A Property Tax Cut Could Help Save Buffalo - WSJ.com.
Here's what I tried to post on the WSJ website; the topic, not surprisingly, was "locked."
Cutting property taxes is not the answer. Rather, the answer is reforming property taxes so that we stop taxing, or at least severely limit, the tax on buildings, and place most -- or better, all -- of the property tax on land value. Not only Buffalo, but also Schenectady, Albany and a number of other hurting cities and towns would benefit from this reform.
When we tax buildings, what we get are (a) fewer buildings; (b) poorer maintenance; (c) slower redevelopment of blighted neighborhoods; (d) less investment.
When we tax land value, what we get are (a) redevelopment of underused properties; (b) vacant lots and parking lots blossom with buildings that will help pay the land value tax; (c) better maintenance of existing buildings because the landlords suddenly realize that they need tenants to help pay their property taxes. All these contribute to a healthy local and national economy.
When we tax buildings, what we get are (a) fewer buildings; (b) poorer maintenance; (c) slower redevelopment of blighted neighborhoods; (d) less investment.
When we tax land value, what we get are (a) redevelopment of underused properties; (b) vacant lots and parking lots blossom with buildings that will help pay the land value tax; (c) better maintenance of existing buildings because the landlords suddenly realize that they need tenants to help pay their property taxes. All these contribute to a healthy local and national economy.
One of the problems in the commercial property world is that many landlords have negotiated triple net leases, so all taxes -- even those which the economists all agree can't be passed along to tenants -- as well as other costs like energy and insurance -- get passed along to tenants. The landlord makes his money no matter how the economy is doing, no matter how the tenant's business is doing, for just as long as the tenant can hang onto his business. Stiglitz would refer to this as sharecropping; I'd add "sharecropping with a vengeance." The landlord doesn't need to lift a finger. This is known as land monopoly capitalism. Winston Churchill called it the mother of all monopolies. (Check out "Ricardo's Law" on YouTube.)
If this sounds like a racket, it is. If it sounds like a miserably designed set of incentives, it is. If it sounds like privilege for some and pain for others, it is. If it sounds like a recipe for urban disaster areas, it is.
Reforming this is not difficult. Henry George pointed the way, and despite a dearth of attention to his ideas in most colleges and universities, there continue to be a significant range of people who see the wisdom of what he had to say. Most recently, Michael Kinsley (see The Week). But Milton Friedman and Bill Buckley saw the wisdom, too, as did Bill Vickrey and a number of other Nobel winners. Explore wealthandwant and lvtfan, and perhaps you will gain the vision that these people had, and perhaps you can help set upstate New York and many other sad cities on their way to being thriving communities again. They aren't beyond help. But we have to learn from our mistakes and the effects of our poorly structured incentives.
Check out Mason Gaffney's article "New Life for Old Cities at http://www.masongaffney.org/.
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