución de impuestos sobre la propiedad mucho más progresiva. Por lo tanto, es fundamental que los dirigentes políticos dispongan de datos fidedignos sobre el alivio del impuesto sobre la propiedad que estos programas proporcionan realmente.
Por primera vez, nuevas investigaciones permiten disponer de esta información. Mediante el uso del subcentro web Características significativas del impuesto sobre la propiedad del Instituto Lincoln, los dirigentes políticos pueden comparar fácilmente las características clave de los programas de exención y crédito del impuesto sobre la propiedad en los distintos estados, y consultar las estimaciones de elegibilidad y ahorros tributarios. Estos datos permiten evaluar el impacto de las exenciones y créditos del impuesto sobre la propiedad en cada estado en particular, así como encontrar ideas para mejorar los programas.
Adam H. Langley es Analista de Investigación Senior del Instituto Lincoln de Políticas de Suelo. Un agradecimiento especial para Andrew Reschovsky, quien proporcionó exhaustivos comentarios sobre este artículo y otros documentos relacionados.
Referencias
Bowman, John H., Daphne A. Kenyon, Adam Langley, and Bethany P. Paquin. 2009. Property Tax Circuit Breakers: Fair and Cost-Effective Relief for Taxpayers. Cambridge, MA: Lincoln Institute of Land Policy.
Cabral, Marika, and Caroline Hoxby. 2012. “The Hated Property Tax: Salience, Tax Rates, and Tax Revolts.” Cambridge, MA: National Bureau of Economic Research. Working paper 18514. November.
Kenyon, Daphne A. 2007. The Property Tax-School Funding Dilemma. Cambridge, MA: Lincoln Institute of Land Policy.
Langley, Adam H. 2015. “Estimating Tax Savings from Homestead Exemptions and Property Tax Credits.” Working paper. Cambridge, MA: Lincoln Institute of Land Policy.
Lincoln Institute of Land Policy. 2014. Significant Features of the Property Tax. Residential Property Tax Relief Programs: Summary Table on Exemptions and Credits in 2012. www.lincolninst.edu/subcenters/significant-features-property-tax/Report_Residential_Property_Tax_Relief_Programs.aspx
Lincoln Institute of Land Policy. 2015. Significant Features of the Property Tax. Tax Savings from Property Tax Exemptions and Credits in 2012. www.lincolninst.edu/subcenters/significant-features-property-tax/Report_Residential_Property_Tax_Relief_Programs.aspx
Over the past five years, the Lincoln Institute has supported the study of value capture policies and instruments in many Latin American countries. Notwithstanding the diversity of approaches and the variety of specific cases, we have identified seven substantive lessons that can help to clarify some of the confusion and misunderstandings associated with the implementation of value capture principles. Each lesson summarized below presents one or two examples drawn from the book, Recuperación de Plusvalías en América Latina: Alternativas para el Desarrollo Urbano.
Value capture refers to the process by which all or a portion of increments in land value attributed to “community efforts” rather than landowner actions are recovered by the public sector. These “unearned increments” may be captured indirectly through their conversion into public revenues as taxes, fees, exactions or other fiscal means, or directly through on-site improvements to benefit the community at large.
1. Value capture is not a new concept in Latin America. The Latin American experience with value capture has long-standing historical precedents. Public debates on the use of value capture and related instruments have been held since the beginning of the twentieth century in several countries. In the 1920s, the debate was triggered by concrete events, such as the problem of paving streets in São Paulo, Brazil, and the lack of external financing for needed public works in Colombia. In other cases, political and ideological factors have motivated national discussions. Representatives of the Partido Radical in Chile made several attempts to introduce the idea, and in the 1930s President Aguirre Cerda proposed legislation to create a national tax on plusvalías (land value increments) based on the ideas of Henry George.
2. However, its application in the urban policy agenda is still limited. Despite many reports of relevant experiences that integrate the principles of value capture, the issue is not well represented or even sufficiently acknowledged within the sphere of urban policy. In some instances, promising value capture initiatives have gained prominence in their own times, only to be forgotten later. An important example is the well-known Lander Report from Venezuela, which proposed in the 1960s that land and its increments in value should be the main source of financing for urban development projects. That report formed the basis for recommendations on urban development finance included in the proceedings of Habitat I (1976).
In other cases, interesting opportunities to use value capture as a tool for urban policy are being lost or ignored. Currently some Latin American countries are not taking advantage of potential unearned land value increments generated by major inner-city revitalization projects. While there is general acceptance of the notion of capturing increases in land values, in reality little of that increased value derived from public action has actually been recovered and redistributed.
3. Legislation often exists but is not implemented. As in many other countries in the region, the variety of value capture instruments available in Mexico, ranging from the contribución por mejoras (a special assessment or betterment levy aimed at recovering the costs of public works) to taxes on plusvalías, illustrates the discrepancy between what is legally possible and what is actually implemented. Contrary to what is often alleged, the general problem is not that the planners or local officials lack legal or practical access to these instruments but that the following conditions tend to prevail.
4. Resistance is more ideological than logical. Even when value capture legislation and instruments are understood (or in some cases because they are understood), they may not be implemented fully due to the proverbial “lack of political will.” This resistance may take the form of misleading interpretations, stereotyped rationalizations and even pure ideological “preaching.”
It is not hard to find public justification that the application of such instruments is neither timely nor appropriate, especially if the justification is based on misleading interpretations. Some such arguments are that impositions on land values are inflationary and disruptive of well-functioning markets, or that they incur unacceptable taxation of the same base twice. Such misconceptions seem to lie behind the reluctance of the Ministry of Housing and Urbanism of Chile to promote the review and resubmission to the Congress of some value capture provisions in the country’s new legal framework on urbanism.
Objections based on stereotyped rationalizations may use the following arguments:
Contradicting these arguments, however, are the development of successful participatory improvement programs in poor areas of many cities (for instance in Chile, Brazil and Peru). These programs have been technically and economically efficient and usually have strong support from the low-income population affected.
Finally, some objections are of a purely ideological nature. The resistance to the implementation of participación en plusvalías in Colombia, for example, is based on the allegation that this device, although recognized as technically well-formulated, represents one more unwanted public “interference” on urban real estate business, such as a higher fiscal burden, limitations on property rights or more regulation (Barco de Botero and Smolka 2000). This position has been replaced recently by a broad consensus among politicians, business leaders and the general public that acceptance of this instrument is a better option than the imposition of additional property taxes.
5. Value capture is gradually becoming more popular. In spite of the obstacles and political resistance, recent Latin American experience with value capture shows a growing interest in the subject and in the conditions that would justify its utilization. Value capture is attracting the attention of municipal planners throughout the region, and it is beginning to be perceived as an important urban policy initiative. This growing popularity is related to several factors occurring in the region.
First, greater administrative and fiscal decentralization requires more autonomy in redefining and obtaining alternative sources of public funds to finance the urbanization process. The need for more local resources has been reinforced by the social demands and political pressures associated with current redemocratization processes and growing levels of popular participation. Formation of extra-budget funds to finance special social programs is linked to almost all new value capture initiatives and has been one of the most attractive reasons for implementing those policies.
Second, the redefinition of the functions of the state (including privatization), together with the decline of comprehensive planning, have set the stage for the development of more flexible public interventions and direct negotiations in land use regulation and public-private partnerships. The release of public areas to the private land market, as well as better coordination between real estate and public sector interests to promote new areas in the cities, are also significant. It is worth noting that even in Cuba one finds a vigorous program through which the Office of the Historian in Havana, operating as a kind of property holding company, refinances its state-owned operations with land value increments resulting from urban renovation projects in the form of rents charged to private development “partners” (Nuñez, Brown and Smolka 2000).
Other favorable factors include the conditions imposed by the agendas of the multilateral agencies, which clearly promote the universalization of user charges and the recovery of the costs of public investments. The growing popularity of new value capture instruments can also be attributed to some frustration with the poor results obtained from the application of taxes and other traditional charges related to urban land in past decades, in terms of both revenues and urban policy objectives.
6. Pragmatism overrides ethical or theoretical justifications. A corollary to the preceding point is that the growing popularity of value capture seems to be inspired more by eminently pragmatic reasons than by ethical criteria, notions of equality, or theoretical and political justifications. Some reforms may even have been introduced without full political awareness of the process, or of its theoretical importance, as previously illustrated in the Mexicali case. The historical evidence shows that most value capture initiatives have responded above all to the need to face fiscal crises and other local problems in the financing of urban development. This is the case even in Argentina, where the need for revenues prevailed over established principles opposed to new taxes when a temporary five-percent increase in the property tax was used as one of the initiatives to finance investments in the new Buenos Aires subway system.
Nevertheless, one should not assume from the above examples that accumulation of experience is not important for the refinement of instruments and the evolution of value capture policies. A case in point is the Colombian experience with the contribución de valorización since the 1920s and the many attempts to overcome some of its limitations, especially in the past 40 years. The recently enacted participación en plusvalías is a more technically developed and politically acceptable version of an instrument targeted to capture the sometimes huge land value increments associated with administrative decisions concerning zoning, density levels and other urbanistic norms and regulations.
7. Value capture is not necessarily progressive or redistributive. It must be noted that the reference to plusvalías is in no way a monopoly of the political left. Both Argentina’s and Chile’s recent experiences show clearly the disposition toward the subject in neo-liberal contexts. In addition, the operacões interligadas (linkage operations) developed in São Paulo, and effectively applied by administrations of opposing political and ideological tendencies, put forward a convincing argument about the impossibility of labeling these instruments in advance.
Progressive local governments, on the other hand, are sometimes reluctant to apply these instruments, and may even reject the notion altogether, for three reasons. First, they may believe that such contributions would be simply a mechanism to impose additional fiscal charges with no redistributive impact whatsoever. Second, even when the resulting revenues are earmarked for the low-income population, they may be insufficient to reduce the absolute differences between rich and poor in the access to the serviced land (Furtado 2000). And third is the intergenerational argument that such charges are being imposed on newer, generally poor, residents who need services, whereas earlier generations were not charged for infrastructure services or amenities.
Thus, the progressive nature of such policies is not resolved by “taxing” land value increments or by focusing on high-income taxpayers. The “Robin Hood” image of such policies fades once it becomes clear that the part of the value actually captured in this way tends to be only a fraction, and often a small one, of what the owner actually receives in benefits. This point seems to have been well understood by many lower-income populations, like those in Lima where a successful program featuring some 30 projects used the contribución de mejoras to finance public works in the early 1990s.
This example and other strong evidence support the need to revisit the conventional wisdom regarding the tension between the principles of benefit and capacity of payment. In practice, the strategy of attracting some public intervention to one’s neighborhood (even if it means paying for its costs) is more advantageous than the alternative of being neglected. This point should, nevertheless, be taken with caution, in light of certain experiences where the contribución de mejoras has been applied in low-income areas with purposes other than benefiting the occupants-for example, to justify the eviction or force the departure of those who cannot pay for the improvements (Everett 1999).
Final Considerations
In spite of the difficulties in interpretation and resistance to implementation outlined above, value capture policies are undeniably arousing new interest and growing acceptance. Efforts to utilize value capture have grown in both number and creativity, and its virtues beyond being an alternative source of public financing are becoming better understood. Public administrations are realizing the “market value” of their prerogative to control land use rights, as well as to define the location and timing of public works. They also see that the transparent negotiation of land use and density ratios reduces the margin of transactions that used to be carried out “under the table.” As the link between public intervention and land value increment is becoming more visible, attitudes are changing to be more conducive to building a fiscal culture that will strengthen property taxes and local revenues in general.
However, there is still much to be done in two spheres: researching the complex nature of value capture policies and promoting greater understanding among public officials with regard to how it can be used to benefit their communities. More knowledge is required on certain Latin American idiosyncrasies, such as when significant land value increments are generated under alternative land tenure regimes that are outside the protection of the state, and in cases where the land represents an important mechanism of capitalization for the poor.
Beyond the traditional, structural constraints of patrimonialism, corruption, hidden interests, ideological insensitivity and the like, a considerable part of the “unexplained variance” in different experiences with value capture in Latin America can be attributed to lack of information. Toward that end of improving understanding of the principles and implementation of value capture, there remain many opportunities to document and analyze current experiences with alternative land valuation and taxation instruments.
Martim Smolka is a senior fellow and the director of the Lincoln Institute’s Latin American Program, and Fernanda Furtado is a fellow of the Institute and a professor in the Postgraduate Program in Urbanism at the Federal University of Rio de Janeiro.
References
Barco de Botero, Carolina, and Martim Smolka. 2000.Challenges in Implementing Colombia’s Participación en Plusvalías. Land Lines 12 (March):4-7.
Everett, Margaret. 1999. Human Rights and Evictions of the Urban Poor in Colombia. Land Lines 11 (November):6-8.
Furtado, Fernanda. 2000. Rethinking Value Capture Policies for Latin America. Land Lines 12 (May):8-10.
Nuñez, Ricardo, H. James Brown, and Martim Smolka. 2000. Using Land Value to Promote Development in Cuba. Land Lines 12 (March):1-4.
Perlo Cohen, Manuel. 1999. Mexicali: A Success Story of Property Tax Reform. Land Lines 11 (September):6-7.
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The interactions between land and property markets and the broader economy of cities and nations are central to the Lincoln Institute’s concerns. Two key objectives of our work in this area are (1) to raise awareness about the stakes of good land policy for creating well-functioning land and property markets and for improving the performance of financial markets, labor markets, the fiscal affairs of local and national governments, and ultimately the economic health of both cities and countries; and (2) to indicate the need for high quality data and an appropriate analytical framework to aid in understanding the importance of good land policy, monitoring the effects of land policies throughout the economy and facilitating policy reforms. In November 1997, the Lincoln Institute held a conference on the theme of “Land Prices, Information Systems, and the Market for Land Information” to explore these issues.
Land Values and Land Policy
How important are the stakes of good land policy? Hee-Nam Jung of the Korean Research Institute for Human Settlements reported on the importance of land markets in the economies of five countries (see Table 1). The value of land in mature economies such as Canada, France and the United States ranged from about one-third to three-quarters of GNP during the mid-1980s, and represented from 8 to 21 percent of estimated national wealth. In the more rapidly growing economies of Japan and Korea, land values were from three to six times as high as GNP in the 1980s, and represented half or more of estimated national wealth. In the mature economies these figures illustrate the importance of land as a source of wealth, but in rapidly growing economies land has an even more significant role in determining economic welfare and a host of incentives for the performance of the economy.
In Japan, for example, booming land and property values during the 1980s served as collateral to fund credit expansion throughout the economy and, indeed, throughout the world. Land prices in Japan’s six largest cities increased dramatically from 1980 to 1991, at a compound rate of about 12 percent annually (see Figure 1). By 1990, the estimated price of land being developed for residential purposes in Tokyo was estimated to be about $3,000 per square meter, compared to figures of roughly $110 in Toronto and Paris and $70 in Washington, D.C.
Between 1991 and 1996, however, Japanese land prices fell by nearly half, taking down the Japanese economy and a host of financial institutions in its wake. The cumulative losses of the Japanese banking system associated with the collapse of the property market and associated businesses are estimated around $1 trillion, making the U.S. Savings and Loan “crisis” seem comparatively insignificant. Analysis of Japanese land policy suggests some of the causes of the boom and bust cycle in land prices: policies that have severely restricted conversion of agricultural land to urban uses; an especially complex land development system that requires exceptionally long times for approvals; and a fiscal system that places little emphasis on the taxation of land and property values.
Land prices in Korea also rose at a tremendous rate during the 1980s-over 16 percent annually from 1981 to 1991. Remarkably, in most years nominal capital gains on Korean land were greater than Korea’s GNP. Jung explained that these gains had profound implications for the distribution of wealth and income in Korea, and for economic incentives. Not surprisingly, the recent collapse of Korean property markets has had tidal effects throughout the economy. As in the case of Japan, the Korean land policy framework has been seen as highly questionable. Government intervention in land and property markets over the years has been responsible for severely distorted markets that represent a major structural imbalance in the Korean economy.
Using Land Market Data for Policy Analysis
Other speakers at the conference presented information on the importance of land market performance for a variety of stakeholders throughout the economy: consumers and taxpayers; land developers and builders of residential and non-residential properties; banks and financial institutions; and both local and central governments. In the case of Cracow, Poland, Alain Bertaud from the World Bank indicated that policies embodied in master plans and zoning regulations were highly inconsistent with the nominal objectives of the regulations, and would lead to inefficient and costly spatial patterns within the city. His paper illustrated the value of having good data on land prices, regulations and the spatial distribution of the population in order to evaluate the effects of policies involving land use, infrastructure and property taxation.
Paul Cheshire from Oberlin College and Stephen Sheppard from the London School of Economics illustrated how data on land and housing prices, land and housing characteristics, and regulations can be used to evaluate the effects of government policies such as the preservation of urban open space. Jean-Paul Blandinieres of the French Ministry of Equipment, Transportation and Housing discussed an ambitious program of the French government to establish “Urban Observatories” to collect and analyze information on land and property markets and the effects of government policies.
Data Collection on Land and Property Markets
Recognition of the costs of land policy failures or, conversely, of the benefits associated with implementing good policies, has given rise to a number of systematic efforts to collect and analyze high quality data on land and property markets within various institutional settings. Pablo Trivelli discussed land and property information systems in Latin America that serve the needs of public and private stakeholders. Perhaps the most impressive of these is an effort in Brazil called EMBRAESP, which monitors key indicators of urban property market performance along with urban legislation, land regulations and major public works projects that might have an impact on the behavior of property markets. Data and analyses from EMBRAESP are of interest to many institutions throughout Brazil. The distribution of the information is self-sustaining through contracts with major newspaper chains, sales of periodic bulletins, disks containing standard data, and special reports responding to individual demands. Much of this information can also be accessed through the Internet.
Another major data collection and analysis effort was reported by David Dowall from the University of California-Berkeley. He developed the “Land Market Assessment,” a tool for analysis of land and housing markets that has been applied in over 30 developing countries and transitional economies. At comparatively modest cost, data are collected through aerial photos and satellite images, surveys of land brokers, and secondary sources on population, infrastructure and regulatory frameworks. Dowall’s analysis of the experience with these assessments documents a number of generic policy findings, especially concerning the costs of inappropriate land policies. His work also suggests that even more cost-effective versions of the tool can be developed that will illustrate the workings of land markets and beneficial policy reforms.
Romeo Sherko, David Stanfield and Malcolm Childress from the Land Tenure Center at the University of Wisconsin-Madison, addressed the issue of designing a strategy for the creation and dissemination of land information in transitional economies, where information has historically been tightly held, thus frustrating both the evolution of property markets and opportunities for policy analysis. Their conclusions regarding the role of the public and private sectors, the scope of data collection, and pricing and dissemination strategies help to explain why land market information is often not provided or is poorly provided by either the government or the private sector. On the other hand, their analysis suggests that the benefits of good land market information are considerable. Some of these benefits were illustrated by David Dale-Johnson from the University of Southern California and Jan Brzeski from Jagellonian University, Cracow, who discussed efforts to document rapidly evolving market prices of property in Cracow and to inform property tax reform efforts.
Samu Kurri, Seppo Laakso, and Heikki Loikkanen of the Finnish Government Institute of Economic Research discussed the land price information system in Finland, suggesting that it is only now beginning to catch up with the needs of many different potential users of the data. These users include those concerned with implementation of a new property tax and macro-economic and financial sector policymakers concerned with the interaction of the Finnish property market and national economic performance. Karl (Chip) Case of Wellesley College presented findings from a preliminary analysis of 100 years of land prices in Boston, which was designed, among other things, to highlight some of the methodological difficulties of measuring land prices in a way that facilitates policy analysis and reform.
Stephen K. Mayo is a senior fellow of the Lincoln Institute.
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Education, training, research, and dissemination have been the instruments used most frequently by the Lincoln Institute to achieve its goals of expanding and making available its knowledge of land policy and taxation. Recently the Institute has begun to combine these instruments in demonstration projects, which involve the application of knowledge, data collection, and expertise to the development and implementation of policy in specific circumstances.
Several ongoing projects provide expert advice and assistance to agencies that are considering new approaches to property taxation, planning, or development. Examples include the consideration of property and land tax reform in several states, the management of state-owned lands, land market monitoring, and support for new approaches to urbanization in Latin America.
Moving forward, the scope of Institute demonstration projects will expand to include the analysis of policies as they are being applied and to document their outcomes. The aim of this expansion is to improve our understanding of the effectiveness of new policy initiatives—what works and in what conditions it does so.
Whether a policy works or not is normally defined in terms of the achievement of the policy’s intended objectives. Thus, our approach would be limited to those policies that have well-defined objectives or intended outcomes. Assessing the achievement of outcomes will be based on performance indicators that measure attainment of the policy’s objectives as well as on the change in other relevant parameters.
Perhaps most important, these demonstration projects will require the collection of baseline data before policy implementation begins so that the analysis of policy effects has a valid benchmark for comparison. Many studies of the impact of policies are severely handicapped by a lack of a good baseline from which to measure change.
When a policy intervention is successful in one application, its results are sometimes readily transferable to other environments, but that is not always the case. For example, the effectiveness of property tax policies may vary with institutional factors such as the clarity of a country’s property rights regime or the independence of the assessment appeal process from political pressure. If institutional dimensions are important determinants of policy effectiveness, more than one assessment of a policy application is needed to determine the influence of those factors. The assumption that “one size fits all” is rarely true when institutional details are an important determinant of policy performance—as they often are in land policy and taxation.
Well-documented case studies of the impact of policies can be powerful instruments in the classroom and as evidence in policy debates. Policy makers and many students often find the results of rigorous case studies to be more accessible and compelling. We anticipate that the results of the Institute’s demonstration projects will contribute valuable new material to our education and research programs.
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To enhance the Lincoln Institute’s commitment to building research capacity on international land policy issues, the Program on Latin America and the Caribbean initiated an expanded effort in 2006 to support research in that region. Since then the Lincoln Institute has issued annual public requests for research proposals that set out the criteria used to evaluate the proposals and a set of priority thematic topics, normally related to land markets, local public finance, and urban development. This year’s priorities include implementation and impacts of land use regulations; land-based instruments to finance urban development; land markets; and urban form.
Most of those who submit research proposals are affiliated with academic institutions throughout Latin America. Other applicants are typically practitioners from government entities, nongovernmental organizations, and private consultancies, as well as scholars working on Latin American themes at universities outside the region. About two-thirds of the proposals submitted and funded are from researchers having no prior affiliation with our Latin America Program, which is consistent with one objective of the research program—to widen the network of those studying land policy issues in the region.
The average size of research project funding has increased over time from around $10,000 in 2006 to about $26,000 at present. Some projects that involve extensive field work to support empirically based research have received larger amounts. Over time the program has also become more competitive, with the number of applications growing from 90 in the first year to 150 currently.
The priority topics and selection criteria are designed to encourage empirical studies, and the 18-month funding cycle allows time for data collection, analysis, and preparation of a final report. Lincoln Institute staff provide technical assistance to many researchers as they finalize their research designs and carry out their work. The participants are also invited to a methods workshop at the beginning of each research project cycle to review survey instrument and sample design, multivariate statistical analysis, experimental methods, and the use of geographic information systems.
At the end of each research project cycle all participants discuss each others’ draft papers at a research seminar. Both the methods workshop and research seminar are highly valued by the researchers, and the events have been offered in Colombia, Argentina, and Costa Rica to facilitate access from different parts of the region. Other training courses offered by the Latin America Program, such as those on urban economics and land market analysis, are also often relevant for those carrying out these research projects.
Selected final research reports are posted as working papers on the Lincoln Institute Web site. Currently 33 final papers are available and another 15 are in process. Many of these papers are downloadable in both English and either Spanish or Portuguese. In addition, seven of the completed research papers have been summarized as Land Lines articles, making their results accessible to a wide audience. This April issue presents one such report on home values in Mexico, and announces the completion of a CD-ROM that compiles more than 80 Land Lines articles that have been translated into Spanish under the title Perspectivas Urbanas.
This research program complements another long-standing Latin America Program initiative that provides support for students working on dissertation and masters theses. The graduate student program is also competitive and based on open requests for proposals. In the past two years, the Lincoln Institute has taken steps to increase the coordination between these two research support initiatives, particularly by coordinating the priority topics and harmonizing the selection criteria. By supporting both emerging graduates and more experienced researchers, these initiatives are developing an extensive network of capable analysts who can advance knowledge about land policy and its consequences in Latin America.
The request for research proposals in 2010 will be posted on the Lincoln Institute’s Web site and distributed electronically by email to those in the region who have registered on our Web site. See page 28 of this Land Lines issue for additional information.
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Sally Powers has been a visiting fellow in the Department of Valuation and Taxation at the Lincoln Institute of Land Policy since 2009. She was director of assessment for the City of Cambridge for thirteen years until 2001, when she became an international consultant. That work has taken her to Kosovo, Montenegro, South Africa, the Kyrgyz Republic, and Turkmenistan, among other countries, where she has participated in projects on property taxation, market value revaluations, and establishment of a valuation profession for a transition economy.
Her career as an assessment administrator and consultant has involved all aspects of property taxation: legal framework, property appraisal, value defense, local government finance, tax policy, project planning and execution, public information, software specification and testing, cadastral/GIS (geographic information systems) mapping and analysis platforms, and tax collection and enforcement. Her research interests focus on mass appraisal, specifically the application of econometric techniques to analyze market activity and develop models to estimate the market value of properties that have not sold. She has written on topics as diverse as appraisal modeling, implementation of the local property tax in Kosovo, and property tax collection strategies.
Powers received her bachelor’s degree in anthropology from the University of Chicago, and she holds a Master of Science degree from the Boston College Carroll School of Management.
LAND LINES: How does your work fit within the research and education program of the Lincoln Institute?
SALLY POWERS: The Lincoln Institute is a leader in property tax policy, and its work influences the local government officials responsible for the property tax in thousands of jurisdictions across the United States and internationally. The Department of Valuation and Taxation presents a variety of conferences, seminars, and courses for property tax professionals, and I have served as faculty for a number of these programs since the 1990s. I’m also involved in working directly with local tax practitioners and in research projects that will continue to challenge the conventional wisdom about the property tax.
LAND LINES: What are some of your current projects?
SALLY POWERS: One major project deals with a joint venture between the Lincoln Institute and the George Washington Institute of Public Policy to create a free, downloadable property tax database for all 50 U.S. states and the District of Columbia. The Significant Features of the Property Tax Web site was launched in June 2009, and the information is updated every year to keep current with changes in the legislation that regulates the property tax in each state.
We regularly expand the subject matter to be included, and have made the site a central access point for information about the property tax from a variety of federal, state, and scholarly sources. For example, the only nationwide study of effective tax rates is published by the Minnesota Taxpayers Association, and this publication is now available for downloading from the Significant Features site. The next topic we plan to organize for presentation on the Web site is the various forms of property classification for tax purposes.
LAND LINES: Can you clarify what an effective tax rate and classification mean, and why they are important aspects of this database?
SALLY POWERS: The property tax rate by itself does not explain much about the property tax burden in a particular community or provide any basis for comparison across jurisdictions. A high tax rate may simply reflect low property values, and a low tax rate may reflect very high values. Effective tax rates are calculated by comparing the amount of the property tax bill for a property to its market value, which may or may not be the same or even close to its assessed value. Effective tax rates, where they are available, thus make it possible to understand the impact of a tax bill intuitively and to make better informed cross-jurisdictional comparisons.
Classification of property is undertaken by many states, either legislatively or in the state’s constitution, to identify property categories based on use, the most common uses being residential, commercial, and industrial. In some states the classifications are applied for identification and reporting purposes only. However, it is employed more frequently to tax favored classes at lower rates than other classes. The most favored classes are generally residential and agricultural uses.
LAND LINES: Based on your research, how well is the property tax holding up as a primary local revenue source during the current recession?
SALLY POWERS: There are two major components to a property tax bill: the property value and the tax rate, as discussed above. In states where local tax jurisdictions are not encumbered with extreme limits on tax rates, the property tax can be quite resilient, because when values decrease the tax rate may be increased. In addition, the value always represents an assessment as of a specific date prior to the issuance of the tax bill. It is not unusual for this assessment date to be a year and a half or more before the date of issuance of tax bills. This “assessment lag” gives local jurisdictions a cushion in times of rapidly changing markets, with time to plan for the eventual change in the level of assessed values and to investigate other local revenue sources. To date, research on property tax revenues during the current down-turn has borne out these features of the property tax.
LAND LINES: It’s clear that the American property tax is a complex affair. How does this compare to your experience in other countries?
SALLY POWERS: International experience with the property tax varies greatly, depending on the maturity of the property tax system, the culture, and the legal underpinnings for the tax. The projects I worked on in Eastern Europe were introducing a market value based property tax. Political leaders and central and local public officials had no difficulty with the concept of market value. Valuation methods were uncomplicated and directly related to sales. A common theme in the U.S. and many other countries, however, is the desire to make the burden of the property tax smaller for residences than for businesses. Some of the proposed formulas to provide tax relief are extremely complicated, such as relating property value to household size and ages of household members.
LAND LINES: How widespread is the property tax?
SALLY POWERS: It is quite surprising how many countries assess some form of tax or fee on property or property rights. Another Lincoln Institute project I am working on is the African Tax Institute (ATI), a joint venture with the University of South Africa at Pretoria. More than ten research fellows at ATI have visited one or more of 38 countries to develop in-depth reports on the various forms of tax on property (Franzsen and Youngman 2009). Most of those reports and supplemental appendices are posted on the Lincoln Institute Web site as working papers. In every country studied the researchers found some sort of tax or fee on ownership or use of property. In many countries all land is owned by the government, but the rights to use the land are owned by individuals and companies that pay fees and taxes on their use rights.
In countries of the former Yugoslavia, for example, the property tax is a familiar concept. In the early 1990s, the Federal Republic of Yugoslavia established a privatization program that transferred ownership of government-owned apartment flats to individual owners. An annual tax was assessed on the owners, based on the characteristics of the property.
LAND LINES: Can you describe more about your interest and experience in econometrics applied to property market data.
SALLY POWERS: I was plunged into multiple regression analysis on my very first property tax job for the City of Boston in 1982. I was part of the team hired to use statistical analysis to develop models (formulas) that could be applied to property data to estimate market value. I was fortunate because the city hired some of the top experts in this emerging field to train us in these methods. Since then, both as an assessor and later as a consultant, I have continued to use econometric tools to estimate market value for property tax application.
It has been fascinating to participate in the increasing sophistication and effectiveness of CAMA (computer assisted mass appraisal) to generate AVMs (automated valuation models). The biggest leap in this technology takes advantage of GIS capabilities to analyze location and property value. I am looking into an econometric tool for CAMA application that analyzes data around median values rather than the mean. This is interesting because the current statistical standards for value accuracy and uniformity are calculated around the median because, compared to the mean, it measures average value with less bias from extremely high or low values.
LAND LINES: Do you have any other observations about the Institute’s work in the current volatile realm of property taxation?
SALLY POWERS: As a visiting fellow at the Lincoln Institute, I have found it especially gratifying to see the increasing public interest in the Significant Features of the Property Tax database. The Web site has been cited by many scholars in the field of local public finance, and the authors of two papers presented at recent Institute seminars used data from the site for their analyses.
Adding to its Web-based resources, the Lincoln Institute has produced more than 10 online courses on such diverse topics as property tax policy, modern valuation technologies, property tax reform in Massachusetts, and introduction of the property tax in transition economies. The IAAO (International Association of Assessing Officers), the leading membership organization for tax assessors and other property tax professionals, has recognized the value of these courses, and now its members can receive continuing education credit for taking them.
Finally, the Institute has inspired more economists to become interested in property tax valuation and equity issues. For example, economists from the University of Illinois and Florida State University are conducting studies of assessment equity that introduce contemporary econometric tools to both display and analyze patterns of overvaluation and undervaluation of property in assessing jurisdictions.
Visiting fellow Dan McMillen (2011), working with a rich data-set that includes the City of Chicago, will present his analysis and conclusions at the next annual conference of the IAAO. I will be on hand to help make his innovative findings accessible not only to the statistical analysts in the audience, but also to property tax assessors who are interested in improving values in their own jurisdictions.
References
Franzsen, Riel C. D., and Joan M. Youngman. 2009. Mapping property taxes in Africa. Land Lines 21(3): 8-13.
McMillen, Daniel P. 2011. Assessment regressivity: A tale of two Illinois counties. Land Lines 23(1): 9-15.
Significant Features of the Property Tax. www.lincolninst.edu/subcenters/significant-features-property-tax
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Over the past several decades, the structure of the U.S. economy has changed as it experienced a continuing reduction of overall employment in manufacturing and ongoing growth in the service sector, especially services involving knowledge workers. The geographic distribution of activity has also changed as population has continued to shift from the seasonal Northeast and Midwest to the warmer South and West. Finally, within metropolitan areas, populations and employment moved from cities to the suburbs as trucking and automobile travel became ubiquitous. These three trends have left many cities in the Northeast and Midwest with much smaller populations, weaker economies, fewer manufacturing jobs, and an inability to offset lost employment opportunities with gains from sectors that are expanding nationally. These are today’s legacy cities, which often have excess infrastructure capacity, underutilized housing stocks, and fiscal stress related to past obligations from public sectors now greatly diminished in size. A recent Lincoln Institute policy focus report, Regenerating America’s Legacy Cities, by Alan Mallach and Lavea Brachman, reviews the performance of a sample of these urban areas and identifies steps the more successful cities have taken to produce stronger outcomes.
While the declines of legacy cities have common causes, their economic performance has become quite diverse in recent decades, as some have delivered much stronger economic, institutional, and fiscal results than others. All legacy cities have an array of assets including infrastructure, neighborhoods, institutions, populations, and ongoing economic activity. Differences in their comparative performance are related to how local policies and leadership have leveraged existing inventories of these assets. In particular, recovering legacy cities have built upon and expanded existing institutions in research, medicine, health, and education. They have also exploited the growing interest in urban neighborhoods where it is easy to walk to stores and restaurants, and where residential densities are higher than those in most suburban communities. Recovering cities also typically have maintained or attracted more educated residents and have seen growth in knowledge-related activities.
Legacy cities that have seen their economies begin to transform and grow again have not necessarily experienced population increases. The population of most legacy cities peaked in the mid-20th century and then declined. Buffalo and St. Louis, for example, had lower populations in 2000 than in 1900. Sometimes the decline in city populations is offset by suburban growth, so that metropolitan populations do not decline. But some successful legacy cities, such as Pittsburgh, have experienced modest population declines even at the metropolitan level. Changing the composition of city populations and economic activity is more important for success than population growth alone.
The successful recovery of legacy cities normally has not resulted from megaprojects that focus on redevelopment, but on the accretion of many small steps with a large cumulative impact—an approach Mallach and Brachman have dubbed “strategic incrementalism.” Their research shows that successful legacy cities have pursued such an approach continually and relentlessly. The key elements of strategic incrementalism require the evolution of new forms for a city’s physical organization, economic components, governance, and linkages to its surrounding region. Physically, the practice involves focusing on the city’s central core, its key neighborhoods, and the management of vacant land. Economically, it involves restoring the economic role of the city based on its comparative advantages and existing assets, sharing the benefits of growth with its population, and strengthening connections to the city’s region. Cities also must strengthen their governance and address the flow of services and fiscal resources between the city and the municipalities in the greater metropolitan area.
Legacy cities have declined over many decades, and recovery will take time and require patience. While the performance of some, such as Camden, NJ, continues to deteriorate, others show signs of progress. In Pittsburgh, Philadelphia, Milwaukee, and other legacy cities on the rebound, economic performance has improved, and the rates of unemployment, crime, and poverty have fallen below national averages despite the fact that populations remain well below their peak 60 years ago.
For additional information on the determinants of legacy city success, see http://www.lincolninst.edu/pubs/2215_Regenerating-America-s-Legacy-Cities.
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The property tax is the most widely unpopular tax in America. States have responded to this public opposition by enacting a range of tax relief policies, especially for homeowners (Cabral and Hoxby 2012). Among the most commonly adopted programs are homestead exemptions and property tax credits; all but three states have at least one of these programs. But despite their broad use and their potentially large impact on the distribution of property tax burdens, there has been remarkably little data available on the tax savings generated by property tax exemptions and credits.
Two new resources, available through the Lincoln Institute’s Significant Features of the Property Tax subcenter, begin to fill this need. These tables provide information for each state on the share of homeowners eligible for these programs and the level of tax savings they receive, as well as an analysis of how eligibility and benefits vary across the income distribution (see box 1, p. 26). This article draws on these resources to provide the first national study of property tax exemptions and credits with estimates of tax savings from these programs. With this information, policy makers have a critical tool to evaluate and improve the effectiveness of their property tax relief programs.
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Box 1: State-by-State Details on Property Tax Exemptions and Credits
The Significant Features of the Property Tax sub-center provides three key resources with information on property tax exemptions and credits in all 50 states; it is accessible at www.lincolninst.edu/subcenters/significant-features-property-tax.
Tax Savings from Property Tax Exemptions and Credits
This online Excel file includes estimates of tax savings from programs in individual states (see abbreviated example below), plus overview tables that make it easy to compare across states. For each program, the file provides estimates of the number of eligible homeowners and the median benefit, as well as a distributional analysis by income quintile. This is the first time that detailed data are available for most of these programs.
Summary Table on Exemptions and Credits
This online Excel file includes a set of tables for 167 programs displaying the value of exemptions expressed in terms of market value; criteria related to age, disability, income, and veteran status; the type of taxes affected (i.e., school or county taxes); whether the tax loss is borne by state or local governments; local options; and more. The summary table makes it easy to conduct quantitative analysis of these programs or make quick state-by-state comparisons. The information in these tables was used to generate the tax savings estimates.
Residential Property Tax Relief
This section of the Significant Features website includes detailed descriptions of property tax exemptions and credits, which were used to create the online Summary Table on Exemptions and Credits. It also describes other types of property tax relief, such as circuit breakers and tax deferral programs.
Notes: Total tax savings from the Senior and Disabled Property Tax Homestead Exemption ($392M) is less than the combined total of the programs for Seniors ($378M) and the Disabled ($22M), because homeowners who are 65+ and disabled cannot claim the exemption twice. The online Summary Table shows that the Senior and Disabled Exemption is a $25,000 exemption for homeowners who are 65+ or disabled; the two Rollback programs are percentage exemptions of 2.5% and 10% for all owner-occupied residences. Source: Lincoln Institute of Land Policy (2015).
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How Property Tax Exemptions and Credits Work
Property tax relief programs come in a variety of forms. Homestead exemptions reduce the amount of property value subject to taxation, either by a fixed dollar amount or by a percentage of home value. Property tax credits, in contrast, directly reduce the homeowner’s tax bill by a fixed dollar amount or certain percentage.
As table 1 illustrates, programs designed to provide identical benefits to owners of $200,000 homes have widely different impacts on homeowners with higher- and lower-valued properties. Given a 1% tax rate, a $20,000 flat dollar exemption reduces property taxes for each homeowner by $200 ($20,000 x 1%). This program has a progressive impact on the property tax distribution because lower-income households tend to have less valuable homes, and the exemption represents a larger share of their home values. In this case, the $20,000 exemption reduces property taxes by 20% on the $100,000 home, 10% on the $200,000 home, and 5% on the $400,000 home.
A percentage exemption, in contrast, provides the same percentage reduction in taxes for all three homeowners—in this example, 10%. In dollar terms, however, percentage exemptions favor owners with higher-valued homes: a 10% across-the-board reduction lowers property taxes by only $100 on the $100,000 home but $400 on the $400,000 home.
In the case of flat dollar credits, homeowners with lower-valued homes usually receive the largest tax cuts in percentage terms. In contrast, the percentage tax credit again provides the owner of the $400,000 home the largest tax cut in dollar terms.
An important feature of property tax exemptions and percentage credits is that the dollar reduction (but not the percentage reduction) in taxes increases with tax rates. For instance, if the homes in table 1 were subject to a 2% tax rate, the dollar savings to their owners would double under the $20,000 exemption, 10% exemption, and 10% credit. While the dollar savings from flat dollar credits do not vary with tax rates, the percentage savings to homeowners decrease as tax rates rise.
Critical Features of Exemptions and Credits
The design of homestead exemption and property tax credit programs varies significantly across the 50 states. Figure 1 (p. 28) summarizes the number and share of state programs with the following key characteristics.
Benefit Calculation
Perhaps the most important feature of property tax relief programs is how benefits are calculated. In 2012, 59% of state programs provided flat dollar exemptions, 19% provided percentage exemptions, and the final fifth used property tax credits or other more complicated formulas to determine the amount of tax relief for each homeowner.
While the programs work in similar ways, their effects differ dramatically. As the examples in table 1 show, flat dollar exemptions and credits make the property tax distribution more progressive, while percentage exemptions and credits do not. As a result, to provide a certain level of tax relief for the median homeowner, percentage exemptions are more expensive than other programs because they result in larger property tax cuts for owners of higher-valued homes. Instead of changing the distribution of property taxes among homeowners, percentage exemptions are primarily a way to shift the tax burden away from homeowners as a group to businesses, renters, and owners of second homes.
State vs. Local Funding
The ultimate impact of exemptions and credits on property tax bills depends on how the programs are funded. Figure 1 shows that in 2012 only 28% of these programs included full state reimbursement to cover local revenue losses, while 57% had local governments bear revenue losses on their own. For 15% of programs, state and local governments shared the revenue loss in some way. (Broad-based programs for all homeowners or all seniors are more likely to receive state funding than programs for smaller groups such as veterans or the disabled. In 2012, 43% of tax relief programs for all homeowners or seniors were state-funded, 48% were locally-funded, and the rest split the revenue loss [Lincoln Institute of Land Policy 2014].)
The primary argument in favor of state funding of property tax exemptions and credits is that it can help mitigate disparities in property wealth across localities. Poorer communities and those without a significant business tax base typically have higher property tax rates, and these communities receive more funds per homeowner under state-funded programs. Without this assistance, communities with higher tax rates will experience larger revenue losses from tax relief programs unless they increase tax rates even further.
Seniors vs. All Age Groups
A number of states provide property tax relief for seniors. In 2012, more than a third favored seniors in some way: seven had statewide programs solely for this group, while 11 also covered younger homeowners but provided higher benefits for older homeowners. Other states provided either the same level of benefits for homeowners of all ages (15 states) or did not have broad-based programs (18 states).
Common arguments for targeting senior homeowners is that property taxes account for a larger share of their incomes, and local governments spend less on seniors than on younger homeowners with school-aged children. While it is true that property taxes account for a larger share of income for seniors than for working-age homeowners, the two groups devote nearly identical shares of their incomes to total housing costs because seniors are far less likely to have mortgages (Bowman et al. 2009, 11). In addition, property taxes are payments for public services, not user fees (Kenyon 2007, 36). Younger households without children in public schools do not benefit from property tax relief under these programs. The preferential tax treatment of seniors may simply reflect the fact that older households are a politically powerful group that votes in high numbers.
Estimating the Benefits of Exemptions and Credits
To estimate tax savings from homestead exemptions and property tax credits, the first step was to create the online Summary Table on Exemptions and Credits, which describes the key features of each program (see box 1 for description). These data draw almost entirely from the Residential Property Tax Relief Programs section of the Lincoln Institute’s Significant Features of the Property Tax database.
The second step was to combine this information with household-level data from the 2008–2012 American Community Survey (ACS). This nationally representative survey has data on more than 6.5 million U.S. households, including the household characteristics that determine program eligibility (age, income, disability, veteran status, etc.) and level of benefits received (home values and property tax bills). For a full explanation of the methodology used to estimate tax savings from exemptions and credits, see Langley (2015).
It is important to note that the estimates reported here are gross property tax savings. Tax relief programs often lead to higher property tax rates, especially under locally-funded programs where jurisdictions raise tax rates to offset the drop in the tax base from the exemptions. Estimates of net property tax savings would be lower in those communities, because the higher tax rates offset some of the direct tax relief provided from exemptions and credits.
Figure 2 shows that total property tax relief from homestead exemptions and property tax credits varies widely across states, but is generally small relative to total property tax revenues. In 14 of the 45 states with these programs, total savings are less than 0.5% of property tax revenues; in 27 states, the savings are less than 2.5%. At the same time, though, tax savings in nine states equal or exceed 10% of total property tax revenues. Indiana’s program is particularly generous, offering all homeowners a $45,000 exemption, then an additional 35% exemption for the first $600,000 in assessed value and a 25% exemption for value above $600,000.
Tax Savings for Different Types of Programs
Most states have more than one property tax exemption or credit program, with different programs targeting different groups of taxpayers—typically all homeowners, seniors, veterans, or the disabled. Figure 3 presents estimates on the share of homeowners eligible for these programs, along with the level of tax savings they receive.
Homeowners
Programs in 26 states are for nearly all homeowners, but usually limited to owner-occupied primary residences. In the typical state with these programs, the median homeowner receives a 12.5% cut in property taxes. On the high end, however, the median property tax cut was at least 25% in more than a quarter of states with these programs.
Seniors
Property tax relief programs in 18 states target older homeowners (typically at least age 65). These programs are much more generous than those covering all homeowners, with a median tax reduction of nearly 30% in the typical state. More than half of these programs provide a median tax cut of at least 25%, while only a sixth of them provide a median tax savings of less than 10%.
In the median state, 19.6% of homeowners are eligible for the programs, but eligibility rates vary greatly across states depending on whether there is an income ceiling. In the seven states that provide property tax relief to seniors regardless of income, 25–30% of homeowners are typically eligible. But in seven states with low income cutoffs ($10,000 to $30,000), only 5–10% of homeowners qualify. The other four states with property tax relief programs for seniors do not fit neatly into these two categories because they have higher income ceilings, strict wealth limits, or other eligibility criteria.
Veterans
State programs for veterans are more common than for any other group of homeowners, although eligibility is often limited to those who are disabled. Indeed, only 10 states provide property tax exemptions or credits for all veterans, even those without disabilities. In the median state with these programs, the typical beneficiary receives a property tax cut of just 3.2%.
There are 31 states that provide property tax exemptions or credits to veterans with service-connected disabilities. Because of the disability requirement, most veterans are ineligible for the programs. Indeed, only 15% of veterans qualify in the typical state. Overall, just 0.6% of homeowners are eligible for these programs in the median state.
Moreover, most of the 31 programs base eligibility and benefit levels on disability ratings from the Department of Veterans Affairs. Just seven states have programs for all partially disabled veterans, and veterans with lower disability ratings typically receive modest tax savings. On the other hand, 18 states restrict eligibility to veterans who are permanently and totally disabled. These programs benefit a very small share of veterans, but they usually provide a full 100% exemption.
Disabled
Programs in 23 states cover disabled homeowners, but really target two distinct groups: disabled homeowners and blind homeowners. In 2012, 12 states had programs for disabled homeowners, seven states had programs for the blind, and five states covered both groups. Programs for the disabled typically require beneficiaries to be permanently and totally disabled, but exact criteria vary. In the median state, 2.3% of homeowners are eligible for these programs and they receive a median property tax cut of 21%.
Conclusion
Homestead exemptions and property tax credits are an important part of the property tax system. These programs are used in nearly all states and can make the distribution of property taxes significantly more progressive. It is therefore critical that policymakers have good data on the property tax relief that these programs actually provide.
New research makes this information available for the first time. Using the Lincoln Institute’s Significant Features of the Property Tax subcenter, policymakers can easily compare key features of property tax exemption and credit programs across states, and see estimates of eligibility and tax savings. These data make it possible to evaluate the impacts of property tax exemptions and credits in their particular states as well as find ideas for program improvements.
Adam H. Langley is Senior Research Analyst at the Lincoln Institute of Land Policy. Special thanks go to Andrew Reschovsky, who provided extensive comments on this article and other related papers.
References
Bowman, John H., Daphne A. Kenyon, Adam Langley, and Bethany P. Paquin. 2009. Property Tax Circuit Breakers: Fair and Cost-Effective Relief for Taxpayers. Cambridge, MA: Lincoln Institute of Land Policy.
Cabral, Marika, and Caroline Hoxby. 2012. “The Hated Property Tax: Salience, Tax Rates, and Tax Revolts.” Cambridge, MA: National Bureau of Economic Research. Working paper 18514. November.
Kenyon, Daphne A. 2007. The Property Tax-School Funding Dilemma. Cambridge, MA: Lincoln Institute of Land Policy.
Langley, Adam H. 2015. “Estimating Tax Savings from Homestead Exemptions and Property Tax Credits.” Working paper. Cambridge, MA: Lincoln Institute of Land Policy.
Lincoln Institute of Land Policy. 2014. Significant Features of the Property Tax. Residential Property Tax Relief Programs: Summary Table on Exemptions and Credits in 2012. www.lincolninst.edu/subcenters/significant-features-property-tax/Report_Residential_Property_Tax_Relief_Programs.aspx
Lincoln Institute of Land Policy. 2015. Significant Features of the Property Tax. Tax Savings from Property Tax Exemptions and Credits in 2012. www.lincolninst.edu/subcenters/significant-features-property-tax/Report_Residential_Property_Tax_Relief_Programs.aspx
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Una versión más actualizada de este artículo está disponible como parte del capítulo 6 del libro Perspectivas urbanas: Temas críticos en políticas de suelo de América Latina.
En octubre del año 2000, los ciudadanos de casi la mitad de las 60 principales ciudades brasileñas, agraviados por décadas de pobreza y ola delictiva, además de pésimos sistemas de provisión de viviendas, asistencia sanitaria y educación, y de falta de planificación de la infraestructura y de acceso a servicios básicos, eligió como alcaldes a representantes de partidos izquierdistas destacados por su labor de apoyo, honestidad y transparencia. Si bien es cierto que estos gobiernos de reforma están introduciendo nuevas esperanzas y expectativas, también es cierto que se enfrentan a una herencia de desconfianza generalizada hacia los políticos y burócratas municipales, quienes tradicionalmente han estado acusados de negligencia y corrupción. Asimismo, confrontan perspectivas fiscales sombrías en forma de una baja facturación impositiva, débiles transferencias federales, y mercados de suelos urbanos que producen segregación y desigualdades profundas.
El partido de izquierda predominante, Partido de los Trabajadores (en portugués, Partido dos Trabalhadores o PT), conservó las cinco ciudades mayores que había ganado en las elecciones de 1996 y adquirió doce más. Estos municipios del PT aspiran a universalizar los servicios, dejando de lado los tradicionales métodos de decisiones tomadas “desde arriba” y otorgando a los residentes un papel activo en sus gobiernos locales. A lo largo del proceso, están reinventando la democracia local, vigorizando la política y alterando significativamente la distribución de recursos políticos y simbólicos. Quizás el caso más notable es el de Porto Alegre, capital de Rio Grande do Sul (estado más meridional de Brasil), donde el PT ganó su cuarto período consecutivo con el 66 por ciento de los votos, un ejemplo que puede haber animado a los brasileños de otras ciudades a votar también por reformas democráticas.
Al igual que las ciudades de otras partes, Porto Alegre refleja su cultura nacional en sus patrones de uso de la tierra, estructura económica y distribución del poder político. El mayor sistema social de Brasil emplea mecanismos complejos para garantizar que sus ciudades continúen siguiendo las mismas leyes, normas y lógica que organizan la sociedad dominante. Dado que muchos aspectos de la sociedad brasileña están cargados de injusticias y desigualdades, la ciudad tiene que estar constantemente atendiendo los efectos de estas fuerzas políticas y económicas de mayor alcance.
Al mismo tiempo, ninguna ciudad es una reflexión pura de su estructura social nacional. Cualquier ciudad puede ocasionar y reproducir desigualdades e injusticias, de la misma manera que puede estimular estructuras sociales y relaciones económicas dinámicas. Hasta donde la ciudad (y especialmente su gobierno) esté en control de las acciones, puede haber efectos positivos o negativos. Por ejemplo, en ningún segmento del código social brasileño está escrito que sólo se pavimentarán las calles de las vecindades de clases altas o medias, ni tampoco que el suministro de agua llegará únicamente a los rincones más privilegiados de la ciudad.
Presupuesto participativo
En Porto Alegre, un frente popular encabezado por el PT puso en práctica el “presupuesto participativo”, sistema mediante el cual miles de residentes pueden participar cada año en asambleas públicas para decidir el destino de la mitad de los fondos presupuestarios municipales, asumiendo así una mayor responsabilidad por el gobierno de su propia comunidad. Esta reforma simboliza una amplia variedad de cambios municipales y presenta una alternativa tanto al centralismo autoritario como al pragmatismo neoliberal. Los vecinos toman decisiones sobre asuntos locales prácticos como mejoras de calles o parques, y sobre otras cuestiones más complejas que atañen a la ciudad. El proceso, argumenta el PT, despierta la conciencia de la gente sobre otras oportunidades para vencer la pobreza y las desigualdades que ponen tanta miseria en sus vidas.
El proceso del presupuesto participativo en Porto Alegre comienza con la presentación formal por parte del gobierno del plan de inversiones aprobado para el año anterior, y de su plan de inversiones y presupuesto para el año en curso. Los delegados elegidos de cada una de las 16 asambleas de distrito se reúnen durante el año para determinar las responsabilidades fiscales de los departamentos de la ciudad. Estudian dos categorías: la primera se compone de las doce áreas temáticas principales del distrito o sus vecindades (p. ej., pavimentación de calles, construcción de escuelas, parques, suministro de agua potable y sistemas de alcantarillado), mientras que la segunda trata de proyectos que afectan la ciudad entera (líneas de tránsito, gastos de limpieza de las playas, programas de asistencia a personas sin hogar, etc.). Para alentar la participación ciudadana, las reglas establecen que el número de delegados es aproximadamente proporcional al número de vecinos que asistan a la reunión de la elección.
El reparto de los recursos entre los distritos sigue las prioridades definidas mediante debate popular: en 1999 se nombraron como “prioritarias” las cuestiones de población, pobreza, carencia de servicios (p. ej., falta de pavimentos), y necesidades de la ciudad entera. La relación tensa que existe entre el ayuntamiento y los ciudadanos ha conducido a una mayor participación popular, y cada año el presupuesto participativo adquiere una tajada mayor del presupuesto total de la ciudad. Las prioridades han cambiado de una manera nunca antes prevista por los alcaldes ni por sus equipos gubernamentales.
Entre los participantes del proceso figuran miembros del partido de gobierno, profesionales, tecnócratas, ciudadanos de la clase media y un número desproporcionado de la clase pobre trabajadora (pero menos de las clases muy pobres). El proceso atrae y estimula la acción política de muchos que no apoyan al partido de gobierno, en contraste con el antiguo sistema de patrocinio que utiliza los presupuestos de las ciudades para pagar los favores de los partidarios. Como un indicador del éxito del sistema de Porto Alegre, se ha observado un aumento muy significativo en el número de participantes, desde apenas unas 1000 personas en 1990 a 16.000 en 1998 y 40.000 en 1999.
A lo largo del camino, el proceso participativo se ha autoreforzado. Por ejemplo, cuando ciertos residentes notaron con molestia que a los habitantes de ciertas zonas de la ciudad les habían pavimentado las calles o les habían asignado una nueva parada de autobús, descubrieron que los beneficiados habían sido justamente los únicos en acudir a las reuniones presupuestarias. En los años siguientes se incrementó la asistencia a las reuniones, lo cual expandió los intereses representados en los votos y aumentó la satisfacción ciudadana. Para los funcionarios es también un alivio, ya que los residentes mismos confrontan decisiones de suma cero: presupuestos fijos que deben asignar a necesidades importantes como el asfaltado de las calles, el aumento de aulas escolares o el establecimiento de programas de ayuda para las personas sin hogar.
Como nota interesante, el sistema de presupuesto participativo en Porto Alegre está teniendo éxito incluso ante la considerable hostilidad mostrada por un Concejo municipal conservador y los constantes ataques por parte de periódicos y programas televisivos de derecha, todos cuestionando los beneficios de la participación y ensalzando los mercados no regulados. El gobierno municipal depende del soporte de los participantes y sus vecinos, de las radiodifusoras y de las muchas personas que se opusieron a dos décadas de dictadura militar, desde 1964 hasta 1985. Al optar por cuatro gobiernos reformistas consecutivos, la mayoría de la población ha logrado ejercer presión sobre un Concejo municipal hostil para que vote a favor de las propuestas presupuestarias del alcalde, manteniendo así la integridad de la orientación progresiva.
Cambios en las condiciones materiales
En 1989, pese a sus altos índices comparativos de alfabetismo y esperanza de vida, las condiciones en Porto Alegre reflejaban la desigualdad y segregación económica de otras ciudades brasileñas. Un tercio de la población vivía en barrios bajos de la periferia urbana carentes de servicios básicos, aislados y distantes de la zona pudiente en el centro de la ciudad. A pesar de este trasfondo, las innovaciones del PT han logrado una mejoría -aunque moderada- del nivel de vida de algunos de los ciudadanos más pobres. Por ejemplo, entre 1988 y 1997 el suministro de agua a los hogares de Porto Alegre pasó de un 75 por ciento a un 98 por ciento de todas las residencias; el número de escuelas se ha cuadruplicado desde 1986; se han construido nuevas unidades de vivienda pública (éstas albergaban apenas 1700 nuevos residentes en 1986, frente a 27 000 residentes adicionales en 1989); a través de la intervención municipal se facilitó un arreglo con compañías autobuseras privadas para que mejoraran el servicio prestado a las vecindades periféricas de escasos recursos. Además, el uso de canales de circulación “únicamente para autobuses” ha mejorado los tiempos de desplazamiento domicilio-trabajo y los autobuses recién pintados son símbolos muy visibles de los poderes locales y los intereses públicos.
Porto Alegre se ha valido de su solidaridad participativa para permitir la participación ciudadana en decisiones sobre el desarrollo económico que en el pasado hubieran estado dominados por intereses políticos y económicos centralizados. La ciudad rechazó la construcción de un hotel de cinco estrellas en los terrenos de una planta de energía abandonada, prefiriendo utilizar el bien situado promontorio para construir un parque público y una sala de convenciones que sirven ahora como nuevo símbolo de la ciudad. Además, al presentársele una propuesta de demolición de barrios para dar cabida a un gran supermercado, la ciudad impuso requisitos costosos y estrictos para la reubicación de las viviendas, requisitos que están siendo cumplidos por el supermercado. Como otro ejemplo, a pesar de las promesas de nuevos empleos y de presiones ideológicas de la compañía Ford Motor, la cercana municipalidad de Guíaba no aceptó la propuesta para una nueva planta automovilística, argumentando, según los principios políticos establecidos en Porto Alegre, que los subsidios requeridos podrían aplicarse con mayor justificación a otras necesidades de la ciudad. (En agosto de 2000, una investigación estatal declaró la “no culpabilidad” del alcalde por la pérdida de la inversión de la Ford.)
No obstante, una serie de restricciones desalentadoras en el ambiente político y económico brasileño continúan limitando las ganancias del crecimiento económico, demandas por mano de obra y trabajos de calidad. Al compararse Porto Alegre y Rio Grande do Sul con las ciudades capitales cercanas y sus estados durante los años 1985-1986 y 1995-2000, se observan pocos contrastes notorios. En general, ha habido un estancamiento del producto interior bruto (PIB) y una disminución del PIB per cápita. El desempleo aumentó y disminuyeron tanto la participación en la fuerza de trabajo como en la tasa de empleo formal.
En vista de este limitado alcance de mejoras económicas, ¿cómo podemos explicar el sentimiento de optimismo y triunfo que circula en el aire de Porto Alegre? Claramente, el éxito de la experiencia que está teniendo la ciudad con el gobierno local refuerza la democracia participativa. Pensamos que el éxito del PT radica en la manera en que los participantes están redefiniendo los poderes locales, con un número creciente de ciudadanos convirtiéndose simultáneamente en sujetos y objetos, iniciadores y receptores, de forma que puedan tanto gobernar como beneficiarse directamente de sus propias decisiones. Esta reconfiguración es inmediatamente discernible en los procedimientos, métodos y funcionamiento del gobierno local.
Al cabo de 12 años, Porto Alegre ha cambiado no sólo la manera de hacer las cosas sino también las cosas mismas; no sólo la manera de gobernar la ciudad, sino la ciudad misma. Porto Alegre ofrece una opción auténtica a la gestión gubernamental, una que rechaza no sólo el modelo de planificación centralista, tecnocrático y autoritario de la dictadura militar, sino también el modelo neoliberal competitivo y pragmático del “Consenso de Washington” seguido aún por el gobierno nacional. Este modelo impone la ortodoxia del Fondo Monetario Internacional (FMI) y requiere imperativos de “ajuste estructural” en forma de libre comercio, privatización, límites estrictos al gasto público y altas tasas de interés, todo lo cual empeora las condiciones de las clases pobres.
Mientras la mayoría de la ciudades brasileñas continúan distribuyendo facilidades y asignando servicios con evidente parcialidad y poca atención hacia las vecindades pobres, la reconfiguración de los poderes en Porto Alegre está comenzando a reducir las desigualdades espaciales mediante cambios en los patrones de provisión de servicios y uso del suelo. Es de esperar que el efecto de tales acciones se haga sentir en las estructuras formales de la ciudad, y a la larga en otras ciudades y en la sociedad brasileña en general.
Nuevas formas de poder local
Usualmente los recursos políticos y simbólicos están monopolizados por quienes controlan el poder económico. Sin embargo, las administraciones municipales radicalmente democráticas como las de Porto Alegre pueden invertir los poderes para bloquear el favorecimiento y el refuerzo del privilegio. Pueden interferir con la estricta solidaridad del poder político y económico, reducir la apropiación privada de los recursos, y promover la ciudad como un cuerpo dinámico colectivo y socialmente dinámico. En otras palabras, la administración de una ciudad podría oponerse a las acciones de grupos urbanos dominantes -intereses de agentes de bienes raíces y otros que utilizan las varias formas de apropiación privada de los recursos públicos para su propio beneficio. Entre dichas acciones figuran la consignación de infraestructura en favor de las vecindades pudientes, la privatización de recursos escénicos y ambientales, y la captura de los incrementos del valor del suelo (plusvalías) resultantes de inversiones públicas e intervenciones reglamentarias. Así, una administración de ciudad que está reconfigurada y orientada al público, permite el acceso al poder local para los grupos tradicionalmente excluidos. Tal cambio constituye una cuasi-revolución, con consecuencias que aún no pueden ser medidas ni valoradas adecuadamente por activistas o municipios esperanzados.
¿Son las experiencias de Porto Alegre con la reforma municipal, el sistema de presupuesto participativo y la planificación democrática del uso del suelo idiosincráticas, o constituyen estas innovaciones una promesa de mejoras más amplias en la política brasileña conforme otros ciudadanos establecen sus expectativas y mejoran la estructura de sus gobiernos? El Banco Interamericano de Desarrollo (BID) está alentando a ciudades de toda América Latina a participar en sistemas de presupuesto participativo, en seguimiento al ejemplo de Porto Alegre. ¿Pueden las administraciones locales con orientación reformista vencer los obstáculos de las restricciones de los mercados internacionales y de la política nacional? Al recomendar los aspectos formales y de procedimiento de la técnica del presupuesto participativo, ¿está el BID sobreestimando los logros económicos prácticos y subestimando las dimensiones simbólicas y políticas de la democracia radical?
La lección de la reforma urbana en Porto Alegre emerge no sólo directamente del mercado económico en forma de nuevas experiencias con el poder, nuevos actores políticos, y nuevos valores y significados para las condiciones de sus ciudadanos. Esos ciudadanos, que sopesan sus expectativas frente a condiciones macroeconómicas de estancamiento, pueden también tener esperanza en la potencial erradicación de las desigualdades espaciales y sociales en el acceso a los servicios. Estas nuevas formas de ejercicio de poder político y de denunciar problemas de uso del suelo y del gobierno ofrecen a los residentes de la ciudad la capacidad de hacer una diferencia en sus propias vidas.
Referencias
Rebecca N. Abers. 2000. Inventing Local Democracy. Grassroots Politics in Brazil. Boulder: Lynne Rienner.
Gianpaolo Baiocchi. 1999. “Transforming the City”, original inédito. Universidad de Wisconsin (septiembre).
Boaventura de Sousa Santos. 1998. “Participatory Budgeting in Porto Alegre”, Politics and Society 26, 4 (diciembre): 461-510.
William W. Goldsmith es profesor del Departmento de Planificación de Ciudad y Regional de la Universidad de Cornell. Carlos Vainer es profesor del Instituto de Planificación e Investigación Urbana y Regional de la Universidad Federal de Rio de Janeiro. En diciembre de 1999, ambos participaron en un seminario organizado por la ciudad de Porto Alegre y copatrocinado por el Instituto Lincoln y la Red de Planificadores, una asociación norteamericana de planificadores urbanos, activistas y expertos que trabajan en pro de la igualdad y el cambio social.
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The shift to a multi-racial government in South Africa is as pronounced and dramatic a transition as that of the new independent states of Central and Eastern Europe. In the past five years, South Africa has adopted a new constitution, elected a new government, redrawn state and municipal boundaries, and undertaken basic reform of its legal and political system. Land policy is central to this transformation, for “since the 1913 Natives Land Act, rights to own, rent or even share-crop land in South Africa depended upon a person’s race classification.” (1) Among the major land-related issues currently under scrutiny are property tax reform, restitution of land rights, and improvements in tenure security and access to landholding.
Land and Property Taxation
South African real property taxes take a number of forms, including “site rating,” a tax on unimproved value alone; “flat rating” on land and structures uniformly; and “composite ratings,” which tax land and improvements at different rates. Multiplicity and change are the norm, as Cape Town has recently decided to adopt site rating, Durban is considering replacement of its composite rating system with site rating, and Pretoria has introduced a temporary tax on improvements to supplement its site rating system.
The property tax in South Africa is not at present applied to rural land, although its potential extension to non-urban areas is the subject of intense debate. It is in the cities, however, that the struggle to transform the country will succeed or fail. In 1995, the urban sector accounted for about 65 percent of South Africa’s population and more than 80 percent of its GDP. Property taxes are an important source of revenue for cities to meet the cost of providing services within their newly redrawn boundaries.
These new boundaries are another index of the pace and variety of change in South Africa. Efforts to consolidate wealthy residential and commercial areas with impoverished townships and settlements have taken different forms in different regions. The central business districts of Johannesburg and Durban have been divided among several taxing jurisdictions that extend beyond their city limits. By contrast, the most of Cape Town’s business and residential regions were combined this summer with a set of neighboring townships in a new administrative region. It consists of 19 former administrations consolidated into 7, involving a transfer of more than 10,000 municipal staff and many assets. These measures have extremely important political and fiscal implications, bringing together as they do residential areas with living standards equal to or even surpassing European norms and settlements without electricity, paved roads or running water.
From a land policy perspective, perhaps the most dramatic legacy of past racial policies is the imbalance between white and non-white landownership. Under apartheid, 87 percent of the country’s land was reserved for white residents, who in 1995 constituted only 13 percent of South Africa’s population. Under these circumstances, property taxation takes on special importance as a potential means for expanding access to the land market. Roy Bahl and Johannes Linn have written:
[A]n equity argument may be at the heart of the matter: urban land prices are frequently so high that low-income groups cannot afford to purchase land…. To the extent that the revenue from property taxes is capitalized into lower current land values (since the tax reduces the expected future private yield on the land), it partially expropriates landownership rights from the present owner and also constitutes a loan to future owners, who can now acquire the land at a lower price but will have to pay property taxes in the future. If low-income groups cannot buy land because they lack liquidity and access to capital markets, property taxation may be one of the policy instruments to improve their access to landownership. (2)
Tax Collections and Tax Revolts
The government faces the challenge of reversing a “culture of nonpayment” for municipal services among township residents. During the apartheid era, the African National Congress (ANC) encouraged its supporters to refuse payment of water and utility charges as a means of contesting the legitimacy of the state-sponsored black local authorities. The resulting arrears were a major financial burden on all levels of government. Now the ANC seeks to promote voluntary payment for these same services, and as well as payment of real property taxes by those who now are able to hold title to their property.
Ironically, one tax protest that received wide publicity took the form of a property tax revolt in one of the nation’s wealthiest white residential areas, the Sandton suburb of Johannesburg. When property tax rates doubled and tripled there in 1996, many local property owners withheld payment in protest. This situation illustrates one of the most paradoxical aspects of the fiscal challenge to the new South Africa: the need to redress the enormous imbalance in resources across racial groups while commanding support from white citizens who feel over-taxed.
On the one hand, the disparities in needs and resources are overwhelming. Households falling below the official poverty level include only 0.7 percent of the white population, but 65 percent of the black population. At the same time, many white taxpayers feel overburdened by taxes-income tax rates, for example, can reach 45 percent on earnings over $22,000-and resentful of nonpayment by some township residents. In Alexandra, a black township inside Sandton, last year’s tax collection rate was only 3 percent. Any effort to meet the pressing fiscal needs of the new South Africa must take into account the vastly different perceptions of contribution and entitlement across its diverse population.
Perspectives on Future Directions
In July, a conference at the University of South Africa in Pretoria brought together governmental officials, policy analysts, academics and international experts to consider local government design and fiscal capacity. Brief overviews of two of the more than 30 presentations at that conference give a sense of the range of issues debated there, from concrete points of physical engineering to theoretical questions of intergovernmental fiscal relations.
At the most basic level, the definition of revenue needs depends on a prior decision as to the scope of local services to which all citizens are entitled. Given that large township areas have grown up without standard infrastructure, what goals should the government set for provision of water, electricity and roads?
Peter Vaz of the official Financial and Fiscal Commission outlined an approach to the monumental task of estimating the cost of providing the minimum services that each citizen can expect. The South African constitution enumerates 27 guaranteed rights, including the right to equality, to human dignity, to life, to freedom of expression, to a healthy environment, to housing, to health care services, to sufficient food, water and social security, to education, to information. The Commission is considering attempts to identify three levels of services-basic, intermediate and full provision. It is also looking at the cost of extending six services to urban and rural areas: water, sewerage, solid waste, roads, stormwater, electricity. For example, the basic level of water provision might be a communal standpipe, the intermediate level a yard tap, and full provision a house connection. The capital cost of each service package then provides a first estimate of the revenue necessary to meet the guarantees relevant to local government activities.
The broadest fiscal questions concern the allocation of taxes and functions among levels of governments. Rudolph Penner of the Barents Group stated that his general support for decentralization in transition economies was tempered in the case of South Africa. The model of voters as consumers choosing a set of local services in exchange for payment of local taxes is not necessarily applicable or desirable in this context. The strong ideological background to politics in South Africa means that voters are not primarily making a local electoral choice on the basis of economic policy. Moreover, the history of apartheid makes self-selected homogeneous groupings unacceptable if they lead to segregation by income class or race. Penner concluded that fiscal decentralization in South Africa must be of a more restrained variety than might be appropriate elsewhere.
These considerations serve only to highlight the sweeping reconsideration of all public institutions and their mandates that has accompanied the initiation of a new era in South African history. Improvements in land policy and taxation may play a significant role in assisting this immense task of national self-transformation.
Joan Youngman is a senior fellow of the Lincoln Institute, where she directs the Program on the Taxation of Land and Buildings. She and Martim Smolka, senior fellow for Latin America Programs, served on the faculty of the July conference at the University of South Africa.
Notes:
1. South African Department of Land Affairs, Our Land: Green Paper on South African Land Policy (1996), p. 9.
2. Roy W. Bahl and Johannes F. Linn, Urban Public Finance in Developing Countries (Oxford: Oxford University Press, 1992), p. 168.
What are the names of South Africa’s official languages?
A recent newspaper trivia puzzle gives a startling perspective on the enormity of the political, legal and cultural changes experienced by South Africa since 1993, and the difficulty foreign observers face in grasping the scope of these transformations.
The original answer to the question about official languages was given as English and Afrikaans. One week later, a correction noted that South Africa’s major tribal languages should also be included. So the full answer lists ten official languages:
English
Afrikaans
Ndebele
Northern Sotho (Sepedi)
Southern Sotho (Sesotho)
Swati
Tsonga
Tswana (Setswana)
Venda, Xhosa
Zulu
