Case studies from South Bend and Princeton examine the impact of shifting taxes from buildings to land. The shift would drive development, promote equity, and capture community value.
One thing I notice is that agricultural land experienced a very large increase in taxes in Princeton. This is troubling to me, particularly if LVT were implemented in an entire state.
Do you think that a state-wide LVT would experience similar changes in tax rates for agricultural land, or is this just because this study was only for smaller cities?
Re Princeton: farms enjoy generous tax exemptions in Princeton: they are assessed based on their productivity rather than market value. The average current township property tax bill is $60 (max $377), increasing to $85 (max $560) under my modelled LVT.
Re LVTing farms in general: I agree with Greg's point that farms' land valuations typically do not break-out the farmer's contributions to soil quality, which should rightfully be IV and not taxed under LVT. Because of the complications with doing this, I typically advocate for fully exempting farmland from LVT (it's a far more important policy for urban areas anyway).
What I actually think would be ideal is to have a low $/acre exemption which applies to all land and is set such that rural farmland is wholly exempt from LVT, but which kicks-in on farms which are sufficiently close to the city that they're starting to see uplift from expectations of future use for suburban housing. This would vary by state, but could be set at (say) an exemption of $5,000/acre.
That's a celever idea and such ideas I think would need to be addressed specifically in a article soley relating to the relation of farms and LVT, because getting farmer buy in for such a idea could be very difficult.
I often wonder if a $X per acre exemption would make LVT would make it an easier sell for Republicans, in addition to being good economically policy generally. Given the population distribution of the party’s voters, you could easily spin this into a “tax on libs”
Agreed. I think it's also a nice way to satisfy the Jeffersonian-ideal types. Basically "if you want to own a plot of land and be relatively self-reliant and tax free, you can do that. Just not on valuable urban land."
I personally am unsure of the feasibility of LVT on farmland. Typically, most farmland has large exemptions, and I run my models assuming exemptions (as in, I hold property taxes on farms even).
Assessors will value farmland as having no "improvements", even though farmers spend significant time improving their land and their soil. It's really hard to put a measure on that.
There is likely a produce-quantity approach to helping understand the rental value of land on farmland.
I still believe the main advantage of LVT is in urban cores, so we can implement statewide holding Ag even or carving them out. However, I have also spoken to several farmers who are LVT proponents and believe that Big Farm owns too much land and uses it inefficiently. Small farmers are much more efficient.
All to say, I remain interested in this topic, and am skeptical of increasing burden on farmers.
Thanks for the thoughtful response. I ask because it seems like the simplest means to implement LVT in the US would be to swap out state-level property taxes with an LVT that raises similar amounts of revenue. I like the idea, but I am concerned about its impact on farmers.
The issue with farmland could be largely resolved if the farms (assuming they have the potential to be productive in the long run) are placed under a conservation easement, eliminating speculative value. This is sound policy if you want to maintain a local food system and the other open space values of farmland
The Princeton model shows farms having their tax burden increase by 49%. Farmers, by nature of their job, also own very large land parcels. It is hard to argue that farmers are not making productive use of their land, so why would we want them to be penalized so harshly?
For the record, I am pro LVT and think writ large it would have a positive impact, but this seems like an unfortunate edge case.
Very interesting analysis.
One thing I notice is that agricultural land experienced a very large increase in taxes in Princeton. This is troubling to me, particularly if LVT were implemented in an entire state.
Do you think that a state-wide LVT would experience similar changes in tax rates for agricultural land, or is this just because this study was only for smaller cities?
Re Princeton: farms enjoy generous tax exemptions in Princeton: they are assessed based on their productivity rather than market value. The average current township property tax bill is $60 (max $377), increasing to $85 (max $560) under my modelled LVT.
Re LVTing farms in general: I agree with Greg's point that farms' land valuations typically do not break-out the farmer's contributions to soil quality, which should rightfully be IV and not taxed under LVT. Because of the complications with doing this, I typically advocate for fully exempting farmland from LVT (it's a far more important policy for urban areas anyway).
What I actually think would be ideal is to have a low $/acre exemption which applies to all land and is set such that rural farmland is wholly exempt from LVT, but which kicks-in on farms which are sufficiently close to the city that they're starting to see uplift from expectations of future use for suburban housing. This would vary by state, but could be set at (say) an exemption of $5,000/acre.
Thanks. I like the $/acre exemption idea.
That's a celever idea and such ideas I think would need to be addressed specifically in a article soley relating to the relation of farms and LVT, because getting farmer buy in for such a idea could be very difficult.
I often wonder if a $X per acre exemption would make LVT would make it an easier sell for Republicans, in addition to being good economically policy generally. Given the population distribution of the party’s voters, you could easily spin this into a “tax on libs”
Agreed. I think it's also a nice way to satisfy the Jeffersonian-ideal types. Basically "if you want to own a plot of land and be relatively self-reliant and tax free, you can do that. Just not on valuable urban land."
I'll let Steve speak for Princeton in particular.
I personally am unsure of the feasibility of LVT on farmland. Typically, most farmland has large exemptions, and I run my models assuming exemptions (as in, I hold property taxes on farms even).
Assessors will value farmland as having no "improvements", even though farmers spend significant time improving their land and their soil. It's really hard to put a measure on that.
There is likely a produce-quantity approach to helping understand the rental value of land on farmland.
I still believe the main advantage of LVT is in urban cores, so we can implement statewide holding Ag even or carving them out. However, I have also spoken to several farmers who are LVT proponents and believe that Big Farm owns too much land and uses it inefficiently. Small farmers are much more efficient.
All to say, I remain interested in this topic, and am skeptical of increasing burden on farmers.
Thanks for the thoughtful response. I ask because it seems like the simplest means to implement LVT in the US would be to swap out state-level property taxes with an LVT that raises similar amounts of revenue. I like the idea, but I am concerned about its impact on farmers.
The issue with farmland could be largely resolved if the farms (assuming they have the potential to be productive in the long run) are placed under a conservation easement, eliminating speculative value. This is sound policy if you want to maintain a local food system and the other open space values of farmland
The Princeton model shows farms having their tax burden increase by 49%. Farmers, by nature of their job, also own very large land parcels. It is hard to argue that farmers are not making productive use of their land, so why would we want them to be penalized so harshly?
For the record, I am pro LVT and think writ large it would have a positive impact, but this seems like an unfortunate edge case.
Hopefully my above comment to Michael resolves your question, but let me know if not! https://progressandpoverty.substack.com/p/new-reports-land-value-taxes-in-college/comment/115924429
We don’t need farms. We can buy all produce at the supermarket.