[RP TownTalk] Land Value Tax Calculator (fwd)

[Alan Thompson & Sarah Wayland]

Roland mentioned that he thought Land Value Taxation would have its 
strongest effect on the Cafritz property. Even that property really 
doesn't have much of an incentive under LVT.

The Cafritz property is 28.24 acres (1,230,134.4 square feet), 
currently owned by Calvin Cafritz, sitting across Route One from 
University Park in a prime location, and completely undeveloped. He 
currently pays the following in taxes:

STATE:       $1144
COUNTY:      $6959
MUNICIPAL:  $5868

Under a Land Value Taxation scheme, Mr. Cafritz would pay:

STATE:       $3294
COUNTY:      $10,299
MUNICIPAL:   $8683

This means he would pay $2815 more to the town under Land Value 
Taxation. The property is currently valued at $866,710 on the State Tax 
Rolls.  If it were assessed at the same rate that as *my* land is 
assessed, it would be $7.6 million.  Market value is probably more.  I 
don't think the $2815 will motivate them much.

-Sarah

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On Apr 13, 2006, at 9:49 AM, Alan Thompson and Sarah Wayland wrote:

[Sarah here, speaking only for myself.]

While I *do* support the idea of a Land Value Tax, I worry about two 
issues.

The first is that the current assessed value of the land does not 
reflect size or location.

The second is that the differential incentive is small, and I wonder 
whether it will be effective.

Let me give some examples to illustrate.

(1) The value of land (versus the improvements on the land) is 
currently set by the state, and those values do not reflect lot size or 
location.

Example 1: On my street are 3 houses: A is on one lot, B is on two 
lots, and C is on three lots. Each address has only one house on it. 
The land value for each property is set at:

A (9000 sq ft) = $55,500
B (18000 sq ft) = $56,400
C (22500 sq ft) = $56,850

So my neighbors all pay roughly the same tax on their land, even though 
the smallest lot is 13,500 feet smaller than the biggest lot.

Example 2: The Town of Riverdale Park sold a 649 square foot commercial 
lot on the southeast corner of East-West Highway and Route 1 for 
$36,000 to Riverdale One LLC (Mr. Caputo) on 6/4/2003. That same 
property has a state-assessed value (last updated on 1/1/2004) of $200.

Clearly the state will have to reassess the value of the land before a 
"land value tax" can have any real meaning.

(2) The amount of money a commercial property will pay, with the 
current assessment structure, will not change by enough to motivate a 
change in behavior.

Example: The old Crestar Bank Building at 6200 Baltimore Avenue, 
currently owned by Jemal Riverdale Citizens LLC, currently pays the 
following in taxes:

STATE:       $946
COUNTY:      $8508
MUNICIPAL:   $7173

Under a Land Value Taxation scheme, Jemal Riverdale Citizens LLC would 
pay:

STATE:       $1469
COUNTY:      $8936
MUNICIPAL:   $7534

For Riverdale Park, this means Jemal would pay $361 more to the town 
under Land Value Taxation. He bought the building for $1,350,000. I 
don't know that $361 will motivate any changes in behavior on his part. 
David Hiles says that this argument (that the incentive is too small 
(or a different version too large)) was not relevant to the merit of 
the proposal, but I think it is worth considering nonetheless.

----

To summarize, the main point is that the state will have to change how 
land is valued before Land Value Tax can truly work. A secondary point 
is that the amount of money we are discussing here will not have much 
impact on a developer who is used to dealing with millions of dollars 
at a time, and doesn't seem to mind lost revenue on the order of many 
thousands each month.

-Sarah