This site demonstrates an economically sound and equitable tax practice used worldwide in hundreds of localities. True tax reform - rethinking the means and ends of taxation- is the goal. This site shows that the problems states face -- urban decay, underfunded schools, unchecked sprawl, rural poverty, and high taxes on good citizens -- can be ameliorated.
Welcome to an idea.
The idea is land value taxation (LVT). On this site, you can directly see how LVT would affect you and your community with our Property Tax Calculator.
LVT in a Nutshell
Briefly, LVT is a re-interpretation of the property tax. Taxes on structures and improvements are reduced or eliminated. Instead of taxing what people do, such as building, buying or fixing up a house, office or factory, LVT taxes only that part of the property that is created by the community: the land values, i.e., the sites that are used. In this way, initiative is rewarded while land banking and speculation is discouraged. LVT maintains needed revenues, while reducing market force distortions caused by taxation.
Unlike many ideas put forth to revitalize our cities to combat sprawl and/or to encourage social and economic justice, LVT has a track record. The Pennsylvania cities of Harrisburg, Allentown and Scranton have been phasing in LVT for years. In five other US states, pending legislation will permit cities, counties and states to enact LVT. This site provides data that explains how LVT works and why it should be adopted.
LVT in our State
At the State level, the Board of Public Works is responsible for "setting the state property tax rates". TP §6-301 specifically notes that "rates" in the plural may be set. For example, the BPW set a different rate for personal property until the statewide taxation of personal property was specifically eliminated by the Legislature in 1985. Currently, it sets a different rate for public utility property which is a statutorily created sub-class of real property which itself is a statutorily created class of property. See TP §8-101. Article 15 of the Maryland Declaration of Rights creates three constitutionally recognized classes or types of property - land, improvements to land and personal property and gives the Legislature the authority to create classes sub-classes of property. Consequently, the BPW may set separate rates for land and improvements, including a rate of zero for improvements to land.
Statewide LVT should be part of the package tax reforms in Maryland and can also be used to raise revenues in an economically sound and socially just way. In the special session scheduled to start on Oct. 29, 2007, there will be a proposal for a 3-cent across the board cut. However, the same effect on revenues could be achieved by having a land value rate of 11.2 cents, but lowering the improvement rate to roughly 6.17 cents. All property owners get a tax cut but 65% of homeowners get a larger tax cut under LVT than under an across the board cut.
No revenue need be lost at all, if the Improvement rate is set at 0 and the Land Value rate is set at 27.74 cents. Under this revenue neutral proposal, 65% of homeowners would still get a property tax cut. The use of a "split rate" (higher on land and lower on improvements) has no effect on the existing "circuit breakers" which protect any potentially vulnerable homeowners.
A different plan, would revise TP 8-101 to create a class of land that is used for as a principle place of residence. We estimate that a rate of 0 cents on Improvements, 20 cents on Land that is used as a principle place of residence and 45.2 cents on all other Land, would be revenue neutral and still increase the number of saving homeowners to over 87%.
The Legislature could also levy a Land Value surcharge tax on Land not used either as a principle place of residence or true Agricultural Committed Land (a.k.a. preferred land). A 50 cent tax on this type of land value would raise approximately $336,300,000. Such a tax would fall almost if not entirely on land value owned by business entities and speculators, many of whom have been using loopholes to avoid paying the transfer tax. Professors Schwab & Oates from the University of Maryland have noted that land value taxes are economically neutral; while Plassmann & Tideman (1999) have estimated a net positive increase on building permits as a result of increased taxation of land value.
All incorporated municipalities have the authority to implement LVT.
Baltimore City, however, is considered a "county" for purposes of property taxation. At the County level, "conventional wisdom" has intepreted TP § 6-302 to prohibit counties and Baltimore City from directly implementing LVT without authority from the Legislature. Consequently, legislative efforts have been directed toward revision to expressly allow local option land value taxation. But there has never been a court case nor an AG Opinion which directly requires this interpretation. We contend that a reasonable reading of Article 15, supports the view that land value taxation is a type of property taxation which is distinct from the taxation of "real" property which is a legislatively created class of property pursuant to TP §8-101. Alternatively, we contend that any attempt by the Legislature to prohibit Baltimore City and the counties from using Land Value Taxation is prohibited by Art. 15 of the Declaration of Rights which specifically grants property taxation authority, including land value taxation authority to the counties and Baltimore City which cannot be abrogated by the Legislature. In other words, Article 15 is in part a repeal of Dillon's rule for counties and Baltimore city, in the field of property taxation. No Maryland courts have directly addressed these issues.
For a more detailed and concrete explanation of how LVT works, please check out LVT Explained. Additionally, the Wikipedia entry for LVT might be of interest.
