Local Government Tax and Land Use Policies in the United States: Understanding the Links

By Helen F. Ladd; Lincoln Institute of Land Policy | Go to book overview

effective when property tax burdens are higher. While it would be useful to determine the effects of deferred taxation, the results here suggest that the choice of deferred tax policy implementation was endogenous.

While 10 per cent is a significant amount of land, several caveats are in order before the results of this study can be interpreted as an endorsement for the policy. First, this study has not demonstrated cost-effectiveness. Various studies (for example, Regional Science Research Council ( 1976) and Hansen and Schwartz ( 1976)) have concluded that use-value assessment does indeed relieve tax burdens on farmers, 15 implying some combination of lowered jurisdictional revenue and burden shifting. One way to get a simple measure of the potential revenue that communities lose would be to get data from states that require dual assessments for rollback taxation purposes. If states have to keep track of tax liabilities under both assessments, the difference would be a measure of the cost of the policy. Collecting a large sample of such data may not be simple because most tax records are kept locally and are often not in an easily accessed database. Even if a cost estimate could be determined, it still begs the question of whether or not the preserved land is worth the cost. The problems of monetizing the scenic amenities of open space are manifest, and measuring the externalities thoroughly would have to include the negative externalities to farming, such as agrochemical run-off and air quality impacts from dust and livestock.

Furthermore, it is not at all clear that preferential assessment should apply to all agricultural land, regardless of the value of the positive externalities it generates. If the amenity derives from open space generally, rather than farmland in particular, the common practice of targeting the programme solely to productive farmland does not follow. Finally, areas of urban sprawl cannot rely on preferential assessment, taking decades to accrue its potential impact on land use, to preserve open space when tax burdens are minor compared with potential returns to development.


NOTES
1.
However, some states put upper limits on local rates.
2.
Note that because assessment ratios differ, it is impossible to compare tax burdens in different states by looking only at nominal rates.
3.
Use-value assessment exists in all states except Wisconsin, which has an income tax credit system for property tax relief and will be excluded from the empirical analysis in this chapter. While the principle of use-value assessment is quite simple, in practice it varies from state to state. One source of variation is in eligibility requirements. Some states have a minimum acreage requirement, usually about five to ten acres, and many have a minimum gross revenue requirement from the parcel, usually from $100 to $2500. New York requires revenue of $10 000 to qualify for agricultural districting. In theory, use-value is the capitalized value of net farm returns, but the owner's future income is difficult to capitalize when cost, price and yield are uncertain. Most states have a standard farm-value

-157-

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Local Government Tax and Land Use Policies in the United States: Understanding the Links
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Figures vii
  • Tables viii
  • List of Contributors x
  • Acknowledgements xiii
  • Lincoln Institute of Land Policy xiv
  • 1. Introduction 1
  • Notes 21
  • References 21
  • Part I - Interactions Between Tax and Land Policies 23
  • 2. Theoretical Controversies: Land and Property Taxation 25
  • Notes 38
  • References 39
  • Notes 48
  • References 48
  • References 53
  • 3. Land Use Regulation as a Fiscal Tool 55
  • Notes 72
  • References 72
  • Notes 80
  • References 81
  • 4. Effects of Taxes on Economic Activity 82
  • Notes 99
  • References 99
  • Notes 107
  • Notes 115
  • 5. Tax Policies to Promote Economic Development 116
  • Notes 128
  • References 129
  • Part II - Tax Policy as a Land Use Tool 131
  • 6. the Pittsburgh Experience with Land- Value Taxation 133
  • Notes 141
  • References 142
  • 7. Property Tax Treatment of Farmland: Does Tax Relief Delay Land Development? 144
  • Notes 157
  • References 159
  • 8. Incentives, Firm Location Decisions and Regional Economic Performance 168
  • Notes 180
  • References 180
  • 9. Tax Increment Financing as a Tool of Redevelopment 182
  • Notes 196
  • References 197
  • Part III - Fiscal and Distributional Impacts 199
  • 10. Fiscal Impacts of Business Development in the Chicago Suburbs 201
  • Notes 212
  • References 214
  • Appendix 215
  • 11. Who Pays Development Fees? 218
  • Notes 231
  • References 233
  • 12. Regional Tax Base Sharing: the Twin Cities Experience 234
  • Notes 251
  • References 253
  • Index 255
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