Solving Problems

Alaska has no state income tax.

Pennsylvania reduces tax on homes and keeps tax on land .

They do it in Texas and Pennsylvania and other states.   In Texas, they have no state income tax, but higher property taxes.   About 15 cities and districts in Pennsylvania reduce the levy on improvements such as homes and buildings and slightly increase the fee on land which encourages landowners to use their land more wisely and put it to use which helps affordable housing and increases development.   We can’t do anything quite like that in California right now because of Prop 13, but Prop 13 is not perfect and can be improved.

Nobel Prize-winning economist Milton Friedman calls this the “least bad tax.” In San Diego, the Port of San Diego is an example of collecting ground rent, a variation on this theme.   It works very well.    Alaska is one of seven states that have no income tax.  Not only that, Alaska pays its residents about $1,500 per year ($1,600 in 2018) and $1312 in 2023—a kind of reverse income tax.  They are fortunate to have substantial oil revenues and a population of only 738,068 (in 2018) and 733,391 (in 2023). ​  So it looks like Alaska is slightly losing population.    

Does Tax Policy Impact Community Well Being?   The Case for a Land Value Return  
By Ted Gwartney November, 2023*. Edited by Alan Ridley, October, 2024**
My background in real property assessment prompts me to ask:  Can taxes cause positive or negative results in a community well-being? When the property tax is applied to the value of buildings it results in a barrier to affordable housing, by making the cost of constructing, improving and maintaining buildings more expensive, reducing the number and quality of homes and commercial buildings.  This increases rents for residents and businesses and results in fewer jobs.  A building owner who wants to add insulation or solar power, is penalized with higher taxes for improving their building and reducing energy consumption and pollution.
When the property tax is applied to the value of land the results are the opposite.  Unlike buildings (that have value only if created and maintained by private owners), the value of land is almost completely independent of what individual landowners do.  Instead, land value reflects what a community has done to make a particular location potentially valuable as a place to live or work.  Land value reflects the value of streets, water and sewer services, transit, schools, etc.  ("location, location, location") the land value it creates is a windfall to landowners who are best-served by public infrastructure.  
The ability of private landowners to appropriate publicly-created land value is the primary  cause of land speculation.  Land speculation is the buying and selling of land, not for the sake of using it, but simply to hold it until it increases in value.  This activity creates nothing of value.  But, by artificially reducing the number of parcels available for development, it increases land prices.  This encourages more land speculation.  Land speculation can reward the land owner until land prices are so high that users (residents and businesses) cannot afford it.  At that point, it drives investment away and creates blight.  Eventfully, a recession will occur. 
The property tax punishes owners with higher taxes when they construct, maintain or improve buildings.  It rewards owners with lower taxes when they allow buildings to deteriorate.  Thus, the economic incentives of the property tax are upside-own.   Owners of vacant buildings and vacant lots pay much less tax than their neighbors with well-maintained buildings, even though it costs the community almost the same amount of money to maintain streets, sidewalks, sewers and water mains in front of similar-sized lots regardless of whether they are developed or vacant. 
Some communities have remedied this problem by reducing the tax rate applied to privately created building values while increasing the tax rate applied to publicly-created land values.  Over a period of time, Harrisburg Pennsylvania reduced taxes on buildings while increasing taxes on land by six times.
The lower rate applied to buildings makes them cheaper to construct, improve and maintain.  The higher rate applied to land values helps keep land prices more affordable by reducing the profits from land speculation.  Thus, shifting the property tax off of building values and onto land values can make both buildings and land more affordable -- without any new spending or any loss of revenue. 
A gradual phase-in of this Land Value Return is an incremental change that could have profound impacts to improve housing affordability and job creation while creating a more equitable tax system where owners pay in proportion to the public benefits that they receive. As a college senior, I was able to understand that public revenue was best raised by taxing the value of land and resources and minimizing the taxes on building value. I saw that most assessors were years behind on reappraising land values. I decided to made my career in land assessment. 
*. Ted Gwartney taught land assessment in many places around the world and helped to setup land assessment systems in British Columba, Canada, Estonia, Jamaica, Southfield, Michigan and Connecticut.  He graduated from San Diego State University in 1964 majoring in Real Estate Economics. Just off- campus, the Henry George School was offering a course on Land Economics. He enrolled because it was similar to his college courses. Their course , however, was based upon classical economic authors, as opposed to contemporary authors who treat land as a form of capital. This led him to an analysis of how property taxes applied to buildings and land result in totally opposite results.
**Alan Ridley is the President of the Foundation for Economic Justice, 3850 Westgate Place, San Diego, CA 92105, [email protected]