Green Party-Ontario Activists Promote Georgist Philosophy

John Fisher

[ GroundSwell, September-October 2006]

Green Party Ontario leader Frank de Jong is running for the Ontario Parliament on a platform that includes land value tax, resource royalities and pollution charges. His campaign site, http://www.parkdalehighparkgreens.ca/ says: "GREEN JOBS. In a Green Economy, businesses will increase profitability and international competitiveness while reducing waste, energy use and pollution. A Green government will shift taxes off of incomes and profits and on to land value, resources and non-renewable energy. To be sustainable, manufacturing must use only renewable inputs."

Frank de Jong is a member of the Common Ground-USA chapter in Ontario/Quebec. That chapter's chairman, John Fisher, has provided GroundSwell with a copy of the 2006-P-BH-A resolution passed by the Green Party Ontario in May, 2006, in Toronto, Ontario, Canada. The resolution which was sponsored by Bruce Hearns (who is also a member of the Ontario/Quebec chapter of CG-USA), is reprinted below.

SITE VALUE TAX ASSESSMENT POLICY

Introduction

Whereas property assessment and taxation should be consistent with GPO economic principles, Site Value Taxation must be an important component of the revenue-neutral Green Tax Shift to be implemented over time.

The current system taxes both the property and the land, and bases the assessment on market value of the buildings and special zoning regulations. That has created a very complex tax system that frequently provides special tax breaks for wealthy landholders and that puts an excessive burden on small landholders in the lower and middle-income brackets. It directly promotes sprawl and misuse of otherwise valuable land by encouraging land speculation that withholds valuable land from full use. Every city and small town in Ontario in 2006 has unused or underused plots of land from the core to the periphery of nearby sprawl. As a result, people who want to own their own home must buy from cookie-cutter plots of land in subdivisions that pave over good farmland and combine the worst qualities of living in the country with the worst qualities of living in the city, but with the benefits of neither.

Site Value Tax, which puts the whole assessment onto the land instead of the buildings, makes withholding land from development for speculation uneconomical, and so encourages optimal use of every plot of land. This also encourages improvements to buildings and homes by making such improvements tax-exempt.

This supports the Green Party values of Community-based economics by promoting development within the core of built-up areas, where most big-box stores and franchises won't compete. The smaller tax load on smaller businesses under site value makes them more profitable than the huge spaces needed by big-box stores and "golden mile" shopping malls of franchises. It supports the value of responsibility by making land speculation and underuse of land uneconomical. It supports the Green value of Social Justice by transferring taxes onto the ultimate source of wealth proportionally and fairly in a way that cannot be evaded.

Be it resolved that:

1. The GPO shall implement Site Value Tax, improving assessment procedures to reflect the value of the land, taking into account long-term restrictions, allowed uses, and other aspects such as econological, cultural and zoning mandates.
2. Assessed value shall derive from the unencumbered value of the site in relation to location.
3. Assessed value shall ignore the market value of the structures on the land.
4. Assessed tax shall, at a minimum, recover costs of site services, including ongoing maintenance where Site Value Tax returns are too low.

Explanation of Each Policy Point

1. The GPO will implement Site Value Tax, improving assessment procedures to reflect the value of the land, taking into account long-term restrictions, allowed uses, and other aspects such as ecological, cultural and zoning mandates. Land has value in relation to usefulness and nearby land in use, and gains value mainly as a result of the effort of the surrounding community, whether the landholder builds or not. A vacant piece of land at the core of a city is worth more than an equivalent-sized parcel of the northern forest because of the proximity of goods and services. Since the community imbues the land with value, the community should recover that unearned profit through taxes.

2. Assessed value must ignore the market value of the structures on the land. The quality of buildings and structures on a parcel of land owe nothing to the community. The community does have an interest in the quality and maintenance of structures, but is not directly responsible for improvements. Furthermore, the biggest incentive to improve the quality of buildings and structures comes from the ability to profit from that effort. Removing taxes on structures encourages the beneficial economic activity of building improvement and rewards individuals for their efforts.

3. Assessed tax must, at a minimum, recover costs of site services including ongoing maintenance where Site Value Tax returns are too low. There are fixed costs associated with delivery of services to any given plot of land that must be recovered by the community and thus must be the lower bound on annual taxes. Landholders must pay for services such as sewage and water costs that include ongoing maintenance and improvements. Such costs are cheaper when shared, so the small costs to a building in the city core would easily be exceeded by the tax relative to site value. However, in rare cases, the tax recovered, when based on site value alone, may not be enough to cover the cost to service outlying properties. Thus the tax rate must have a lower bound fixed by the cost of those services, regardless of the site value. Note that land without service would pay only site value tax.