Environmentalists:

For or Against Reforming the Property Tax?

Jeffery Smith

[Reprinted from Blue Oregon, May, 2007]

Have you joined the ranks of the "property rightists"? Some environmentalists have. Without naming names, one even echoes their call to abolish the property tax.

Good intentions pave the way to a hot place. Where the property tax has been kept down - Dixie in America - or where it's been capped, following California's lead, small owners get crumbs while owners of high-value lots save millions; capping the property tax is a gold-plated gift to speculators and sprawl artists. Where there is no property tax or it's poorly enforced - south of the US border - you see worse sins than sprawl, sins against both nature and humanity.

Take a deeper look at the property tax. It falls on both homes and land, two items quite different. One we did not create, cannot do without, cannot increase, and constantly bid up its value. Indeed, an owner can make more money by simply letting land lie vacant in the middle of bustling downtown then selling when prices peak. Note the wasted space next time you visit Portland.

That speculative act of withholding central land is what causes sprawl, not the property tax. Indeed that tax can even counter sprawl, not as currently constituted but by shifting the burden from buildings to land. Then when owners fix up their property, they're not punished. When owners procrastinate or speculate, they're prodded by the land tax to get busy and develop where development does good.

What happens when owners of prime lots build? They:

• attract private investment - as happened in Sydney Australia,
• hire workers - as occurred in New Zealand,
• reduce joblessness while raising wages - a la Denmark,
• add to the housing stock, lowering the cost of housing (supply and demand does alter price, still) - see Pittsburgh,

And they fill in cities. That's what curbs sprawl. Stephen Reed, mayor of Harrisburg PA, gives credit to his town's land tax for sparing its suburban farmland from development. A more compact city shortens trip distances and lets residents walk or ride bikes or buses, all of which reduces fuel consumption, smog, and emission of gases altering the Earth's climate.

One substitute for taxing property has been to tax income. Yet the powerful have shot that pseudo-reform through with loopholes, leaving workers to pay the lion's share. That generates the mentality of tax avoidance, not wealth creation, so investors seek shelters and don't pursue enterprises like alternative energy. Further, it and the tax on sales are unnecessary complications to start-ups, such as a recycler or retrofitter, and both taxes diminish the discretionary income of taxpayers, fostering the mentality whereby one seeks cheapest price, not necessarily highest quality.

Calling for these "land dues" implies that Earth is here for us to share, that her worth is a bounty that belongs to us all. Arguing against the property tax, especially its land half, reinforces the worldview of dog-eat-dog, of squeezing all the money one can out of the land one owns. When the only way to profit from land is by owning it, then people must develop it, even prematurely, and you end up with laws like Measure 37. Developing every owned site to the max despoils, whereas the optimum is to develop the center intensely while keeping much space open throughout the region. Doing that is what maximizes the bottom line; a region with open space will be more livable and have higher taxable values than one with border-to-border development.

The other conventional way owners profit is to sell out and move on, rending the fabric of community. A benign way to recover land value is to share it; that is, to pay in land dues (or land taxes) to one's society and to get back "rent" dividends, a bit like Aspen CO does or Alaska does with oil revenue. Most residents, owning land whose value is at the average or less, would come out ahead; owners of prime sites, typically the rich or out-of-towners, would pay more, so sharing is progressive.

Having owners pay for what they take, not for what they make, is but one benefit of geonomics. As newly enlightened environmentalists leave the ranks of the pro-property people, perhaps they can bring some of them along, to a tax policy that works right for both people and planet.