Are We Running Out of Time
to Achieve Change Incrementally?

Edward J. Dodson

[Comments responding to Fred Harrison's challenge to Steven Cord, 6 March, 2011]

Fred Harrison

Responding to Steven Cord...

Mase's point is that the locally administered property tax actually generates its revenue from the rent of land, even if there is an element in the "tax" that is formally assigned to the assessed value of the buildings. Ergo, unless the overall tax burden is raised, as a result of the change to the two-rate, the 2-rate tax does not, in fact, raise any more from the rent of land (in practise) than was raised before the re-arrangement.

Of course, if your intervention obliged local jurisdictions to raise their assessments of values; and providing they did not reduce the rates, to remain "neutral" in the revenue generated -- in that case, additional revenue is raised. But that is the result of regularising the assessment procedures (important); not from redefining the tax as 2-rate.

Ed Dodson

What the data does point to is that when tax rates on assessed value of buildings are lowered and increased on (even very inaccurate) assessed value of land parcels, there is a demonstrated market response. Steve's research (and that of Josh Vincent) compares cities of similar size in the same geographical area. And, consistently, the two-rate city shows increased investment in property renovations and construction starts. This is an indication that even very most changes in the rates are factored into the investment decisions of property owners.

Over the years I have supported the incremental approach promoted by Steve, although I am not a proponent of advocating revenue neutral shifts.

The problem we face today is that we are running out of time. Josh performs admirable and effective work, but he is working almost alone. IF he was leading a professional team of fifty people working on analysis and advocacy, the rate of change would certainly be more significant and have greater staying power. As it is, Josh (and before Josh, Steve) spent much of their energy defending modest two-rate changes whenever proponents left office, replaced by individuals either opposed or ignorant of the merits of a land-only property tax base.

Thanks to the efforts by Josh and Steve (supported by a handful of others from time to time, it must be acknowledged), there are a few communities that have done much more than change rates for revenue neutrality. The problem is that these communities were at rock bottom, ready to reduce public goods and services to a minimum, and were losing both businesses and residents at a rate destined to turn them into ghost towns once the elderly residents who could not leave died off. For places like Aliquippa, Pennsylvania, land values -- as low as they had fallen -- were the only thing left to tax. Throughout Pennsylvania there are dozens of similar towns with the same demographics. The reasons for living in many parts of Pennsylvania have disappeared with the disappearance of mineral reserves and heavy industry. Even a 100 percent tax on the market rents of land might not raise enough revenue to pay for needed public goods and services. Either other taxes would still need to be imposed, or revenue sharing has to come from the state or federal governments.

The political dialogue over taxation is dominated by ideologies (i.e., perspectives not influence by facts) and by vested interests. In the U.S. the vested interests have the funds to hire the lobbyists and contribute to the campaigns of those seeking office. The universities teach economics from a perspective that confuses rather than enlightens. We never developed a competing "think tank" to systematically provided governments and the public with a competing explanation of what was happening in the economy and why.

Individually, many of us have made important contributions to keeping the effort alive. Collectively, we have failed in the effort to achieve status as a mainstream school of thought. I know from 30 plus years of teaching that our perspectives are sound and analytically powerful, but only a small percentage of people exposed to what we talk about adopt our principles as core values they feel compelled to work for. This, in my view, represents the more important ongoing challenge we face IF we are to be effective change agents -- before time runs out and the veneer of civilization Henry George wrote about evaporates.