Minnesota looks at funding transport from land tax

A new report from the University of Minnesota looks at ways of financing transportation projects by capturing part of the benefit they provide.  Land value tax is only one of the eight options  (Land Value Tax,  Tax Increment Financing, Special Assessments, Transportation Utility Fees, Development Impact Fees,  Negotiated Exactions, Joint Development,  Air Rights) considered.

A quick skim indicates that on the whole it’s pretty good, though it seems to overestimate the difficulty of assessing land value, and repeats the error of some previous studies which conflates owners of land occupied by low income people with the low income people themselves. (More likely, low income people are renters living on land owned by someone else, and when taxes on such land increase the owners can’t pass the cost on to their tenants.)

There is also mention of a study, new to me, that seems to document an anti-sprawl benefit from a land tax. The study unfortunately is secured by ssrn; I shall have to try to find it elsewhere.

This study was requested and funded by the Minnesota legislature.

Hat tip to lvtfan.

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One Response to “Minnesota looks at funding transport from land tax”

  1. I wrote an article for our newsletter on the the same track:
    Minnesota Value Capture study includes land value tax as a strategy to fund transport.

    Hooray. But.

    The Center for Transportation Study at the University of Minnesota was charged by the legislature some years ago to provide a comprehensive overview of tools to fund transport. We are happy that the effort, excruciating in its evenhandedness did acknowledge that easy administration of a land value tax and also its likely efficiency as a way to fund transport was valid. It certainly noted the shortcomings of traditional funding mechanisms, which is a welcome relief from paradigmatic reports.

    The report though, (please read it) was unclear about a very important point: progressivity vs. regressivity. It cited one study done in New Hampshire, which claimed regressivity (although eh ameliorations suggested by that paper go explored, but also cited the now-notorious Pennsylvania Economy League study of Pittsburgh LVT in 1985 commissioned by an anti-LVT Mayor (Caliguiri) , which claimed LVT was regressive in poor neighborhoods.
    Discredited by subsequent studies done by Pittsburgh city council staff and CSE Trustees Dr. Herbert Barry and Daniel Sullivan, that study made a fundamental flaw in claims of LVT regressivity: the study claimed blighted, absentee-owned, residential properties as “low income” properties when in fact they are part of the business model of prosperous operators on the real estate and banking sectors. When owner-occupiers were considered as a subset of study, the benefit of LVT was clear, while clearing the way for an enlightened tax policy.
    This outcome has been replicated many times in LVT impact studies performed by CSE. To illustrate: in 2008, an initial shift to LVT in the impoverished neighborhood of Tioga in Philadelphia tells us that 62% of parcels would save and 38% would pay; when we filter for owner-occupiers that number of savers climbs to 70.6%. When we filter again for residential parcels only, that number climbs further to 76%. That’s called a trend.

    This is a crucial failing of most professional research into land value taxation. The rather clinical approach to property values and taxes is understandable, but the failure of neighborhoods or of huge government investment can again and again be laid at the feet of absentee ownership of land values, and including that analysis in any complete picture of LVT. Should we applaud the CTS for its work? Yes.
    Yet, we ought to remind them and future researchers that any program to propel smart growth will always be hindered by identifiable factors such as who has title to the land we want built upon. Adding that factor to previous LVT studies or to this current study would lead the researchers to a conclusion perhaps too muscular for their taste.

    1 http://intern2-cts.software.umn.edu/Research/Featured/ValueCapture/index.html

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