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
Pittsburgh. Henry Pollakowski ( 1982) was unable to find much in the way of 'adjustment effects' as measured by the number of property transactions. However, his data extended only from 1976 to 1980. Steven Bourassa ( 1987) explored the effects of Pittsburgh's tax system on housing development. Using monthly data on the value of new residential building permits as his dependent variable, Bourassa found that the tax rate on improvements, but not the rate on land, was a statistically significant determinant of the level of residential building activity. Bourassa's findings, while of some interest, are limited in scope, for, as we shall see, the major impetus to development in Pittsburgh has been in the non-residential sector. Of more relevance to our concerns is an interesting study undertaken in the mid 1980s by the Pennsylvania Economy League ( 1985). At the request of Mayor Richard Caliguiri, the League examined the effects of the graded tax on both the development of the city and the equity of the tax system. Drawing both on extensive interviews with 'local development experts' and some quantitative analysis of the graded- tax ratio and development of different properties, the League concluded that: 'The graded tax has very little effect on development' (p. ii).
3.
As Nicolaus Tideman has emphasized to us, the Bentick-Mills timing effect depends critically on the systematic association of land assessments with actual use. Simple random errors or inaccuracies in assessments will not in themselves compromise the neutrality property of land-value taxation.
4.
For a useful description of the historical evolution of Pittsburgh with a focus on the renewal efforts under Renaissance I and II, see Shelby Stewman and Joel Tarr ( 1982).
5.
The commercial building boom in Pittsburgh under Renaissance II has encompassed several major projects: PPG Place (six buildings, including a 40-storey office tower), One Oxford Center (a 46-storey office tower and retail complex), The Steel Plaza/One Mellon Bank Center (a 53-storey office tower and retail complex that includes the main station of the Light Rail Transit system), Allegheny International's headquarters, the Liberty Center, the Hillman Complex and several others.
6.
The assessment-sales ratio in Pittsburgh is 0.25, so that the nominal tax rates appearing in Table 6.1 must be divided by 4 to obtain measures of effective tax rates.
7.
See Oates and Schwab ( 1997) for a more detailed description of the sources and nature of our data.
8.
We include an extensive set of tables based on the Census data in Oates and Schwab ( 1997).
9.
Clearly, not everyone would agree with this assessment. Walter Rybeck ( 1991), for example, quotes the Pittsburgh City Council President as follows: 'I'm not going to say the land tax is the only reason a second renaissance occurred, but it's been a big help' (pp. 4-5).
10.
There are, however, crucial differences between the structure of the income tax in Philadelphia and in Pittsburgh. In Philadelphia, the tax is a commuter tax; the suburbs around Philadelphia do not have wage taxes of their own. In contrast, in Pittsburgh the first claim on a person's income resides in his place of residence. So when the city of Pittsburgh raises the wage tax, suburbs tend to do likewise in order to get what, from their perspective, is essentially 'free money'. For this reason, the incentives for businesses to leave the city would be somewhat weaker in the Pittsburgh case than in Philadelphia. Nevertheless, higher wage taxes in the Pittsburgh metropolitan area could be expected to have a detrimental impact on economic growth in both the city and suburbs.

REFERENCES

Bartik, Timothy J. ( 1991), Who Benefits from State and Local Economic Development Policies?, Kalamazoo, Michigan: W.E. Upjohn Institute for Employment Research.

Bentick, Brian L. ( 1979), "The impact of taxation and valuation practices on the timing and efficiency of land use", Journal of Political Economy, 87, 859-68.

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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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