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Among the many problems cities have been trying to solve since the mass exodus of people to the suburbs is vacant land. In larger cities this usually amounts to several thousand parcels. Unfortunately, the current property tax system rewards those who let their properties go by lowering their taxes. Anyone who improves his or her property with any kind of new construction or rehabilitation is immediately penalized with a larger tax bill. So the question becomes can a city reward those who build on or improve their property without tax credits or abatements?
It may surprise you, but the answer is yes. And the answer has been around for more than 120 years! The concept of two-tier (also known as: site value or land value) taxation was first put forth in the book Progress and Poverty (published in 1879) by Henry George (1839-1897). This system works by having separate tax rates for the land and any building on the land. The rate on the land is higher to discourage speculators from holding the parcel for long periods of time. The rate on buildings (or "improvements") is set lower to encourage better uses of valuable downtown real estate than surface parking lots.
This system was enabled in the state of Pennsylvania in 1913 but only in the last 20 years have some cities taken advantage of it. The biggest hurdle to getting more cities to try Two-tier Taxation is the fact that many people still have not yet heard of it. This is beginning to change though. James Howard Kunstler praises the benefits of this taxation method in his book Home from Nowhere. The short chapter on property taxes from that book can be viewed at www.earthrights.net/docs/kunstler.html. More than 100 years after his death, George's ideas live on, an enduring legacy to a man who wished to make our world and our cities a better place to live.
More information on this subject can be found at the following websites:
Created by Paul E. Janostak, December 2002.
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