[RP TownTalk] land value tax oversold

[Roland Walker]

[bruce.wernek writes]
> Clearly we have several proponents of the LVT.  Is there anyone out there
> who can provide a counter point so we can hear both sides of the issue?

While it is associated with extremists and fringe movements (such as
radical redistributionist "land reform") the land value tax is
actually a serious idea, and is considered among economists to be
reasonable policy.  I personally think it is a neat concept for cities
like Philadelphia or Buffalo that have large, empty interior zones. 
The land value tax inarguably changes the incentives towards favoring
density.

However, we are talking about a minor tweak to the tax system.  Its
potential effect on economic development in Riverdale Park is being
greatly oversold.

While there are no famous disasters that have resulted from
jurisdictions implementing a land value tax, such jurisdictions are
few, and the evidence of revitalization is sparse and anecdotal.  Most
successful economic revitalizations have not depended on such tax
structures, and they are used by none of our more successful
neighbors.

Actively marketing the town, on the other hand, is a proven tactic
which is far more important, and which is used effectively by our more
successful neighbors.

Also consider that we are not the sole taxing authority for land in
our borders.  Town property tax is about 40% of the total property
tax: our ability to change incentives is constrained by the fact that
the county and state would continue to tax improvements.

Similarly, taxes are not the only economic incentives out there. 
Douglas Jemal's empty properties are a good example.  All of his
property taxes there are dwarfed by the amount he is losing in rents
by not leasing his shops.  Yet the prospect of collecting those rents
is not enough to incentivize getting businesses in, because (by his
calculation) the amount lost in rents is small compared to the amounts
gained by appreciation on the property.

On the empty lot at Route 1 and E/W Highway, Joseph Caputo has every
economic incentive to build more densely -- he could make 10 times the
rent.  However, the opportunity cost (by his calculation) for learning
how to build a multistory development is too great to justify that
additional rent.   All these amounts are at a much greater scale than
the property taxes.

There are some real-world implementation wrinkles as well -- the State
of Maryland is now a major landowner in town.  The university's
M-Square development is to become our single largest source of tax
income.  However, publicly owned land is untaxable.  Our ability to
collect funds from M-Square depends on their development being
structured to have a private interest own a taxable building there, or
some other special arrangement.

The strongest effects of a land value tax would not be in the commonly
identified problem spots in town but at locations such as the very
large Cafritz property on Route 1.  The Cafritz heirs would get a very
large kick in the pants, encouraging them to replace wooded greenspace
with dense residential development.  I fully support their right to do
that under the current zoning, but I would not intentionally push
along the destruction of greenspace by changes to the tax code.

In sum: the land value tax may indeed have some benefit, but benefits
come with side effects.  And the benefits may not address our current
problems.  Benadryl is a beneficial medicine, but it won't do anything
for a broken toe.  Several past councils, upon consideration of much
more evidence than has been presented on this list, have decided not
to prescribe land value tax as a cure for our current problems.

R