Transcript and Video of our Expert Panel Event: Legalize Land Value Tax
Video from December 5th, 2024:
https://www.youtube.com/watch?v=ubu8epQXOVo&ab_channel=SierraClubNorthStarChapter
Moderator (Paul Manning): I'd like to thank Representative Elkins and Representative Sencer-Mura and Representative-Elect Katie Jones for also joining us today and for their support for better housing policy. Representative Larry Kraft is in transit and sends us regards as well if you're an elected official and we missed recognizing you you know raise your hand pop in say something.
I'd also like to thank our co-hosts the Sierra Club Common Ground USA, Neighbors for More Neighbors, Sustain St Paul, Bike Minnesota, Our Streets, Sustainable Developer Collective, and Move Minnesota and lastly thanks to all of you who joined us tonight we're honored to have folks from across Minnesota and across the country today we have attendees from California, Oregon, Washington, Illinois, Texas, Louisiana, Virginia, Massachusetts and New Jersey and I'm sorry if I missed any other states.
Our panelists today are:
Nick Allen - a PhD candidate in the department of urban studies and planning at MIT his work asks how the institutions governing land shape Urban Development and constrain local politics he considers planning dilemmas by drawing from from comparative political economy in institutional economics and Public Finance previously Nick was an economic development official in in Detroit and conducted research on Urban transitions in South and Southeast Asia.
Josie Faas is the executive director of the Robert Schalkenbach Foundation and co-director of the center for property tax reform, an independent Research Center focused on issues of equity and transparency in Taxation. She's been particularly involved with land value tax efforts in Pennsylvania.
Adriana Rizzo is a graduate student at UC Riverside and a member of the Common Ground California and Californians for electric rail.
Jamal Thomas is a member of the California common ground his research around georgism and the Land value tax led to him writing private privatize the methods public publicize the profits. He won first place in the 2024 Henry George School of social sciences writing contest
So I'd like to thank them all for joining us while Josh gets the video ready to share here. I have a couple of housekeeping items to make sure the event runs smoothly first if you're not a panelist please keep your audio off we'll do our best to monitor this but please avoid any repeated disruptions and second if you have any questions for the type them in the chat specifying which panelists you'd like to ask and we'll try to get to as many questions as possible in our time today. Alright well thank you all for attending and on to the video Josh.
Thank you so now we'll move on to the panelists panelists and ask them a bit about land value tax.
How did you get involved with land value tax and what's been your involvement generally?
Nick: Well you met Josie in the video and the last thing the video talked about - the Detroit Land value tax plan is kind of where I pick up on this. So I'm currently a PhD student at MIT but before coming here to Massachusetts I was working in Michigan on economic development in Detroit and I think there were three big things that we were really struggling with and Detroit continues to struggle with but we're certainly struggling with back in 2017.
The first was residents of the city were enormously overburdened with property taxes - Detroiters who own some of the lowest value homes in in the country pay some of the highest property tax rates on those homes which of course suppressed the value and also really destabilized a lot of people in housing, so about 30,000 homeowners went through tax foreclosure over a decade after the Great Recession.
The second thing that was a deep problem was that in order to get any new investment into the city we needed to create these selective tax abatements where we would one by one go to individual properties and decide whether they were worthy of new investment. And if so we would update their taxes.
And the third thing was really just a competitiveness issue you know. I think the way that the mayor of Detroit likes to talk about it is that the tax system we have rewards disinvestment and punishes investment. When you're looking at other cities with lower tax rates that often have other advantages people were really overlooking the city of Detroit for reasons that weren't related to the actual value being in the city.
All of that felt like you could sort of cut through it with a land value tax so I began working on this proposal around then we pushed very hard on it to bring State legislation.
That happened oh I want to say two years ago now and the mayor really worked very hard in sort of explaining this to Residents so I'll talk a little bit about those the barriers that we've encounter in that process, but it's been really exciting to sort of push this issue into the public light and to really see people rally around this idea particularly you know in the face of some really significant hard long-term issues in the city.
Josie: Sure, so I I first heard about land value tax in graduate school as I think a lot of students in urban planning and public policy do, but it wasn't until I came to this Foundation that I really got to dig into it.
And so the way that we work with land value tax is essentially it is our mission is to promote the ideas of 19th century social reformer Henry George and those of you who know George know that land value tax was kind of his seminal policy right?
So it's a very comfortable space for us to be in but it's also a really exciting space because it is in a lot of ways a very simple policy too. But then the devil is in the details and how it's implemented and so there's pretty much limitless opportunities to do different analyses and talk to different communities to figure out whether it's legal, whether it's going to work.
And by work I mean is it going to be more Progressive? Is it going to support existing zoning? Is it going to bring affordable housing into communities? and so at this point that's really the kind of work that I get to do which is really exciting.
Adriana: Yeah so I am from California [which] is sort of like a living experiment in how not to do property tax policy. We have pretty much the opposite of a land value tax here in California which is Prop 13. Which basically freezes property tax levels at a low rate and also says that properties can only be assessed when they're sold which incentivizes people to hold on to properties for decades and decades and creates huge inequities and property tax assessment.
It's even worse than the ones highlighted in the video where you have some homes that are worth millions of dollars and they're paying like $1,000 a year in property taxes and things like that. I grew up in California.
I'm a product of the public school system. I work in higher education and so I think this was something that was always kind of apparent to me, the inequities of Prop 13 you know. We're seeing these incredibly inflated housing home values and at the same time our schools are underfunded. California is in the bottom 10 States in terms of school funding despite being one of the largest economies in the world.
So I got kind of involved in 2012 when there was a ballot measure prop 15 which wasn't even directly land value tax but it would have made the property tax system more equitable by taxing commercial properties at a higher rate and reassessing them and so that was kind of my entry into the property tax reform world.
Then I read progress in poverty which is Henry George's sort of seminal work about land value tax and became involved with Common Ground California. I have since become the president of our chapter and been involved with other initiatives.
We've worked on for example a bill two years ago to study the implementation of a land value tax in California which unfortunately did not succeed, but which I can talk about more later. Then we've also been involved in initiatives to sort of implement a land value tax in a sort of an indirect way via social housing and transit value capture. Basically the idea is, can we use land rents by sort of renting out Public public land and use those revenues to subsidize social goods like public transit or low-income housing or things like that. So that's how I got involved.
Jamal: Yeah absolutely so my first exposure to land value taxation was more on the philosophical side through georgism which is basically summation of the political philosophies of Henry George.
After I like got exposed to it I tried to find like things that were maybe wrong with it or like how can we [find] what's the fatal flaw in this political philosophy? When I couldn't really find anything outside of just implementing it it kind of made me a little bit more attracted to it and after looking into a new job in California, I'm originally from Alabama, and I moved over to California for a job, I kind of got a little unsettled because of the housing market.
Kind of like what Adriana was saying about the large amount of disparity that Prop 13 has had over the state so that instead of just moping about it I try to get politically active and joined the California common ground. Now we're just trying to find ways to attack this.
Now, we'll kind of go through again and just I want to ask what motivates you to work on land Valley tax? What does it mean to you? what's the heart of it to you?.
Nick: I like to say that I work on the inverse of land value taxes which is all the problems that we might solve if we had better taxes available. If we were thinking about better ways to capture the value that is collectively created within cities and if we were trying to do everything we could to make sure that people can make productive investments in their communities. Really what I'm working on is all the barriers to that, and in my mind land value tax is a really elegant solution to those barriers.
It's not the only solution but I like it as a mechanism to think about what we could do today, practically, that would really move the lever on all these challenges we have within our cities. Challenges of making sure that low-income households can afford the taxes. Challenges in terms of making sure that the public investments we have can pay for themselves. And thinking about this question of making sure that those who are putting effort into making this city a great place are seeing… are being rewarded for that.
Josie: Well I think land value tax kind of has it all right and I think that's maybe what Jamal was alluding to too. So I think philosophically it's super solid right because it's essentially a policy for capturing the value that a community creates that is otherwise held in private hands right? And accrues to the people who own the property where value is rising. And it's rising in part because of the things that they do within their property right and that value is rightly theirs, but a lot of that value actually comes from Investments made by the community and things like Transit safety education jobs. Those sorts of things.
And so LVT does a really nice job of recapturing it in a relatively low cost way. This is not an elaborate mechanism. We're using a tool i.e. the property tax that we all already use so that's a big part of it for me. And then knowing what it does in the places where it's used and so there we're really in the United States looking mostly to Pennsylvania.There's been some really good studies done and I know Nick was involved in a number of them and sort of leading up to the push for lvt in Detroit. Quite a lot of this work was happening.
But we see things like more progressive tax systems, we see infill development, rightsize development, we see people going into tax arrear less. I mean the on the ground impacts are significant and they're positive so I think both those things make me enthusiastic about the policy.
I also just philosophically don't love the way that our society is so stratified where so few people have so many resources and I think that land and ownership of land and the ability to capture the value from land is a major driver of that. And I see lvt as a tool for reversing that, we're starting to course correct anyway. And then I think maybe naively I still think that we are able to come together and do hard things for the greater good and I think that lvt is one of the tools that can allow us to do that.
Adriana: I think the main thing that motivates me is just the Injustice of the default tax system in so much of America. I think you know Henry George has a quote "everybody works but the vacant lot" and it just seems fundamentally unfair that some people are able to become very wealthy by essentially no work while other people work very hard their entire lives and yet continue to suffer in poverty.
You know the video talked a lot about vacant lots and cities and then if you go to downtown Los Angeles you'll see there are vacant lots that are fenced off and people living in tents on the street literally next to these vacant Lots in some places.
And you know this is some of the most most valuable land in the world possibly and it's sitting there vacant for tax reasons. All while people are sort of dying on the streets. And that just seems incredibly unjust and I think you know that's kind of what keeps me motivated.
I'm also an earth scientist in my day job and so [often] think about natural resources. I think land value tax is a really important way to more accurately (sp.) distribute natural resources. Like so many of our environmental problems come down to water rights,mining rights, things like that. And I think you know particularly as we think about the clean energy transition, there's I think potentially a gold rush for critical minerals like lithium and things like that and land value taxes and taxation is really needed to make sure that those that that happens in an equitable way. That doesn't create this sort of boom and bust economy that you know sort of leaves a lot of people behind, including potentially the environment. So yeah it's very good definitely from an environmental angle it's huge.
Jamal: So I come at this really from three areas, the first one being philosophical. Like everyone has basically said before here is that if there is a revenue stream that doesn't come out of your own labor that is the more just way of getting public financing and public Revenue out the door. And I think that if we did have a Society where someone's fruits of [their] Labor are kept to themselves and everyone's able to get the resources they need in order to be the best they could be we would have a better Society overall.
And second would be the political. When I did the writing assignment for the Henry George School of social science I started looking into kind of just the history of just land taxation in general and really seeing that in the course of American history a lot of people smarter and much more famous than me wanted this. From the founding fathers the Thomas Payne and Thomas Jefferson and we can go all the way back to Biblical times with The Book of Leviticus so I think that like finally finishing what all the forefathers before us couldn't do was I think one of the things that I would think would be that's amazing to have you know.
And then the final thing would just be economics. Like every single economist that I respect and researched can't really deny that just shifting to a natural resource taxation would be much more efficient in terms of resource allocation, as well as Revenue generation. So those are my three concerns.
I definitely think you know philosophically it it makes a lot of sense I think we we all kind of we all kind of see value in that but you know unfortunately still a lot of barriers to achieving it and I think you all have some interesting perspectives and what's preventing us from getting there and so I'm curious:
What are the key barriers to advancing land value tax and what do you think are some of the best ways we can address those concerns and barriers?
Nick: So in this case I'll highlight two things that I think are really important precursors. The first is that in order to have a land value tax that functions properly it is necessary to have an accurate system of land valuation in the community you're working in. If you don't have that, a land value tax will not work as described. And it will actually distort many of the outcomes that you want, so it's really working against you.
The other really nice thing about working on that is if you're actually valuing land at its market value you're approaching what a land value tax would do, because the property taxes on that land are or typically the property taxes overall on that land are going to shift towards land value. And that shifts it off to other things in the community.
The other thing that I would say is I've been thinking a lot about the mechanism design here. When we worked on this in Detroit we really kind of followed closely what Pennsylvania had done with this idea of a split rate tax where you raise the tax on land and reduce the tax rate on structures or raise the tax rate on land and reduce the tax rate on structures. And I actually think it's a pretty crude mechanism for implementing a land value tax.
There are a lot of things that you can pay for that would have very high returns in a community and sort of doing that simple adjustment actually misses a lot of those opportunities as well. So I could talk about the legal reasons that that's an attractive structure. But I would just say you know, thinking outside of the constraints of what we've done legislatively is a really helpful way to think about what it would look like to localize this in other places.
Q: Are saying we should think beyond split rate taxation for implementation?
Nick: Yeah. I think other good examples of this are there. There are a lot of different mechanisms you could Implement that would sort of either be land value taxes directly or quasi land value taxes.
So one thing I'm working on right now is looking at Transit funding options around a land value tax, because transit, especially heavy rail systems like Subways really or the light rail in Minnesota, really drives land values around the stations. So figuring out ways to harvest that value to fund the system is really important, and it's not actually done anywhere in the US right now.
The other thing that comes to mind with this is you know pairing it with things like up-zoning and figuring out ways that you can do Mass upzoning (which is a major conversation in the US) while also returning the value of that up zoning in a way that both benefits future builders and also like brings back the value of that up zoning to Residents. Coming up with a creative mechanism to solve that problem would be really exciting and I think also unlock a lot of the community challenges with up zoning.
Josie: Okay so I made a list so I'd be able to be systematic but just to return real quickly to what Nick just said about upzoning. We did some work relatively recently for the City of Richmond which is undergoing a major up zoning effort. And lvt or an approximation is a big part of trying to capture the value that they're creating there so I I would love to talk more about that.
Okay so what are the hurdles? Let's preface this by saying it's an awesome idea. We should all do it, but let's talk about the hurdles because they're real and if we're serious about doing it then we need to understand that these things are real and deal with them accordingly.
So I think one of the big barriers and it probably doesn't apply to anybody on this call because we've opted in to have this conversation but it's a wonkish solution, right? This is not a like fix it immediately kind of thing. You have to think it through. Yes it's mathematically simple, but most people don't really understand property taxes.
And so to go from a baseline of not really understanding the property taxes that we're paying right now to: "what if we made it a step more complicated?" takes people pretty far out of their comfort zone. And to the extent that these things have to be implemented by elected officials that can be a real problem right?
If the voting public is not on board or doesn't understand or has a knee-jerk of like this is boring I don't want to think about it that can derail things.
Another thing that we encounter a lot is the fact that property is an illiquid asset right? so your property increases in value [but] it doesn't mean you have more money in the bank to pay your bills right? or your property tax bill [increases] and so as soon as you start shifting tax rates you're touching everybody's Property Tax Bill and that means some people's bills are going up.
And so you know we see it all the time especially as the housing market and real estate in general is booming these values are going up. Obviously a tax bill is determined not necessarily well. It's based on the value of the property, but the rate is what actually determines the bill, but that's a Nuance that most people don't really delve into when they're reacting to a property tax bill. So again this has to do with kind of public perceptions.
I think in the same vein you know property taxes are good from an economists standpoint but a lot of the same things that make them good from an economists standpoint make them sort of unpopular in terms of people who pay taxes. They're very visible and they're distinct and you can't move that property to escape the tax right? and so that's a big part of the Georgist perspective and why we like lvt. But it also makes it a kind of unpopular thing to talk about.
There's a lot of legal hurdles and I think Paul you mentioned one in the beginning of this event around Minnesota and legality. In Minnesota lvt and split rate not being necessarily automatically permissible.
I think one of the biggest things is the fact that lvt in a sense kind of goes against what we've all been taught As Americans. Of how to behave right? Somebody said buy low sell high. Maybe I said it in the video, but I can't remember but that's kind of our culture right? Like we're all brought up with that ethos of like if you're smart you invest. And you know you sell high and you make money. And the whole thing about lvt is that it's essentially trying to tax away those gains. And so for those reasons it can be tricky. It's public policy and the public part of that has to be persuaded and brought along you know. And educated about what exactly this policy is going to mean for them.
Yeah I definitely think that the wonkish comment is true. I think it's tough to start a conversation by talking about a tax right? You have to kind of start with making property taxes more fair or you know something along those lines than introducing a new tax to someone right? it's not the most exciting thing
Adriana, what do you see as some of the major barriers to advancing land value tax?
Adriana: Yeah I could talk about some of the political barriers. So I think Josie kind of alluded to some of this but I think the potential for like tax revolt type politics is a big threat to land value tax, so the reason California is in such a situation was because of the tax revolts in the 70s. Which were the proponents were kind of coming out of a fights against School integration. Sort of upset about you know about protests at the UC campuses so there was kind of a culture war aspect to it.
It was also part of the anti-growth Southern California movement that is happening at the same time. But this also introduced a lot of the zoning restrictions we have.
But basically it was sort of like a Grassroots movement of like right-wing homeowners [that] basically pushed this sort of terrible tax system on us and I think and it continues to be sort of the stalwart for that demographic in our state today.
Like my recently elected Republican assembly member had Prop 13 as her sort of top priority and so I think that continues to be, [or] I think that is a potential political problem with land value taxes.
Yeah and I think you know broadly there's a sort of Home voter hypothesis that you know once people become homeowners it affects you know how they vote.
So in 2012 with prop 15 - which was the property tax reform ballot initiative - that was only for only affected commercial properties. It didn't even touch any homes people own but nevertheless a majority of homeowners voted against it while a majority of renters voted for it because they sort of saw their material interest was in line with the commercial landlords. And so I think that that's a political problem as well.
I think as the housing crisis gets worse and you know fewer and fewer people are able to be homeowners that may become less of a problem and it may be easier to to pass some kind of land value tax but that is a political obstacle.
Another obstacle that we've kind of come across - so when we ran our bill in 2022 to study a land value tax it didn't change the tax system at all it was just to study what the benefits of a land value tax would be. The bill did not make it very far in the assembly because we had a list of basically what I would describe as like Suburban commercial interests set a letter of opposition that killed it. So this includes you know interests like the Realtors, the apartment association (which is kind of the landlord Lobby). Realtors who you'd think might be supportive of land value taxes as it might lead to more home sales but I think they're sort of so stuck in the anti-growth status quo.That is they're not thinking that way. And then a bunch of associations like from basically Suburban Southern California as well as like the Flasher barricade Association which I think built highways.
And so there basically is the concern that if we implemented a land value tax that would increase Urban growth and decrease Suburban growth. Which I think is good for the environment and it would be good for affordability in our cities, but there are some you know the profiteers off of sprawl might lose money in that situation. And they were organized and powerful enough to win in this case. So I think those are sort of other interests that would be opposed to LVT.
So I think it just depends on building a coalition of people who are renters and workers and you know labor unions who would probably benefit from a land value tax. Making us organized enough to stand up against these other interests. But I think you know, as some other people have said, that can be challenging because it is a little bit wonky.
Yeah I think we kind of ran into that in Minnesota similar issues of political activist groups and Suburban kind of interests having a lot of objections to land value tax.
I guess I'm curious about Nick and Josie from your work in Detroit and Richmond. Did you see or learn anything interesting about how to kind of overcome that in terms of messaging?
Nick: Sure I mean I worked on this for four years in Detroit. I went to hundreds of community presentations over that time. I would say 90% of what I talk about in those presentations is not a land value tax.
I talk about the problems that people face under the current tax structure. I talk about the dilemmas and tradeoffs and I try to show that those problems are linked. In my mind the LVT tax is a really hard thing to message. It is really hard to convince people that they want a tax.
What they do want is the bad things that are happening in their City to stop, and if you can, if you have an option or an idea about how that can happen people are very excited to hear about it. But I would never go through the door talking about a land value tax. I would talk about the things that matter to folks already paying their taxes. Trying to make you know repairs work on their homes and wanting to see their City be a better place.
Coming from a kind of problem solving angle and [not] like land value tax is a solution in search of a problem. And you don't want to invert the order of operations.
Josie: Yeah very true. Yeah I think that's right and I think also if you don't have Nick to do the talking for you, get a local person who's got some pull and some Charisma who can really speak from a place of experience in the community especially.
Like for us we're in Princeton is honestly never going to have a land value tax right? so we don't have Home Field Advantage when we talk to people. It's really like let us talk to you about this idea. We've done this research. We've run the numbers. Here's who's going to pay more here's who's going to pay less. Here are the lots that are going to see changes, you know, significant changes in their tax bills we are not you know nobody is excited over this.
Like we need somebody to come in and be like hey guys - exactly what Nick was saying - like we know the community, we know the problems you're having, this is a policy that's going to you know support getting the solutions that you want. You need more housing. You need more affordable housing. You want those vacant Lots cleaned up. You don't want people dumping dead cars next to your house. Like here's how we're going to do this, and then we can backfill with the numbers.
And the numbers absolutely matter, but the messaging is super important, and I think it goes back to what we were just talking about with the Achilles heels of this. It is a tax, and as Nick said nobody really likes paying tax. I mean it's life, death and taxes but we don't really like either, so the messaging is really huge.
I think talking about it within you know a group of solutions is important. Our Coalition is kind of taking that approach of looking at it within the context of Transit and single access stair blocks and people over parking and kind of issues like that. Talking about it as part of a broader solution.
Okay and then sorry back to you Jamal what do you kind of see as the key barriers to advancing LVT? and what are your thoughts on ways to address that?
Jamal: So I completely agree with what all the other panelists were saying. That there's just a lot of this first mover advantage and a lot of people just don't want to be the first person there and the first person to fail.
I also think that a lot of this is just simply self-interest sometimes and real estate is kind of the main way for the average person to generate wealth. So when you talk to any person about anything that could even remotely reduce that there's going to be a strong negative response to that.
So part of the reason that I actually wrote the paper "privatize methods publicize the profits" is to try to find some out of the-box solutions to get around all of this public and private opposition to land value tax. And from what I gathered from the research I think that you know having some type of prototype or something that you can like bring up to the masses and say hey this works, it's always works, you know, come join us. [This] would probably just be the best way of going about it.
So the out of the box solution that I had was if you took land value taxation, and the citizen dividend was simply just a basic income giving the people out of the revenue, and also other different tenants that people that align with georgism talks to and rolled it into a Private Bank maybe that could be a way that you could get land value taxation out the door without having all of this opposition. But again you know you don't know till you try so you know it's always just the what finding out what works and trying to go with that so
yeah we need to learn and adapt for sure. okay great I think I'll move on to some of the questions that we've been getting from people in the chat. The first one is very topical:
Minneapolis like many cities, has seen a cratering of property tax income in its downtown office core shifting tax burdens to residential areas. How do you see land value tax interacting with this trend?
Josie: sure so cratering because the value has gone out of that part of the city because of covid and work from home?
yeah so lvt like property tax is based off of Assessments right and so if your assessments are showing that part of the city the value has gone down then the tax liability is going to go down. Now there may be some additional granularity because lvt is really looking at the land value whereas property tax is looking holistically at improvements and land.
Generally speaking downtown areas are going to have much higher land value. I think we all kind of implicitly know that but I'm going to hedge a little bit and say this is where I kind of step into my I would want to look at the numbers and be able to actually do the analysis to speak confidently about what an lvt would do versus a traditional property tax in that circumstance. So again this is really the part of this that we do is to like let's run the numbers let's see what it actually looks like.
And I think that you know in terms of messaging potential public policies like you always want to have that back stop of being certain of what's going to happen so just off the cuff I would say if the values are going down and the assessments are reflecting that chances are in lvt would mirror that effect. The degree to which that would be the case I don't really know because I haven't seen those numbers.
Yeah and I I think it's I think the overall trend of it just you know in the past few months people getting the increased property tax bills has gotten people thinking and asking questions about about property tax so an opportunity for LVT to be discussed of a way to redistribute money away from just putting it all on certain Residential Properties
Josie: Yeah so generally speaking sorry I just wanted to add one thing generally speaking not specific to any one city. LVT generally shifts the burden off of residents and onto other types of properties right vacant? Parcels 100% of the time see their tax bills go up. That's just math right because if part of your tax bill is composed of improvements you don't have any improvements and suddenly the whole burden goes onto land you're going to see that that tax bill go way up. And generally speaking residents do make out much better under an LVT but again I would want to see the numbers.
Nick: Yeah I'm reluctant in this case to immediately jump to land value tax as the solution to the problem of cratering downtown values what I can say is a much worse solution is what cities are actually doing which is raising their commercial property tax rates as a way to backfill that to me feels like a real strategic error.
You know of course we want to make sure that we're not shifting burdens to other classes. But the more you make it difficult to invest in any particular asset class the more you assure that that area is in demise so I really worry about that a lot. And I'm reluctant to say. So land value tax does not do that but I would really want to think about a host of alternatives to raising property taxes through more taxes.
Yeah yeah good point so the next question is can you give me a guess as to whether my building would go up or down in property tax. I'm in a higher than average amenity area near Transit and an uptown?
Moderator: So there is one thing I'll put in the chats that you can kind of look at. It's some research by Metro Transit Michael Krantz so I'll put that in the chat here. But you know in general when he put together a hypothetical land value tax for Minneapolis he found that most or over half of properties would see a tax decrease, and it's mostly the ones where 80 to 100% of the value of the property was in the building. So that's most apartments and major developments. So I think for most Apartments there'd be a slight decrease.
I'll kind of follow up with that with Nick. I think generally in your research you've found that occupied housing sees tax reduction is that true? or do you have any thoughts on that?
Nick: I will so I think the paper you're citing is actually a paper that some colleagues of mine worked on that I bundled together into a report so I just want to say that you know credit where credit is due that was Mark kidmore and Fernand Peres. but I the overall findings in Detroit are that it significantly reduces owner occupied property residential property that's and that's a very specific local market effect and it's an effect of the exact way that we structured this where we reduce building tax rates in exchange for land tax rates.
The reason for that is basically because as a fraction of total value land value is very low in owner occupied properties in Detroit. That's going to be different in different cities it's going to be different in different parts of cities and so the modeling work that Josie is describing is the sort of critical precursor to figuring out like what do you need to focus on and what do you need to pair this policy with to make sure that it makes sense for everybody.
I'd say a really good way to do that because it will not in most cases it will not reduce taxes for every single resident is to talk about things like property tax credits that can very progressively redistribute property tax burdens.
How can we advocate for this at the city and local level? How can we get this to happen? and I think that might kind of go in line with some other questions we're getting about. Do you know how we should speak with elected officials who aren't familiar with land value tax? Do you have any lessons about how to communicate with elected people?
Josie: So I have one little tidbit that seems to land pretty well and I don't know that I'm the only person saying it but I'll share it. Basically thinking about property tax as a signal that you're sending to the market right? so you're sending multiple signals in the policy world. One of the big ones in terms of land use is zoning right? If you want to see what you're Zoning for built then implement an lvt right? because what you're doing is you're incentivizing the market to build to the highest and best use.
I will add because we just funded some research looking at - it was some agent-based modeling looking at lvt and then lvt plus incentives for Green Space preservation. That combo is amazing right because lvt says build build build right? Basically that's the message. Infield development - do it right? There's land , build on it because you're not going to be paying additional taxes on your improvements and that's a very strong Market signal.
And so what you're saying is what we zone for what we really want to see but if you're not careful you can overshoot that right? And so the idea about preserving Green Space is that - there's no healthy city that has no green space right? Like we kind of implicitly understand that, so those two things together are really really powerful but thinking about it as property tax talking to the market in ways that we don't even necessarily think about.
As policy makers, as voters, as taxpayers, and developers think about these things right? When they're costing out a project this absolutely is part of that equation and so if they see wow this is zoned for you know multifamily 4 unit housing part of the equation of whether they realize that zoning is going to be property tax.
And so that seems to land with elected officials because they're looking at this from a very kind of high level they want to see things happening on the ground. Think of the traffic controller analogy of like we're sending out signals right and a traditional property tax you're sending this perverse signal not to invest because the more you invest in improvements the higher your bill goes. And so to the extent that property tax is a signal to the market - lvt is the signal you want to be sending.
Nick: I love talking with electeds about this and I'm hoping that representative Elkin might chime in too but I will say this when you talk about proposing new taxes you're sort of asking public officials to walk the plank for you.
It's really difficult to pitch the idea that you are going to raise taxes on specific groups of people even if you're reducing them on others, so here's what I would say about that especially for constituencies who see their taxes rise. It's very important to have a message that that you are creating long-term value for every single site in the city. That includes people who own vacant lots and scrapyards today. It includes a lot of people who would otherwise be very resistant to this.
What they would see as just a strict shift in tax burden. Making sure that officials know about that and are prepared for that kind of change but also giving them a modeled result of what that looks like and who they need to talk to is really important.
And the last thing I would say is build the Coalition first you know? I think it's really exciting to be in the winning team and it's really exciting to show the kind of diverse Coalition that you can put together around an issue like this. That's a lot of the work that public officials would have to do for themselves. I see representative Elkins joining us so I'll stop there.
Elkins: I think the way that we've approached you know trying to to get a foothold in Minnesota is providing the establishment of land tax zones as an option for cities. And the way we've been pitching it is you know we've had in the wake of the George Floyd civil disturbances you know a couple of pockets of in both Minneapolis in St Paul in particular that you know were were raised during the rioting.
And [we are] saying hey this is a way that we could discourage speculators from sweeping in on those now vacant Lots. And you encourage that those lots come into the hands of developers who actually want to build something back on those lots and I think that argument has been resonating.
We have a particularly stubborn Senator that we need to win over. But certainly in the Minnesota House among our leading tax leadership we have support for the concept of at least doing this kind of a trial and I would say actually some of our biggest opposition has just been from our assessors.
Minnesota has always assessed the value of both land and improvements, but that data has never been used and so the assessors have gotten lazy and they don't really trust their own valuations of the land.
And they understand that if you know if we're to implement this that suddenly oh that we're going to have to pay attention to this part of it. But one of the other appeals of you know targeting you know blighted areas is that if you've got a vacant lot all the value is in the land so it's much easier to accurately establish those values and so it also should help allay some of those concerns and arguments as well.
Adriana: Yeah I'd just like to add to the discussion of the assessors that that's also been an issue for us and you know something we've tried to do as an organization is try to run candidates and endorse candidates for assessor and kind of Be Active in those races. Because at least in California, most assessors are elected, although they're a very sort of low salience election that most people don't really pay attention to.
Nick does that tie into what you were talking a bit about - setting up assessment schemes and the assessment side of things
Nick: yeah 100% And I think that one of the best things anybody interested in working on this can do is to invest in their local assessor and to learn about local assessment.
That's a great takeaway for us okay I think a couple other questions here let's see. There's been some kind of questions about you know so the Minnesota law would allow cities to establish land value tax as zones. Generally is there research about whether it should be done across an entire city or done in certain Special Districts for certain purposes?
Josie: So I know there was an implementation in New York City that was within I want to say it was a certain segment of the Upper West Side it was specific to one segment of the residential zoning and it was an LVT. And it was very successful in causing infill development so that's the only real world implementation that I'm aware of that was like part of a municipality and again it was even more targeted than just geographically. But it it did bear fruit it did actually do what was hoped would happen.
And then we've seen municipalities turn lvt on and off as they need it so that's another thing. So again not geographically specific within a municipality but but temporarily specific in terms of we want that redeveloped we'll turn it on it got redeveloped we turn it off. It's an interesting policy tool for sure.
Nick: I'll double down and say I think it's a great idea. It's really difficult when you have fixed jurisdictional boundaries to know exactly what the right of a group of people for this is, and you know think about like business Improvement districts it's a bunch of people getting together to say we would like to voluntarily tax ourselves to raise the services.
The really important thing is getting a group of people together who say this is a really great idea to fund things that we want so whatever that group of people looks like is the right group of people for this. So I'm excited to hear that that's how Minnesota is approaching it.
Okay a couple other questions yeah I mean I think a common one is that people are generally worried about like how this would raise taxes on their home or sorry well so here here's what it says I think I'm in favor of LVT but I'm worried about homeowners who cannot afford their homes taxes Rising because their land value tax is high but their property tax is low.
Adriana: Yeah I can answer that one. So yeah I think that it is a valid concern in some cases if you have somebody who is low income but owns property and doesn't want to be displaced I mean I think there's two answers.
I think on one hand you know as a homeowner you have the option to sell your property to to pay off that tax and you know perhaps that's not such a bad thing if you're you know if you're we have a problem in where you know a lot of family-sized homes are being occupied by aging single people who can't necessarily take care of that home and are you know be maybe it would be better if they were to downsize and have a family move in there. So I think some having on some level having an incentive to sell your home is not always the worst thing, but I think it's also important that we have policies that allow people to kind of defer I think defer taxes until death like in some cases for elderly people who would not like to be displaced or people who have sort of like you know hardship due to the low incomes I think we it's important to build in options like that for people who are in instead of in those specific situations.
Jamal: Yeah that's basically what I was going to say yeah it's having a it's called like a working person deduction that any deduction that you make is just carried over on the title and is paid by whoever gets the the title next at the sale. Just to make sure that the money that is deducted or exempted is still paid - it's just going to be on a longer time span. Usually there are two different solutions to that. There is a deduction for working families and exempting retired people until the transfer of the title.
Nick do you have any thoughts on kind of these types of cutouts
Nick: yeah I mean Josie and Adriana have both talked about this issue and how different approaches to this the big the deeper issue is sort of the illiquidity of owning property. I guess what I would say is I really think the virtue of tax systems is stability and predictability. And sudden changes are very difficult for people to absorb.
Whether talking about you know a big transition in the tax system. Or a you know a land value increase that people aren't expecting that sort of sneaks up on them. So I think ideas like Adriana like you know being able to defer tax payments as tax liens are really attractive.
There's also trickiness to it. Boston has that option I think there are about 10,000 seniors who are eligible and something like 200 of them use it because people really don't want to take debt on their property, so just thinking through those challenges and talking with people about it and you know again modeling it out is a really helpful way to to address it. But I think it's a non-trivial issue.
Josie: I think another thing to think about also is the phased implementation right? so I know like you know our colleagues at the center for the study of Economics were really at the fore in Pennsylvania and all those implementations. And in those cases the recommendation is always a revenue neutral implementation. So this is not a grab for more tax dollars right this is a this is you're just bringing in the same amount of Revenue and a phased approach.
So I think in all of those cases it was a 10 percentage point increase towards an LVT whatever their ultimate you know rate structure was going to be per year. So that gives owners in the market a chance to adjust.
You never want to flip a switch and be like hey surprise your tax bill just went up you know 30 fold which we just saw happen in Cook County. But I think that was a mathematical error unfortunately. But it sends shock waves through the whole Community right. And it's going to hit people who absolutely can't afford to have that happen.
So yes, absolutely tax deferrals are an important tool and the other thing to keep in mind is I mean look, our property tax code is full of abatements and exemptions and all of these carve outs for different people veterans you know older people widows disabled people. I mean depending on the state and the municipality it can look like a lot of different things lvt is not immune to those. You know it's not like you adopt an lvt and suddenly you don't have access to those types of tools you do right but then you have to consider the equity issues that you know the ripple effect of everybody who isn't eligible for one of those kinds of protections. So yeah I think phased implementation, revenue neutral implementation and then being mindful of how you want to use those protections for particular classes of taxpayers that's all super important.
Yeah all good points and you've all kind of mentioned a few examples of this but are are there any like real world examples where land value tax is implemented where land prices fell or we're better to publicly capture economic you know gains yeah are there any specific examples that you point to any countries or cities that that you bring up with people are electeds when you talk about land value tax?
Nick: Well, my cheeky response is every community in the United States has a land value tax, we just also tax property in addition to that. So you know this is not a big difference in how we think about it and furthermore we exempt particular parts of property all the time.
Tax abatements often only tax the value of buildings. We often you know specifically take things off the tax rolls and so a land value tax is really not. It's an incremental difference from what our property tax system is.
There are bigger experiments like Singapore is a fascinating example that I encourage people to look into. There the federal government froze the value of land in 1972. It didn't expropriate it but it said look we're actually just going to make sure that all future transactions happen at this price and over time we're going to collect that land and make it national and then lease it out on a land basis and I encourage people to think about that just because it's an amazing alternative system with very different incentives. So you know I think it's fun to be imaginative about this too and not get too locked into a particular solution.
Jamal: so I would have two examples. Singapore is an amazing example of land value Taxation and land value capture working. The first example I would bring up is Taiwan. The founder of Taiwan was very much about Henry George. He learned about his policies and actually wrote the Constitution that allowed for taxation of lands. So the whole area of Taiwan still to this day still does taxation of land.
And then the second one I would say would be Denmark I think a couple decades ago there was a political party that was able to put land taxes into the onto the docket as one of their platforms and then when they eventually got into power they put a very small land tax on the entirely of Denmark. So I always bring it up whenever anyone says there's going to be a terrible you know destabilizing force is what what Denmark's doing.Those are two I would bring up.
Josie: I find often people put less weight in the international examples and I'm not going to say that that's right but you know what happens in the US right? and we don't have that many implementations. They're all in Pennsylvania. I think give or take about 20 municipalities and school districts over time and like I said LVT has come and gone in those places and some still have it and some don't.
So when people ask about okay but what happens in the US context there's some sort of information holistically about those experiences and then there's information about specific municipalities. So Pittsburgh doesn't currently have an lvt. I know there's a push there to bring it back but there was some really profound things that happened in Pittsburgh when they implemented an lvt and basically you know brought that downtown area back to life.
In fact I was just at the national tax Association conference and attended a panel where they were comparing I believe it may have actually been Minneapolis and Pittsburgh and they were looking at zoning and the way that zoning had changed and actually coincided with the period of time where Pittsburgh had an lvt. And the presenter kept saying Pittsburgh had so many more requests than Minneapolis for upzoning and you know it just kept happening. And so I waited till after and I was like you know they had a land value tax during that time period And he was like oh I didn't know that.
But so those are examples that the Pennsylvania studies which again I know Nick was involved in but really were happening pre the Detroit push. But I feel like Detroit really that effort really incentivized a lot of very specific Research into the impacts of lvt.
So we've got a lot of good data coming out of that and I mentioned in passing the kind of lvt on and off switch. The town in Pennsylvania that did that was Millbourne Pennsylvania and they actually did it to get a specific site reused and it was an ex Sears Roebucks site a very large parcel that was derelict and abandoned and basically they switched on a full land value tax got it redeveloped I think now like back offices for a hospital or something. It started to pay taxes and then they realized or they did the math and realized that actually shifting back to a more traditional property tax structure would be better for residents and so they subsequently did that.
So I don't know how well the Melbourne example sells lvt although it does show that boy if you put that tax pressure on a big parcel which is exactly what they did you can really make things happen.
Moderator: Great examples that I'll be using I think I got one more question here and it's more technical that now that the Minnesota house is split in a power sharing agreement with Republicans if any of the elected electeds on the call have any insight as to if there are Republicans that support land value tax which which types of Republicans are good to speak with and kind of what's what helps what helps them conceptualize land value tax?
Elkins: Well I'll just say I don't think that this is necessarily a partisan issue. We did have the bill heard in the last session and I don't think I was hearing a lot of specific arguments that the Republicans were making that weren't just basically based on a misunderstanding of the concept.
If I can take a short opportunity here to make another comment though I'm looking at the the comments in the chat and a lot of them are suggesting a basic misunderstanding about the way that property taxes work in Minnesota right now.
So I'm seeing a lot of comments suggesting that if you have more development for property taxes a city's revenues will increase for example. And that's not actually the case so the way property taxes are done in Minnesota is a city establishes its budget. You know from the budgeted amount they deduct the amount of revenues they get from other sources like state or federal grants.
The remaining amount is called the levy which is the portion of the budget that has to be covered by property taxes and then the levy is simply divided by you know the whole City's tax base to to come up with a rate per dollar of value.
And then we also have this very complicated class rate system where the multiplier for you know businesses like twice what it is for for residential but all you're you're doing is saying is figuring out the the how you're going to take the the levy amount the amount the amount that has to be collected through property taxes and how you're going to apportion it among the among the properties.
So land value tax is just a different way of apportioning the levy among among the properties and so it would be Revenue neutral but it would tend to shift the the tax burden you know away from more densely populated densely developed land towards less densely developed land. That's would be the main effect so if you have a vacant lot your tax is going to go up if you have a well developed building right next door the tax for that building is going to go down.
Yeah great thanks for the clarification and your comments on the state of the partisanship around land value tax.
That's all the time we have. I would like to take a moment to encourage you to support efforts to legalize land value tax in Minnesota so keep an eye out for our summary email after this where we'll include some ways you can get involved and show your support. We encourage you to reach out to your local elected officials to express your support, volunteer with one of our great co-host organizations and there's also an opportunity to meet in person if you'd like to discuss the event at at the next neighbors for more neighbors social next week so you can go to the neighbors for more neighbors website and see where that is. So I want to thank you all for attending and thank our panelists for your great comments.