Property taxes are ubiquitous around the world, and in the United States, they’re a tax most people love to hate. Unlike sales and income taxes, which are baked into every purchase and paycheck, property taxes are added onto mortgage bills or mailed in as lump sum payments, making them a conspicuous irritant to the person cutting the checks.
Many of the other taxes we pay are determined at the state or national levels, giving rise to large scale patterns of taxation. Property taxes, on the other hand, are mostly determined at the local level, and can vary widely between states and even across neighboring towns within the same state. And because they’re calculated by applying a formula to the value of a person’s land and buildings, the appropriateness of each bill depends heavily on the accuracy of the property assessments upon which it is based. As a result, property tax bills differ considerably from parcel to parcel, giving the impression of arbitrariness that can be infuriating to home and business owners alike.
By embracing our disdain for the property tax, however, we’re missing out on the very real benefits this tax can produce when correctly conceived and administered. This is where the Center for Property Tax Reform (CPTR) comes in. A joint effort of the Robert Schalkenbach Foundation and the Center for the Study of Economics, CPTR works directly with municipalities, elected officials, local civic groups, and members of the public, to explore how their property taxes can be reimagined to reduce blight and sprawl, and enhance economic equity at the community level.
The “how” of CPTR’s work is straightforward, yet the impacts are anything but ordinary. By using current property tax assessment data, Center staff explore the effects of shifting the portion of property owners’ bills that come from the value of the land versus the portion levied against the value of improvements.
CPTR’s premise is simple: land is valuable because it gives its owners access to community-provided benefits (like public safety, schools, and roads), but improvements (like homes and other buildings) are the result of individual efforts and investments. So…tax the land to reinvest that value in the community amenities that made it valuable to begin with, but untax buildings to encourage more of what you want to see, like new construction in the city center, historic preservation, and reuse of formerly blighted properties.
This approach goes by a few names, but “two rate tax” and “land value tax” are the most familiar. The concept and approach are already being used successfully in a number of places from Allentown, Pennsylvania, to Canberra, Australia, to Hong Kong.
Like the property tax itself, each application of a land value tax is different, which is why Center staff engage municipalities individually, through tailored efforts based on what’s already on the ground, and with an eye towards realizing the unique future each sees for itself.
To explore what a land value tax would look like in a sampling of U.S. cities, check out CPTR’s Tax Shift Explorer. To learn more about the Center’s work in cities and towns nationwide, visit the website.