Last month, Connecticut Gov. Daniel Malloy signed into law House Bill 6706, setting in motion a process by which certain municipalities would be able to implement something called a Land Value Tax (LVT). LVT is a form of property tax that is a little unusual in the sense that it only taxes the value of land itself, and not improvements on the land.
What's the Philly connection? The legislation was authored with help from the obliquely named Center for the Study of Economics (CSE), a spin-off of the Henry George Foundation of America based near 10th and Pine streets. The foundation was created to carry on the mission of the Victorian-era economist Henry George (pictured), who was born in Philadelphia and advocated for LVT as a kind of cure-all for social inequality. The eponymous foundation has been working since the 1930s to carry on his vision — but that vision has never found much traction in George's hometown.
But now Joshua Vincent, executive director of CSE, says that he has lined up "meetings with 10 Connecticut cities" who want to be part of the LVT pilot program. After languishing for a good century or so, the taxation formula has piqued the interest of city administrators in a number of older American cities that have struggled with abandonment and vacant land.
The reasoning is simple: Revenue dwindles for other kinds of property taxes as improvements — i.e. buildings — are demolished (or collapse, as the case may be). Connecticut cities like Hartford and Bridgeport have struggled with vacancy as much or, arguably, more than Philadelphia, and may view the new tax model as a simple way of correcting their tax code to address this fact.
Vincent remarked on the startling eagerness of Connecticut to adopt the system.
"[It's] amazing how fast it came, compared to our dear old town," he said, noting that the CSE only started lobbying for LVT in Connecticut last December.
What does the legislative victory mean for LVT's case in Philadelphia? Vincent says that he's eager to look at the 2014 AVI assessments, but there is obviously no clear time line in a city that has ignored his group's LVT advocacy essentially since their founding nearly eight decades ago.
However, Vincent noted that one of the biggest boosters for LVT was Hartford Councilman Larry Deutsch, a close colleague and friend of Philadelphia Councilmember Wilson Goode Jr.
What the rise of LVT in struggling older cities is also uncertain: the tax structure is far from universally embraced by economists.
"[LVT] looks good on paper, but it's difficult to actually implement honestly and accurately," said Kevin Gillen, a senior research consultant at the Fels Institute of Government.
Gillen said that instances where LVT had actually been adopted had resulted in corruption problems - appraisers have to decide what the highest and best use of land is in order to calculate its true value because actual improvements are not taken into account. He said in some instances appraisers had sought kickbacks by threatening to list, for instance, a single family home's highest and best use as some sort of commercial or industrial structure with a punitively high tax rate.
Additionally, even when the system is run cleanly it's difficult to get accurate values on something as speculative on what the best use of land could be. Gillen said the over-reliance and power vested in appraisers that make the tax system work - folks who, in places like Philadelphia, are typically older patronage employees who may not actually be experts in real estate - had led to wildly inaccurate valuations in places like Pittsburgh.
The fact that the system was being sold as a panecea for places with an abundance of vacant land also raised questions.
"The argument to use the plan to fight blight only works if land has some potential for development," said Gillen, noting that Detroit had the highest property tax rate in the nation - but also the most vacant land. He recommended cities like Philadelphia simply increase the rate that their current tax system values land versus improvements to discourage speculation on vacant parcels.
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