How might smarter taxation be able to help Baltimore? Here's a great answer from Bill Peirce:
Steve H. Hanke and Stephen J.K. Walters explain in "How Sunday's NFL Cities Became Champs" (op-ed, Jan. 21) the recent economic success of New York, San Francisco and Boston (relative to Baltimore) by property tax limitation. Their point could have been strengthened by carrying the tax capitalization analysis one step further.
The authors point out that a decrease in the tax levied on a building results in a larger stream of net income from that building, which justifies a higher value for the building. When the existing building is worth more than the cost of building a new one, buildings will be renewed and replaced and the city thrives. That is a good argument for eliminating the tax on buildings, but cities still need revenue and they can tax the value of the land without hindering development because the quantity of land is fixed. The problem with limiting property taxes as a whole is that cities or states have resorted to more damaging taxes, including income and sales taxes. Shifting from a conventional property tax to a land-value tax would allow cities to support themselves without damaging the incentives for growth.
Comments