I've been thinking about who the "natural constituencies" for land value taxation are, and there are a lot of them. But it seems to me that firefighters and their families are a prime ally for those who think that Land Value Taxation is an important contribution to making our country a better place to live for all of us.
Firefighters end up going into a lot of buildings that aren't officially occupied. In neighborhoods where not everyone has suitable housing or employment, an unoccupied building might be a place where squatters are living or hanging out, and our firefighters will go in to make sure no one is there.
In places where many poor people share housing that might be expected to provide housing for a single family, additional partitions that create privacy for multiple room occupants make the spaces more dangerous both for residents and for firefighters.
Policies that promote keeping the sort of building sometimes referred to as a "taxpayer" -- that is, an obsolete or nearly obsolete building that provides the landlord enough income to cover his taxes while he waits for his asking price on a valuable piece of land, but is fundamentally an underuse of prime land -- tend to endanger the lives of firefighters.
There is another angle from which firefighters (among many others) will find land value taxation a desirable reform. Like many other municipal workers, firefighters frequently cannot afford to live in the towns and cities in which they work. Land value taxation works to reduce the selling price of housing and increase the supply of housing. This allows those who choose to live closer to their work to do so. (They may not have the house on an acre with a picket fence -- and some of us will continue to want that -- but many of us, given the option of comfortable, technologically modern, affordable housing within a relatively short commute of our work, in a school district we trust to educate our children well, would pass on the house with the picket fence.)
Our current system -- a property tax that places identical millage rates on land and on buildings, supplemented in many places by local and state sales and wage taxes -- produces a host of social and economic ills.
A far better alternative would be to divorce the millage rate on land from the millage rate on buildings and other improvements, and begin to lower the millage rate on the buildings. Simultaneously, begin to increase the millage rate on buildings. What will happen? Think about these four cases, from the point of view of the property owner:
1. A property worth, say $100,000 for the lot, with no building on it.
2. A $100,000 lot with a $25,000 building on it
3. A $100,000 lot with a $100,000 building on it
4. A $100,000 lot with a $500,000 building on it.
The total property valuation is $400,000 for the land and $625,000 for the buildings. Under the conventional property tax, where land and buildings both have the same millage rate, #1 is paying only 10% of the property tax, and #4 is paying 60% of the property tax.
Fellow #1 has little incentive to improve his land. He can cover his taxes adequately without doing so, and meanwhile, the land is probably appreciating; it will be worth more next year. He can sit and wait.
Fellow #2 is paying only 25% more than Fellow #1, and his $25,000 structure is producing some income, or a place for him to live
Fellow #3 has a reasonably new building on his land, and is paying taxes a good deal higher than Fellow #2.
Fellow #4 seems to have developed his site to something approaching its highest and best use, and, for his temerity, is responsible for over half of the property taxes.
Let's say that each is paying 1.5% of his property's value each year under the conventional property tax. Total collections are about $15,375.
What would you do, as the landholder for each of these properties, if, instead of charging 1.5% on both land and buildings, we started charging, say, 2% on the land and then whatever it took to remain revenue neutral on the buildings. 2% of $400,000 is $8,000, and so the rate on the buildings would need to be 1.18%. Here's how the bills would look
Fellow #1: $2,000, up from $1,500
Fellow #2: $2,295, up from $1,875
Fellow #3: $3,180, up from $3,000
Fellow #4: $7,900, down from $9,000
If you were #1 or #2, you might do nothing. You'd grumble, and pay up, or vote to go back to the other system. You might, though, start thinking about how you could put your land to better use, or consider selling it to someone else with an interest in doing that.
Fellow #2 is the one who is causing the firefighters the real danger. Fellow #1 is, perhaps, a problem to his fellow citizens, in the sense that the firefighters may have further to go to get to their developed properties because fellow #1 is keeping his good site unused. The folks on the $75,000 or $50,000 land, who'd prefer to be in better locations, are further from the firehouse, and perhaps outside the range of the hydrants.
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