Land Value Taxation in the Context of the Current Budget Discussion
I am the director of the Henry George Foundation, a non-profit educational foundation thathas been working with cities since 1926, and is based at 413 South 10
th
Street, Philadelphia,PA 19147.I am here because of our concerns about the real budget gap, and the hard choices that mustbe made to plug that gap. Because of the varying scenarios presented by council, the
administration and others, there is still no clear way forward. Therefore, we’d like to put our
idea into the mix, and show how it could work.Wage taxes are regressive in Philadelphia; they should be a last option, until more low-income protections are enacted.Sales taxes are regressive, but have the advantage of exempting food and clothing.The property tax appears attractive on the surface; as it is the basis of a small percentage of city tax (though the main source of school tax). Yet, serious and concrete concerns aboutvaluation exist and must be addressed. The new values, while appearing to be a vastimprovement, are
still in the “rough cut” stage and are far from a final result.
The Foundation would suggest that aspects of the council and administration’s plan could be
enacted for this year, giving municipal government time to establish protections from bad taxpolicy, bad property valuation, and too few tools to protect taxpayers. We propose a bridge.For example, that bridge could be the sales tax increase. The impact on working and poorfamilies can be directly ameliorated by adopting the land value tax using the current values.Why and how?As the only recent academic study of land versus building values for the residential sector(Drexel, Lebow College of Business 2002; Philadelphia valuations as studied by ProfessorsMcCain, Jensen and Meyer) demonstrated that the BRT numbers for residential land andbuilding values were essentially accurate:
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At this time, however, we feel justified in drawing the conclusion that, on the basis of our estimates, theBRT proposed ratio of 18% for land to total value does not appear to be highly inaccurate. The establishedratio of 21.2 for all residential properties is not materially different from the original BRT value. Thisestablishes confidence that the research performed by the City Controller's Office (published in the AppendixA of the Tax Structure Analysis Report) is accurate (or that there is little reason to suggest that the findingswould change in any major way, could all properties have been examined). In short, the conclusions madeabout the residential properties in this study are consistent with the suggestion that about 4 in 5 Philadelphiaresidential properties would see savings under the proposed shift to Land-Value Taxation. BRT data wouldhave to be upgraded significantly to improve on these conclusions.
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We all eagerly await the BRT new data in certified form, with protections for vulnerablehomeowners. Until that time, Philadelphia must make choices.Although LVT should be (and has been) implemented with a gradual shift to an emphasis onland taxes, study indicates that 78% of residential properties in Philadelphia would see a tax
413 S. 10
th
StreetPhiladelphia, PA 1947Phone: (215) 545-6004Fax: (215) 545-4929
www.ourcommonwealth.orgwww.urbantools.orgmanager@urbantools.org
Henry George Foundationof America
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