Public Officials and Land Value Taxation

Nadine Stoner

[A panel organized at the conference of the Council of Georgist Organizations held in Camp Hill, Pennsylvania, 31 July 2012. Excerpts compiled from notes taken by GroundSwell editor, Nadine Stoner. Reprinted from GroundSwell, November-December 2012]

Participants included: Josh Vincent of Philadelphia who is the director of the Center for the Study of Economics; Al Katzenberger of St. Louis who is the president of the Public Revenue Expenditure Council; Dan Sullivan of Pittsburgh who is the director of Saving Communities; Warren Chamberlain of Holliston, Mass. who serves as an elected member of the Planning Board; and Ted Gwartney, MAI, who served as an assessor in Michigan, British Columbia, Connecticut, and as an appraiser in California.)

Josh Vincent: "Scranton is in the news right now in the Investors Business Daily and the Wall Street Journal because they are about to punk out on a bond payment. The Scranton Parking Authority floated bonds back in the 1990s and early 2000s at high rates back in the good old days and is now in an impossible situation. The Council defaulted on the municipal bonds. We wrote to the Mayor Doherty and the Council recently suggesting why don't you increase the land value tax. The response has been property taxes are bad; we think in our city that is very poor and depopulating that a wage tax is the way to go. They have a wage tax now, about 2.8%. What would be the Georgist response that a wage tax is the way for a city to go?

Frank Peddle: "We had a conference in Canada in 2007. Wages in Scranton are going to be Bolshevik wages."

Everybody is going to be making the same because they took the firemen and policemen and everybody down to minimum wage, which is the same as if you are scooping ice cream. You want to be increasing wages, not reducing them to that level. Somehow you have got to make the connection between increasing wages and productivity.

Josh: "Mayor Doherty put up 25 properties, condos and hotels abated on taxes for 20 years. By reducing the take from real property we are actually going to reduce taxes."

Nick Rosen: "We shouldn't give tax abatements to a few developers, but pass a general law saying if you build an addition to your house your property tax does not go up."

Ted Gwartney: "Mayor Jim Clarkson of Southfield, Mich. in 1967 when facing this exact same question announced that he was going to hire a new assessor whose job would be to reassess all the land and value it properly and depreciate all the buildings and also put out a brochure that said any improvements you make will not increase your taxes." He was successful.

Dan Sullivan: "Let me tell you about Pittsburgh's experience with the wage tax. We had a City Council that loved land value tax but we had a mayor that loved wage taxes. The wage tax went up and up to 4%. The wage earners went out and out until we weren't getting much revenue from that. We were hemorrhaging people. So the next mayor cut the wage tax one year and 5/8% the next year and out migration slowed, and ten years later we were not losing many people at all. The School Board then started raising the wage tax and the out migration resumed.

Al Katzenberger: "St. Louis is a wage tax city. It's wage tax is not as high as other cities. St. Louis's wage tax is 1%. What happened recently was a fellow by name of Rex Sinquefield required St. Louis to vote on this wage tax issue every 5 years. When it was on the burner, Josh, Don Killoren and I were at the mayor's office because they were concerned that the wage tax might not pass. This was an opportune time to talk about land value taxation. In St. Louis the city property tax is only about 11% of the city's revenue. Most of the city revenue comes from the wage tax, sales taxes and fees. The mayor's office said LVT should help stabilize the city's finances. The city is millions of dollars in debt to its three pension systems. I think an LVT study would help St. Louis. (PS: The city voters voted to continue the wage tax for 5 more years.)

Ted: "I told you about Southfield, Mich. That is where the mayor decided to do something without legislation or any special laws being passed. The results were that the taxes on land tripled. The taxes on buildings were halved. The public was educated about the new land taxation system. It was not increasing the assessment taxes on new construction. Thirty US corporation headquarters were relocated to Southfield from Detroit and other regional locations. Southfield became one of the fastest growing cities in the US in the 1960s. You can do things without necessarily having to change the law. Unemployment was near zero at that time."

Ted: "Role playing as the mayor of Hartford, the capital of Conn., nearly 60% of all the values in our town are exempt. The state capital has state office buildings so our tax base in quite small. About half of the remainder that is left is commercial. So we solved our problems during the past 20 years by doubling the tax rate on commercial so they are paying much more taxes than residential, freezing assessments so that wouldn't change, and getting some revenue from Indian casinos, and we got big subsidies from the state government. The state government pays about half of our total city budget. Now in 2012 the state doesn't have the money and is not able to subsidize the city more than 50%. The Indian casinos are not doing as well as in the past so we are not getting as much money from that. The only thing that is left is basically increasing taxes and we have already gone as high as we can on commercial, and we don't want to increase residential. So we are looking at alternatives. At this point we are one of at least a half dozen cities in Conn. giving some thought to the land value tax as an alternative."

Al: "In Missouri we have over 50 different kinds of tax abatements, including TIFs and sales, etc. that are available to the City of St. Louis. We also have another 50 or so community development programs going on, and these include different kinds of grants. An example of one is near my house. It is a trolley that is two miles long and will cost $45 million. The mayor said this is good, this will bring in tourism but you (neighborhood folks) are not paying for it because it is a grant. The government officials will tell you we need a quick fix, that it takes too long to study every issue (including LVT). St. Louis is both a city and a county. One of the officials in our city, the treasurer, doesn't collect all the money for the city. Uniquely he collects money from about 11,000 parking meters in the city. He is in sole possession of that money and doesn't return it to the city. Now he has built multi level parking garages. When we talk to the mayor about that as an example of collecting revenue from land values, he says we are trying to get rid of the treasurer's office. (PS: After 28 years St. Louis elected a new Treasurer. She takes office January 1, 2013.)"

Jake Himmelstein: "I have been in a couple of land tax fights in Philadelphia, none of them successful. The point is that we did get a lot of publicity. As a result I got a reputation as a land taxer. I feel that the problem is that we have just got to get enough publicity because there is little understanding of the land tax. We have a crisis in taxation in Philadelphia. We need someone to explain the land tax and how it would benefit Philadelphia. We have to teach people what the land tax is.

Warren Chamberlain: I am an elected official in the town of Holliston, Mass. I am in my second term on the Planning Board. Since I have been elected, though I knew a lot about Henry George before that, I am sensitive to the political dynamics and what is acceptable and what is not acceptable. We know that property taxes are extremely unpopular. In Massachusetts our towns depend on subsidies from the state. That amounts to income and sales taxes subsidizing our property taxes. The local residents don't really understand the difference between the privilege of the land versus the right of their house or to be able to make that distinction. What is it I am really paying for when I pay my taxes? For myself, I am on limited income now and know the issue. What happens to someone on a fixed income when things change? All towns, cities, and states are short on cash. It is a local issue, national issue, and global issue. Massachusetts recently voted to allow casino gambling, thinking this is another way to get more revenues, because they want to avoid paying more property taxes. The way the state gets its money becomes an issue of income taxes, sales taxes, and now we get the casino issue as a panacea. Being on the Planning Board in a town that is very likely to be impacted negatively if a casino is located in a targeted town right next to us, we know what happened in Connecticut and all the cities in and around the casinos and negative externalities imposed on them. A lot of those towns and cities suffered in order for the state of Connecticut to get this extra revenue that was evidently able to subsidize the city of Hartford. In New England with its six states we are kind of like one big family. But the states are separate entities and have different tax policies. My son lives in New Hampshire. I went to a meeting of the Federal Reserve Board a couple of years ago and people from all the states came and gave reports on the economic development of their states. New Hampshire gave a report that, since the courts told them they had to subsidize the schools, NH did not want to have a state sales or income tax. They decided to put a mill rate on the local property tax. So there is a state property tax. Half of the property tax is a land tax and normally a little more than that. I would like to tell the legislators let's look at New Hampshire. New Hampshire's population is growing, they have good businesses growing, they have lower unemployment. We are losing population. The difference is state tax assessments. I can use that as an example. They tax the land. When we see the tax policy of a community, what is the outcome? People in New Hampshire are quite happy about the property tax. How do you feel about paying the $22 per thousand mill rate. What has happened to New Hampshire is that when the local taxes are higher, the income of prospective buyer can only buy so much and that means he can only borrow so much. That means that house values are actually lower in New Hampshire even though the monthly payment might be the same per month. The difference is more of my money goes to the town and state and I have control over it and less money goes to interest to the banks. In Massachusetts the financial services sector is doing fine because they can get more interest. There is a tug of war between the financial powers and the towns in getting financing. If we can show how we can shift people back to the land that is the real solution. I am working on how to explain it.

Dan: Getting back to casinos, Las Vegas leads the nation in housing foreclosures. All the gambling does not occur in the casino. People who got away from property taxes, including California, lead the nation in foreclosures. In Pittsburgh the councilmen liked the land value tax but the assessments were so bad to where the house next door had 7-8 times the land value, so we had to get rid of it. We would like to bring it back but the county doesn't want to fix this land problem. We can't sue in the courts because the land and buildings are the same and the tax bill is the same either way, so it is a moot question. The assessments are so bad somebody would be paying more than they should. We don't have control over the assessments. The city of Pittsburgh lost its right to do its own assessments. The law gave that to the county. We had a land value tax and when the assessments came in, there was a huge outcry from people who were assessed 7-8 times as much, so the Council voted to abolish the land value tax. If the land values were right there are seven councilmen who would vote for it.

Josh: In Alleghany County there are two ways to go. Pittsburgh is an outlier due to fact that the land and buildings values are so bad. Clairton, for example, has a land value tax, and it has consistent land values from parcel to parcel and zoned use to use. That way they have almost eliminated the tax on buildings.

Jake Himmelstein: The land value tax was in force in Pittsburgh from 1913 to 2000. I have two scrapbooks about land value tax, including Philadelphia, that I am willing to donate.