Awesome news! Take note PA Cities of the Third Class:
City Council voted to adopt “land value tax” in 2002, on the urging of The Center for the Study of Economics in Philadelphia, whose president, Joshua Vincent, had made a presentation the year before.
Land value tax shifts the basis for property tax to assessed value of land and away from assessed value of buildings. It’s designed to encourage development and discourage speculative hoarding of ground.
While 16 cities and two school districts in Pennsylvania use land value tax, Altoona this year became the first municipality in the country to go as far as to rely on land value alone.
Council introduced the practice with a 20-percent shift toward taxing on land alone, followed by successive annual shifts of 10 percent, until the transformation was complete.
As William Kibler notes, the evidence of the impact from the tax change has been mixed, although several factors may be muddying the incentive effects.
Blair County’s assessments are out of date, and the Altoona Area School District – the largest tax bill landowners have – hasn’t adopted LVT. In PA, only school districts that are coterminous with a 3rd class city are allowed to tax land at a higher rate than buildings. The Altoona Area School District is not exactly coterminous with the boundaries of the city of Altoona, so they’re not allowed. PA really needs a state enabling law to allow any school district to adopt a split-rate property tax.
Regular assessments are also very important with LVT, because you’re no longer getting revenue from new building construction. Under LVT, the way your tax base grows is that more infill construction in the downtown makes the downtown land more valuable, and you realize those land value gains when you reassess. If you don’t assess regularly, you’re not going to capture that land value growth. Altoona also seems to have learned the lesson that overly prescriptive zoning rules limiting infill construction opportunities on small lots defeat the purpose of LVT.
The other issue is that housing developers are not exactly beating down the door to build in Altoona. A more development-friendly tax code should make them a more attractive location to build than similar cities in the region, but the places that could really use LVT are cities like Philadelphia and Pittsburgh, or smaller growing cities like Bethlehem and Easton, where people really want to build more mixed-use infill projects, but the high taxes on building construction are imposing some deadweight loss on new residential investment. I’ve argued elsewhere that Philadelphia should replace its 10-year tax abatement on new construction with a land value tax.