NUTTER and City Council to RAISE TAXES -- The usual gang of Criminals

[Bixbyte]

Philadelphia, December 19, 2012– Mayor Michael A. Nutter announced that the City of Philadelphia has reached an important milestone in the transition to the Actual Value Initiative (AVI), the approximate total aggregate value for all property in Philadelphia. The approximate taxable value under AVI is $96.5 billion for residential, commercial and industrial properties. Under the current system, the value of taxable properties is $38 billion.

Mayor Nutter described the multi-billion dollar property value as approximate because an estimated 16,000 parcels, or 3% of properties, have anomalies and must be rechecked. OPA is working to confirm values for those properties, which will change the overall number of $96.5 billion.



A special message brought to you from The Mayors Multimillion Dollar Mansion.

[MarketStEl]

For what it's worth, the property tax rate that Council will approve once the new assessments take effect is supposed to be "revenue neutral." That is, the total amount collected will be the same as the amount collected under the current assessments.

What will change is who the money is collected from.

Homeowners who bought homes in neighborhoods that have gentrified or are gentrifying, such as Northern Liberties and Point Breeze, are likely to get socked with big tax hikes because their properties are now valued accurately. Many lower-income homeowners in neighborhoods gentrification hasn't hit, and those owning older, unrehabbed homes elsewhere, will likely see their taxes fall a bit now that their homes are no longer overvalued.

I - and just about everyone else in real estate here - have been following the Actual Value Initiative (AVI) for some time because it will materially affect the industry. Even though the tax bills will finally reflect fair assessments, some Philly homeowners will still likely feel compelled to sell their homes because the taxes have risen to a level they cannot afford.

I've been banging the drum rather loudly on the blog I edit for a change that I think will soften the blow significantly for many Philly homeowners. The move would have another salutary effect - it would likely lead owners of vacant land and abandoned properties to develop and improve them so they can pay their suddenly much higher tax bills. The move is to shift the property tax burden to the land itself rather than the improvements on it.

Here's my most recent commmentary calling for a move in this direction.

The "single tax" on the value of land alone was first proposed by social reformer Henry George in his book Progress and Poverty, published in the 1880s. The statement on the state historical marker in front of his birthplace on 10th Street below Pine puts the case succinctly: "Tax socially produced land values, not labor and capital, he argued."

The logic is simple. Rises in the value of land are not the result of any effort expended by the land owner. Therefore, the land owner is not necessarily entitled to enjoy the profit therefrom, for he did nothing to earn it. Income from labor and investments, on the other hand, do reflect individual effort and should accrue to those who made that effort.

His proposal has drawn admirers on both Left and Right since the book was first written. Conservatives like it because it encourages individual thrift and effort; liberals, because it counters the tendency for wealth to accumulate in a landowning class. (For instance, the liberal website Keystone Politics has picked up every one of my pro-land-value-tax AVI commentaries and excerpted or elaborated on it.)

No political entity has yet adopted the "single tax" in its purest form; taxes on income, capital and consumption persist in every industrialized society. But a number of cities in the Anglo-American world have shifted to a land-only property tax system or a near neighbor, a "split rate" regime that taxes land far more heavily than improvements. (I argued for this in my most recent commentary as a half-measure that would cushion the blow of AVI.) Virtually every city that adopted a land-value-based property tax system has experienced a rise in development activity in its wake. I see no reason why it wouldn't do the same here - and it would likely keep those hard-won new Philadelphians from decamping.

[StrangeTanks]

For what it's worth, the property tax rate that Council will approve once the new assessments take effect is supposed to be "revenue neutral." That is, the total amount collected will be the same as the amount collected under the current assessments.

What will change is who the money is collected from.

Homeowners who bought homes in neighborhoods that have gentrified or are gentrifying, such as Northern Liberties and Point Breeze, are likely to get socked with big tax hikes because their properties are now valued accurately. Many lower-income homeowners in neighborhoods gentrification hasn't hit, and those owning older, unrehabbed homes elsewhere, will likely see their taxes fall a bit now that their homes are no longer overvalued.

I - and just about everyone else in real estate here - have been following the Actual Value Initiative (AVI) for some time because it will materially affect the industry. Even though the tax bills will finally reflect fair assessments, some Philly homeowners will still likely feel compelled to sell their homes because the taxes have risen to a level they cannot afford.

I've been banging the drum rather loudly on the blog I edit for a change that I think will soften the blow significantly for many Philly homeowners. The move would have another salutary effect - it would likely lead owners of vacant land and abandoned properties to develop and improve them so they can pay their suddenly much higher tax bills. The move is to shift the property tax burden to the land itself rather than the improvements on it.

Here's my most recent commmentary calling for a move in this direction.

The "single tax" on the value of land alone was first proposed by social reformer Henry George in his book Progress and Poverty, published in the 1880s. The statement on the state historical marker in front of his birthplace on 10th Street below Pine puts the case succinctly: "Tax socially produced land values, not labor and capital, he argued."

The logic is simple. Rises in the value of land are not the result of any effort expended by the land owner. Therefore, the land owner is not necessarily entitled to enjoy the profit therefrom, for he did nothing to earn it. Income from labor and investments, on the other hand, do reflect individual effort and should accrue to those who made that effort.

His proposal has drawn admirers on both Left and Right since the book was first written. Conservatives like it because it encourages individual thrift and effort; liberals, because it counters the tendency for wealth to accumulate in a landowning class. (For instance, the liberal website Keystone Politics has picked up every one of my pro-land-value-tax AVI commentaries and excerpted or elaborated on it.)

No political entity has yet adopted the "single tax" in its purest form; taxes on income, capital and consumption persist in every industrialized society. But a number of cities in the Anglo-American world have shifted to a land-only property tax system or a near neighbor, a "split rate" regime that taxes land far more heavily than improvements. (I argued for this in my most recent commentary as a half-measure that would cushion the blow of AVI.) Virtually every city that adopted a land-value-based property tax system has experienced a rise in development activity in its wake. I see no reason why it wouldn't do the same here - and it would likely keep those hard-won new Philadelphians from decamping.

That taxing the land thing is the dumbest idea I ever heard. So in other words, a 40 story apartment building should pay the same amount of taxes as a single family home with the same footprint? A farmer should be expected to pay the same amount of taxes as 500 houses built on the same acreage?

My biggest gripe right now with the AVI project is there is no cap on the amount individual taxes go up or down in a single year.

[ArcticSplash]

That taxing the land thing is the dumbest idea I ever heard. So in other words, a 40 story apartment building should pay the same amount of taxes as a single family home with the same footprint? A farmer should be expected to pay the same amount of taxes as 500 houses built on the same acreage?

My biggest gripe right now with the AVI project is there is no cap on the amount individual taxes go up or down in a single year.

No that's not what he's proposing, he's saying instead of combining the dollar figure for the land value with the improvement value, that there should be a separate tax on land value and another on improvements, with significant weight placed on the land value.

The theory goes that if you let a vacant lot sit around you will be paying way more in that you would if the lot was assessed with no improvements. If development raises land values close to the vacant lot, the land value tax jumps higher, enough to cause enough pain to make the owner decide whether to sell the property or join in and make improvements to the property to generate income or to sell to offset the losses accumulating by allowing the lot to sit fallow. That is not what happens in Philadelphia right now. If I own a vacant lot in an undesirable area that suddenly gets a Piazza next door, my taxes hardly change at all, which motivates me to do precisely nothing. If my vacant lot goes from taxes of $80-$160 a year up to $1,000 a year because development has cause improvements and land values to go up all around it, my vacant lot is now costing me some serious cash and the more years I do nothing, the more profit I lose waiting out for some builder to buy my land to develop a rowhome for yuppies, etc.

[raider.adam]

Homeowners who bought homes in neighborhoods that have gentrified or are gentrifying, such as Northern Liberties and Point Breeze, are likely to get socked with big tax hikes because their properties are now valued accurately. Many lower-income homeowners in neighborhoods gentrification hasn't hit, and those owning older, unrehabbed homes elsewhere, will likely see their taxes fall a bit now that their homes are no longer overvalued.

That isn't correct. The people that are going to have a problem are the ones in gentrified neighborhoods that HAVEN'T been appraised up to current levels. If your house is currently appraised at $300K, and stays at $300K, your taxes will likely go down. It's the neighbor next door currently appraised at $10K that is going to have the problem when he gets moved up to $300K.

I've been banging the drum rather loudly on the blog I edit for a change that I think will soften the blow significantly for many Philly homeowners. The move would have another salutary effect - it would likely lead owners of vacant land and abandoned properties to develop and improve them so they can pay their suddenly much higher tax bills. The move is to shift the property tax burden to the land itself rather than the improvements on it.

Here's my most recent commmentary calling for a move in this direction.

The "single tax" on the value of land alone was first proposed by social reformer Henry George in his book Progress and Poverty, published in the 1880s. The statement on the state historical marker in front of his birthplace on 10th Street below Pine puts the case succinctly: "Tax socially produced land values, not labor and capital, he argued."

The logic is simple. Rises in the value of land are not the result of any effort expended by the land owner. Therefore, the land owner is not necessarily entitled to enjoy the profit therefrom, for he did nothing to earn it. Income from labor and investments, on the other hand, do reflect individual effort and should accrue to those who made that effort.

His proposal has drawn admirers on both Left and Right since the book was first written. Conservatives like it because it encourages individual thrift and effort; liberals, because it counters the tendency for wealth to accumulate in a landowning class. (For instance, the liberal website Keystone Politics has picked up every one of my pro-land-value-tax AVI commentaries and excerpted or elaborated on it.)

No political entity has yet adopted the "single tax" in its purest form; taxes on income, capital and consumption persist in every industrialized society. But a number of cities in the Anglo-American world have shifted to a land-only property tax system or a near neighbor, a "split rate" regime that taxes land far more heavily than improvements. (I argued for this in my most recent commentary as a half-measure that would cushion the blow of AVI.) Virtually every city that adopted a land-value-based property tax system has experienced a rise in development activity in its wake. I see no reason why it wouldn't do the same here - and it would likely keep those hard-won new Philadelphians from decamping.

That taxing the land thing is the dumbest idea I ever heard. So in other words, a 40 story apartment building should pay the same amount of taxes as a single family home with the same footprint? A farmer should be expected to pay the same amount of taxes as 500 houses built on the same acreage?

My biggest gripe right now with the AVI project is there is no cap on the amount individual taxes go up or down in a single year.

No that's not what he's proposing, he's saying instead of combining the dollar figure for the land value with the improvement value, that there should be a separate tax on land value and another on improvements, with significant weight placed on the land value.

The theory goes that if you let a vacant lot sit around you will be paying way more in that you would if the lot was assessed with no improvements. If development raises land values close to the vacant lot, the land value tax jumps higher, enough to cause enough pain to make the owner decide whether to sell the property or join in and make improvements to the property to generate income or to sell to offset the losses accumulating by allowing the lot to sit fallow. That is not what happens in Philadelphia right now. If I own a vacant lot in an undesirable area that suddenly gets a Piazza next door, my taxes hardly change at all, which motivates me to do precisely nothing. If my vacant lot goes from taxes of $80-$160 a year up to $1,000 a year because development has cause improvements and land values to go up all around it, my vacant lot is now costing me some serious cash and the more years I do nothing, the more profit I lose waiting out for some builder to buy my land to develop a rowhome for yuppies, etc.

I still have not been convinced of Land Value Taxation. There are several flaws I see in the thinking that I have not seen reasonably addressed.

1) How do we determine the independent value of land without the impact of its structure? All areas of the city don't have a sufficient amount of vacant land turning over to generate unbiased comparables.
2) In many parts of the City, is lack of higher property taxes on vacant land really what is keeping the land unused? In many parts of the City, higher property taxes on vacant may get speculators out of owning the land, but that also means it is just going to sit with the City instead and now you get no taxes and it still remains undeveloped for probably the same amount of time, if not longer.

Take another example, the lot in CC where they are supposed to build the Mormon Temple. That sat undeveloped as a parking lot not because of property taxes, but because the City sold the land to the developer with a clawback provision and then proceeded to not use the clawback for 16 years.

3) Even if you wanted to make it more painful owning vacant land, you can do that simply with a surcharge and not mess with how developed land is assessed.
5) It still requires the City to efficiently collect the taxes and seize the land if not paid.
6) And I don't think it is necessarily a fair tax. If two people are neighbors and they own the same size lot, why should the person who owns a modest 3 bedroom 1 story house pay the same property taxes as someone who owns a 3 story 7 bedroom house?

[Bixbyte]

For what it's worth, the property tax rate that Council will approve once the new assessments take effect is supposed to be "revenue neutral." That is, the total amount collected will be the same as the amount collected under the current assessments.

What will change is who the money is collected from.

Homeowners who bought homes in neighborhoods that have gentrified or are gentrifying, such as Northern Liberties and Point Breeze, are likely to get socked with big tax hikes because their properties are now valued accurately. Many lower-income homeowners in neighborhoods gentrification hasn't hit, and those owning older, unrehabbed homes elsewhere, will likely see their taxes fall a bit now that their homes are no longer overvalued.

I - and just about everyone else in real estate here - have been following the Actual Value Initiative (AVI) for some time because it will materially affect the industry. Even though the tax bills will finally reflect fair assessments, some Philly homeowners will still likely feel compelled to sell their homes because the taxes have risen to a level they cannot afford.

I've been banging the drum rather loudly on the blog I edit for a change that I think will soften the blow significantly for many Philly homeowners. The move would have another salutary effect - it would likely lead owners of vacant land and abandoned properties to develop and improve them so they can pay their suddenly much higher tax bills. The move is to shift the property tax burden to the land itself rather than the improvements on it.

Here's my most recent commmentary calling for a move in this direction.

The "single tax" on the value of land alone was first proposed by social reformer Henry George in his book Progress and Poverty, published in the 1880s. The statement on the state historical marker in front of his birthplace on 10th Street below Pine puts the case succinctly: "Tax socially produced land values, not labor and capital, he argued."

The logic is simple. Rises in the value of land are not the result of any effort expended by the land owner. Therefore, the land owner is not necessarily entitled to enjoy the profit therefrom, for he did nothing to earn it. Income from labor and investments, on the other hand, do reflect individual effort and should accrue to those who made that effort.

His proposal has drawn admirers on both Left and Right since the book was first written. Conservatives like it because it encourages individual thrift and effort; liberals, because it counters the tendency for wealth to accumulate in a landowning class. (For instance, the liberal website Keystone Politics has picked up every one of my pro-land-value-tax AVI commentaries and excerpted or elaborated on it.)

No political entity has yet adopted the "single tax" in its purest form; taxes on income, capital and consumption persist in every industrialized society. But a number of cities in the Anglo-American world have shifted to a land-only property tax system or a near neighbor, a "split rate" regime that taxes land far more heavily than improvements. (I argued for this in my most recent commentary as a half-measure that would cushion the blow of AVI.) Virtually every city that adopted a land-value-based property tax system has experienced a rise in development activity in its wake. I see no reason why it wouldn't do the same here - and it would likely keep those hard-won new Philadelphians from decamping.

I tend to disagree with you or your quoted source Henry George.
Equal Equity for all -- creates inequality in opportunity.
The Mayor and City Council are inventing a situation where business opportunities are nonexistant.
If you see a property and can make a good deal through any economic advantage such as the location
has a lower tax base then there exists an unique incentive to buy and maybe rebuild perhaps even in a lower class location.
AVI will take away many business opportunities.
Businesses and individual investors will invest elsewhere.
There is always an advantage to new construction if taxation is nonuniform.
In addition people that have their property investments taxes raised have motivation to sell or abandon and invest elsewhere.
Good luck when we all discover that this is a lame excuse by Nutter and his clown posse running City Council to raise all taxes to close our schools and fuel greater funding for their Charter Schools schemes and to increase city workers pay and benefits packages.
More properties will be abandoned and taken back by the City.
Therefore, THIS IS A TERRIBLE IDEA.

[StrangeTanks]

That's idiotic in my opinion.

So lets use your same example, except instead of being an investor you bought the lot next door to you as a side yard. So now, not only have the taxes on your yard gone up 1000% but more than likely the taxes on your house have gone up similarly.

Now if I was an investor on the other hand, and I purchased a vacant lot 10 years ago for 20k lets say, and now its worth 150k (I don't know what lots go for in NL right now). I've experienced such a tidy profit that $1000 a year is simply the cost of doing business and I wouldn't bother selling until I felt I timed the market correctly.

If gas prices went up 1000% in a year there would be riots in the streets. I understand your idea of punishing investors, but your not doing that, your just punishing those residents who took a risk and bought a house in a marginal neighborhood before the piazza was next door.

[raider.adam]

That's idiotic in my opinion.

So lets use your same example, except instead of being an investor you bought the lot next door to you as a side yard. So now, not only have the taxes on your yard gone up 1000% but more than likely the taxes on your house have gone up similarly.

Now if I was an investor on the other hand, and I purchased a vacant lot 10 years ago for 20k lets say, and now its worth 150k (I don't know what lots go for in NL right now). I've experienced such a tidy profit that $1000 a year is simply the cost of doing business and I wouldn't bother selling until I felt I timed the market correctly.

If gas prices went up 1000% in a year there would be riots in the streets. I understand your idea of punishing investors, but your not doing that, your just punishing those residents who took a risk and bought a house in a marginal neighborhood before the piazza was next door.

The other thing we need to realize in reality is that all of the vacant land in Philly, even in a perfect world, is not getting developed for several decades. We actually DO want private speculators and investors to purchase a lot of this up because that means they are paying taxes on it instead of the City owning it.

What Philly DOES need to do is enforce maintenance of vacant land and fine if not done. Would you rather a prive person own the land and keep it mowed and trash free and pay taxes or the City effectively own it, mow them 1 or 2 times a year and not get revenue?

[raider.adam]

edit:

[Cro Burnham]

I'm with MarketStEl and ArcticSplash: a land tax, or some variant of it, is the best way to go forward. But given that this is Philadelphia, that is exactly why one would never be adopted.

Many folks are convinced that the tried and true all-in property value tax is just fine (AVI-adjusted, of course).

I think this is largely because "this is the way it's always been done" and people are suspicious of innovation.

But, fundamentally, what is the rationale behind the current all-in property value scheme?

It is a wealth tax. There is no other way to describe it. If you believe in a wealth tax - that the government deserves an annual bite of the principle of your wealth - whether in the form of your improved home value, 401K, pension, stocks, retirement nest egg, savings account, jewelry, car, antiques, art, etc., regardless of whether you have realized any gains in these investments - then you should support the current scheme.

But then you should also support the city taxing the value of your savings account, your antiques, your art, your jewelry, your stocks, your retirement accounts, etc. - i.e., anything you possess that has value. My guess is that you wouldn't support that. So why is your real estate property fundamentally different from these other forms of wealth?

If there are two houses on identical lots right next to each other, but one house is in shytty condition and the other has been maintained and improved so that it is worth twice as much, what is the fundamental rationale for why the shytty house should be taxed at half the rate of the good one? Why does the city deserve so much more from the person with the nice house?

Do you believe the value of the house is an accurate indicator of the resident's consumption of city services (policing, fire protection, trash collection, utilities, school use, street maintenance, parks and recreation, social services, etc.)?

Obviously not. Thinking about this for more than five seconds reveals clearly that increased house value is, if anything, negatively correlated with consumption of city services.

So, my dear supporters of the all-in property tax scheme vs. a land tax variant, just what is the rationale for your belief?

And, assuming you do not also support an analogous tax by the city on your other wealth principle - stocks, savings, jewelry, art, etc. - what is the rationale for this seeming inconsistency?

I challenge you to come up with an intellectually honest rationale - i.e., not "well, this is how they do it almost everywhere, so it must be right!" or some variant thereof.

I don't believe there is a sound rationale, but I am certainly open to someone seriously challenging that belief.

For what it's worth, the property tax rate that Council will approve once the new assessments take effect is supposed to be "revenue neutral." That is, the total amount collected will be the same as the amount collected under the current assessments.

What will change is who the money is collected from.

Homeowners who bought homes in neighborhoods that have gentrified or are gentrifying, such as Northern Liberties and Point Breeze, are likely to get socked with big tax hikes because their properties are now valued accurately. Many lower-income homeowners in neighborhoods gentrification hasn't hit, and those owning older, unrehabbed homes elsewhere, will likely see their taxes fall a bit now that their homes are no longer overvalued.

I - and just about everyone else in real estate here - have been following the Actual Value Initiative (AVI) for some time because it will materially affect the industry. Even though the tax bills will finally reflect fair assessments, some Philly homeowners will still likely feel compelled to sell their homes because the taxes have risen to a level they cannot afford.

I've been banging the drum rather loudly on the blog I edit for a change that I think will soften the blow significantly for many Philly homeowners. The move would have another salutary effect - it would likely lead owners of vacant land and abandoned properties to develop and improve them so they can pay their suddenly much higher tax bills. The move is to shift the property tax burden to the land itself rather than the improvements on it.

Here's my most recent commmentary calling for a move in this direction.

The "single tax" on the value of land alone was first proposed by social reformer Henry George in his book Progress and Poverty, published in the 1880s. The statement on the state historical marker in front of his birthplace on 10th Street below Pine puts the case succinctly: "Tax socially produced land values, not labor and capital, he argued."

The logic is simple. Rises in the value of land are not the result of any effort expended by the land owner. Therefore, the land owner is not necessarily entitled to enjoy the profit therefrom, for he did nothing to earn it. Income from labor and investments, on the other hand, do reflect individual effort and should accrue to those who made that effort.

His proposal has drawn admirers on both Left and Right since the book was first written. Conservatives like it because it encourages individual thrift and effort; liberals, because it counters the tendency for wealth to accumulate in a landowning class. (For instance, the liberal website Keystone Politics has picked up every one of my pro-land-value-tax AVI commentaries and excerpted or elaborated on it.)

No political entity has yet adopted the "single tax" in its purest form; taxes on income, capital and consumption persist in every industrialized society. But a number of cities in the Anglo-American world have shifted to a land-only property tax system or a near neighbor, a "split rate" regime that taxes land far more heavily than improvements. (I argued for this in my most recent commentary as a half-measure that would cushion the blow of AVI.) Virtually every city that adopted a land-value-based property tax system has experienced a rise in development activity in its wake. I see no reason why it wouldn't do the same here - and it would likely keep those hard-won new Philadelphians from decamping.

[raider.adam]

I'm with MarketStEl and ArcticSplash: a land tax, or some variant of it, is the best way to go forward. But given that this is Philadelphia, that is exactly why one would never be adopted.

Many folks are convinced that the tried and true all-in property value tax is just fine (AVI-adjusted, of course).

I think this is largely because "this is the way it's always been done" and people are suspicious of innovation.

But, fundamentally, what is the rationale behind the current all-in property value scheme?

It is a wealth tax. There is no other way to describe it. If you believe in a wealth tax - that the government deserves an annual bite of the principle of your wealth - whether in the form of your improved home value, 401K, pension, stocks, retirement nest egg, savings account, jewelry, car, antiques, art, etc., regardless of whether you have realized any gains in these investments - then you should support the current scheme.

But then you should also support the city taxing the value of your savings account, your antiques, your art, your jewelry, your stocks, your retirement accounts, etc. - i.e., anything you possess that has value. My guess is that you wouldn't support that. So why is your real estate property fundamentally different from these other forms of wealth?

If there are two houses on identical lots right next to each other, but one house is in shytty condition and the other has been maintained and improved so that it is worth twice as much, what is the fundamental rationale for why the shytty house should be taxed at half the rate of the good one? Why does the city deserve so much more from the person with the nice house?

Do you believe the value of the house is an accurate indicator of the resident's consumption of city services (policing, fire protection, trash collection, utilities, school use, street maintenance, parks and recreation, social services, etc.)?

Obviously not. Thinking about this for more than five seconds reveals clearly that increased house value is, if anything, negatively correlated with consumption of city services.

So, my dear supporters of the all-in property tax scheme vs. a land tax variant, just what is the rationale for your belief?

And, assuming you do not also support an analogous tax by the city on your other wealth principle - stocks, savings, jewelry, art, etc. - what is the rationale for this seeming inconsistency?

I challenge you to come up with an intellectually honest rationale - i.e., not "well, this is how they do it almost everywhere, so it must be right!" or some variant thereof.

I don't believe there is a sound rationale, but I am certainly open to someone seriously challenging that belief.

The point you make about the condition of the building I agree with, but it isn't a support for land value taxation. I don't think the condition of the building should be that relevant to the tax assessment. If you have two houses next to each other with the same lot, square footage, rooms, etc, they should be taxed rather equally, even if one hasn't done maintenance and the other has. I agree that you shouldn't be punished for maintaining your property, but nor should you be punished for buying a smaller house that is next to a larger one.

As for challenging it, I listed multiple points already in the thread.

[sharkey]

[QUOTE=ArcticSplash;558898]No that's not what he's proposing, he's saying instead of combining the dollar figure for the land value with the improvement value, that there should be a separate tax on land value and another on improvements, with significant weight placed on the land value.

The theory goes that if you let a vacant lot sit around you will be paying way more in that you would if the lot was assessed with no improvements. If development raises land values close to the vacant lot, the land value tax jumps higher, enough to cause enough pain to make the owner decide whether to sell the property or join in and make improvements to the property to generate income or to sell to offset the losses accumulating by allowing the lot to sit fallow. That is not what happens in Philadelphia right now. If I own a vacant lot in an undesirable area that suddenly gets a Piazza next door, my taxes hardly change at all, which motivates me to do precisely nothing. If my vacant lot goes from taxes of $80-$160 a year up to $1,000 a year because development has cause improvements and land values to go up all around it, my vacant lot is now costing me some serious cash and the more years I do nothing, the more profit I lose waiting out for some builder to buy my land to develop a rowhome for yuppies, etc.[/QUOTE


If he is promoting a true Henry George system, THAT IS WHAT HE IS SAYING. Before dismissing it, look into it. I have taken the courses offered by the George school (based right here in Phila.) and the ideas make sense.

[Cro Burnham]

The point you make about the condition of the building I agree with, but it isn't a support for land value taxation. I don't think the condition of the building should be that relevant to the tax assessment. If you have two houses next to each other with the same lot, square footage, rooms, etc, they should be taxed rather equally, even if one hasn't done maintenance and the other has. I agree that you shouldn't be punished for maintaining your property, but nor should you be punished for buying a smaller house that is next to a larger one.

As for challenging it, I listed multiple points already in the thread.

So should the city be able to tax the principle of your other assets? If not why not?

I'm glad we agree that house condition should be irrelevant to taxes (although under the current or AVI City RE tax scheme, condition is totally relevant), but what makes the size of the house so special? What is it about the size of the house on the lot (and not the lot itself) that is relevant to the taxes it is subject to?

Does the existence of a house with greater square footage somehow cost the city more?

I don't think so - I think you are buying into the notion that a bigger house should be taxed more because it is . . . just bigger. I don't get the basic rationale for this belief.

So what is the cosmic principle that anoints house size (vs. lot size and value) more deserving of city taxation?

You have proposed (very subjective and very debatable) policy considerations supporting an all-in property value tax over a land tax, but not a fundamental principle.

Is there a principle, as opposed to an unproven policy consideration?

[MarketStEl]

No that's not what he's proposing, he's saying instead of combining the dollar figure for the land value with the improvement value, that there should be a separate tax on land value and another on improvements, with significant weight placed on the land value.

The theory goes that if you let a vacant lot sit around you will be paying way more in that you would if the lot was assessed with no improvements. If development raises land values close to the vacant lot, the land value tax jumps higher, enough to cause enough pain to make the owner decide whether to sell the property or join in and make improvements to the property to generate income or to sell to offset the losses accumulating by allowing the lot to sit fallow. That is not what happens in Philadelphia right now. If I own a vacant lot in an undesirable area that suddenly gets a Piazza next door, my taxes hardly change at all, which motivates me to do precisely nothing. If my vacant lot goes from taxes of $80-$160 a year up to $1,000 a year because development has cause improvements and land values to go up all around it, my vacant lot is now costing me some serious cash and the more years I do nothing, the more profit I lose waiting out for some builder to buy my land to develop a rowhome for yuppies, etc.

If he is promoting a true Henry George system, THAT IS WHAT HE IS SAYING. Before dismissing it, look into it. I have taken the courses offered by the George school (based right here in Phila.) and the ideas make sense.

Actually, in my last commentary on the subject, I stopped short of doing a full Henry George - I recommended a split rate, largely as a means of easing in the change. In my earlier commentaries (search for "AVI" on the site), I went full bore.

And I have not taken classes at the Henry George School - though I did spend a fair bit of time in college with a graduate student in economics who explained the principle to me fairly clearly.

Under a pure land value taxation system, it's true that the owner of an empty lot, the lot next door with a one-story bungalow on it, and the owner of the lot next to it with a 12-unit apartment building would all pay the same amount in tax. That's because the development activity - the increase in wealth deriving from direct expenditure of energy (labor or capital applied to labor) - also increases the value of surrounding land.

The owner of the vacant lot did nothing to increase its value. Why should that person enjoy the fruits of the increase?

In other words, a tax on applied effort penalizes the industrious and rewards the "rent-seeker."

("Rent-seeking" is a term economists use to describe someone who wants to make money without really putting either himself or his money to work. Securing a monopoly on the supply of a good or service is a form of rent-seeking insofar as the added profit is not the result of the actual effort expended in providing the good but of the artificial scarcity created by the monopoly. A landlord renting out space in a building he constructs or buys is not a "rent-seeker," for there will be effort required to construct the asset or keep it in usable condition.)

You may note, if you go back through Keystone Politics' riffs on my essays, that that site identifies my position as being in line with that of the real estate industry as a whole. I'm not completely sure that is the case - I don't think the National Association of Realtors has taken an official position on property taxes one way or the other - but I'm sure that many in the business probably would like to see a tax regime that makes development more likely and idle land speculation less so.

Back to AVI itself: There is probably no way to implement a radical change in an existing system, which AVI definitely is, that does not produce some major winners and some serious losers. That this occurs is not an argument against making the change if it is needed, and uniform, fair assessments are needed. Our impulse to cushion the blow for the losers is admirable, but unless it is gradually phased out, it will simply replace one set of distortions with another.

[MarketStEl]

I should note one more thing:

You may recall that the epithet "single taxer" often gets applied to advocates of Henry George's position.

That's because the man himself advocated such a thing.

The tax on land values alone would also substitute for taxes on income and consumption as well as on buildings.

Doing this would be a radical step indeed. It was when George first proposed it and would still be today.

[raider.adam]

So should the city be able to tax the principle of your other assets? If not why not?

I don't see the relevance of the question. We're talking about an existing system. Whether ideal or not, property taxes are not being replaced this year, next year or 10 years from now. In fact, Land Value Tax doesn't change that either. It is still a tax on perceived wealth.

Talking about how to get rid of a property tax system is a separate discussion not relevant to the discussion of Philadelphia reforming its assessment system, because one is actually happening right now. The other is not nor any time soon. I have no problem discussing broader tax reform, but that is a separate discussion from AVI.

I'm glad we agree that house condition should be irrelevant to taxes (although under the current or AVI City RE tax scheme, condition is totally relevant), but what makes the size of the house so special? What is it about the size of the house on the lot (and not the lot itself) that is relevant to the taxes it is subject to?

Relevance to other comparable properties and their value.

Does the existence of a house with greater square footage somehow cost the city more?

Taxes have very little to do with cost of services or impact. Does someone making $100,000 cost the City more than someone making $30K? Yet, the guy making $100K pays more wage tax.

I don't think so - I think you are buying into the notion that a bigger house should be taxed more because it is . . . just bigger. I don't get the basic rationale for this belief.
So what is the cosmic principle that anoints house size (vs. lot size and value) more deserving of city taxation?

You aren't comprehending the argument. No one is saying to tax based on size. I am saying if you are going to tax the property, you do it based on the value of the whole property, not just the land it sits on. Since each house doesn't go on the market and resell every year, you have to base the value on something. To do that, you compare it with other properties that sold that are of comparable style, size, etc.

You have proposed (very subjective and very debatable) policy considerations supporting an all-in property value tax over a land tax, but not a fundamental principle.

Is there a principle, as opposed to an unproven policy consideration?

What does this even mean?

Actually, in my last commentary on the subject, I stopped short of doing a full Henry George - I recommended a split rate, largely as a means of easing in the change. In my earlier commentaries (search for "AVI" on the site), I went full bore.

And I have not taken classes at the Henry George School - though I did spend a fair bit of time in college with a graduate student in economics who explained the principle to me fairly clearly.

Under a pure land value taxation system, it's true that the owner of an empty lot, the lot next door with a one-story bungalow on it, and the owner of the lot next to it with a 12-unit apartment building would all pay the same amount in tax. That's because the development activity - the increase in wealth deriving from direct expenditure of energy (labor or capital applied to labor) - also increases the value of surrounding land.

The owner of the vacant lot did nothing to increase its value. Why should that person enjoy the fruits of the increase?

In other words, a tax on applied effort penalizes the industrious and rewards the "rent-seeker."

("Rent-seeking" is a term economists use to describe someone who wants to make money without really putting either himself or his money to work. Securing a monopoly on the supply of a good or service is a form of rent-seeking insofar as the added profit is not the result of the actual effort expended in providing the good but of the artificial scarcity created by the monopoly. A landlord renting out space in a building he constructs or buys is not a "rent-seeker," for there will be effort required to construct the asset or keep it in usable condition.)

You may note, if you go back through Keystone Politics' riffs on my essays, that that site identifies my position as being in line with that of the real estate industry as a whole. I'm not completely sure that is the case - I don't think the National Association of Realtors has taken an official position on property taxes one way or the other - but I'm sure that many in the business probably would like to see a tax regime that makes development more likely and idle land speculation less so.

Back to AVI itself: There is probably no way to implement a radical change in an existing system, which AVI definitely is, that does not produce some major winners and some serious losers. That this occurs is not an argument against making the change if it is needed, and uniform, fair assessments are needed. Our impulse to cushion the blow for the losers is admirable, but unless it is gradually phased out, it will simply replace one set of distortions with another.

The problem with your land value taxation argument is you focus way too much on vacant land. If two similar land parcels have a 4 story house and a 1 story house, are you saying the 1 story house owner is not industrious and he should be penalized for not tearing down his house and building a 4 story house? Obviously that would be an absurd argument.

[Bixbyte]

.....
In other words, a tax on applied effort penalizes the industrious and rewards the "rent-seeker."

("Rent-seeking" is a term economists use to describe someone who wants to make money without really putting either himself or his money to work. Securing a monopoly on the supply of a good or service is a form of rent-seeking insofar as the added profit is not the result of the actual effort expended in providing the good but of the artificial scarcity created by the monopoly. A landlord renting out space in a building he constructs or buys is not a "rent-seeker," for there will be effort required to construct the asset or keep it in usable condition.)

You may note, if you go back through Keystone Politics' riffs on my essays, that that site identifies my position as being in line with that of the real estate industry as a whole. I'm not completely sure that is the case - I don't think the National Association of Realtors has taken an official position on property taxes one way or the other - but I'm sure that many in the business probably would like to see a tax regime that makes development more likely and idle land speculation less so.

Back to AVI itself: There is probably no way to implement a radical change in an existing system, which AVI definitely is, that does not produce some major winners and some serious losers. That this occurs is not an argument against making the change if it is needed, and uniform, fair assessments are needed. Our impulse to cushion the blow for the losers is admirable, but unless it is gradually phased out, it will simply replace one set of distortions with another.

Nutter et City Council plan does indeed include a rate decrease for a resident versus a real estate investor of 1.4% difference.
Yes Henry George appears correct in this respect but the 1.4% reduction steers badly needed investors clear.
But, what you do not see in his non-equitable equation is the 10 year tax abatement that I point out is used as a large tax avoidance scheme by many large money corporations situated on Philadelphia turf.

I will give you one example.
Gasoline stations without naming brand names.
Run them for 10 years with some tax exemptions and then they amazing close them.
The very same corporation builds new construction at a close proximity.
A gas station is a gas station and location, location, location is not important in vending gasoline.
But, having a 10 year tax abatement is very important to their bottom line.
The city is complicit to allowing this scheme.
Just need the proper permits to build another gas station while closing another gas station.

So, the bottom line is Nutter and Council seek to tax the RE investors and raise the tax on the homeowners simultaneously.

That is the actual fact our CITY is run by the BIGGEST MOOCHERS!

[MarketStEl]

The problem with your land value taxation argument is you focus way too much on vacant land. If two similar land parcels have a 4 story house and a 1 story house, are you saying the 1 story house owner is not industrious and he should be penalized for not tearing down his house and building a 4 story house? Obviously that would be an absurd argument.

Maybe so, but actually you're headed in the opposite direction.

Let's put it another way: If the owner of the plot with the one-story house is making enough from whatever he does, including renting out the house if he does that, to feel satisfied with what he has after paying the land tax, then fine. Ditto the owner of the 4-story house. Ditto, for that matter, the owner of the vacant lot. None of them will be penalized with a higher tax bill for making any improvements to their property, or for not making them. If they do make them, however, their taxes do not go up. That only happens if demand for land in the area pushes up that value. As it stands now, anyone who improves their land pays more in taxes when doing so. Yes, this makes sense under a system that taxes the total value, for that has increased.

But the purpose of a true "single tax" system is to tax only unearned value, that is, value that comes to the owner of an asset that itself cannot be increased in value through applied labor or capital. The only asset that produces such an increase in value is land, if rising demand for it in a general area makes individual parcels more valuable. The reason for focusing on vacant lots is because those are pure land assets.

Were this discussion taking place in New York City (where Henry George ran for mayor in 1888 on a single-tax platform, btw), we wouldn't need to "infer" the value of vacant land, for most real estate transactions there involve two sales: the sale of the building and the sale of the ground beneath it (what is called the "fee" in industry parlance). The value of empty lots in a given area, however, can in all likelihood be used to infer the value of improved lots around it, just as sales of improved properties in an area often cause the assessed value of similar nearby properties that have not changed hands recently to rise as well.

[MarketStEl]

The problem with your land value taxation argument is you focus way too much on vacant land. If two similar land parcels have a 4 story house and a 1 story house, are you saying the 1 story house owner is not industrious and he should be penalized for not tearing down his house and building a 4 story house? Obviously that would be an absurd argument.

Perhaps, but I think you may have it exactly backwards. Consider the arguments used against high marginal income tax rates, namely, that they penalize work and investment by draining those efforts of most of their return.

A tax on the improvements on the land is subject to the same logic: the owner of the one-story house is penalized for replacing it with a four-story three-flat with a store on the first floor by having to pay more in taxes after the improvement is made.

With a "single" land value tax, that is not the case. If the owner of the one-story house is satisfied with what he makes from his efforts, or if it's his primary residence and he earns money doing something else, then he suffers no penalty for either working harder or longer hours or for adding on to the house. For that matter, if the owner of the vacant lot can earn enough to pay the taxes on it by doing something else that produces income, he too is free to leave it vacant until the right opportunity, as he sees it, comes along.

The "penalty" hits the landowner who is just sitting on the land, waiting for IT to rise to the price he wants while others build around it. A higher tax on land alone would likely push that landowner to either build or sell.

The point of a single-tax regime is to tax only "unearned" income, that is, income that is not the product of applied labor or capital invested in some productive activity.

The reason for the focus on vacant land is because it is the benchmark for determining land values in an area. If demand for land in an area rises, so will the value of the vacant lot, and that lot's value can be used to infer the land portion of the value of adjacent properties, just as the value of an improved property that has not changed hands in a while is often inferred from the sales prices of similar properties in an area.

I see my original reply got posted before my housemate's router went squirrelly again. I'm leaving this up anyway because it contains an additional parallel for understanding what a land tax would and would not do.

[Bixbyte]

Perhaps, but I think you may have it exactly backwards. Consider the arguments used against high marginal income tax rates, namely, that they penalize work and investment by draining those efforts of most of their return.

A tax on the improvements on the land is subject to the same logic: the owner of the one-story house is penalized for replacing it with a four-story three-flat with a store on the first floor by having to pay more in taxes after the improvement is made.

With a "single" land value tax, that is not the case. If the owner of the one-story house is satisfied with what he makes from his efforts, or if it's his primary residence and he earns money doing something else, then he suffers no penalty for either working harder or longer hours or for adding on to the house. For that matter, if the owner of the vacant lot can earn enough to pay the taxes on it by doing something else that produces income, he too is free to leave it vacant until the right opportunity, as he sees it, comes along.

The "penalty" hits the landowner who is just sitting on the land, waiting for IT to rise to the price he wants while others build around it. A higher tax on land alone would likely push that landowner to either build or sell.

The point of a single-tax regime is to tax only "unearned" income, that is, income that is not the product of applied labor or capital invested in some productive activity.

The reason for the focus on vacant land is because it is the benchmark for determining land values in an area. If demand for land in an area rises, so will the value of the vacant lot, and that lot's value can be used to infer the land portion of the value of adjacent properties, just as the value of an improved property that has not changed hands in a while is often inferred from the sales prices of similar properties in an area.

I see my original reply got posted before my housemate's router went squirrelly again. I'm leaving this up anyway because it contains an additional parallel for understanding what a land tax would and would not do.

And I guess the reason TEVA just pulled out of Philly is they believe our City is Fair and Equitable?