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American Journal of Economics and Sociology, The, Dec, 2000 by Walter Rybeck
On the plus side, abatements testified to the serious disincentives imposed by taxes on buildings. Under some plans, they also shifted more of the tax burden onto land values.
On the negative side are factors that reduced the popularity of abatements. Typically they do not apply across the board and are open to political favoritism. Enterprises in old buildings object to paying taxes that subsidize tax relief and new structures for their competitors. The temporary nature of abatements is also questioned: after a locality lifts the offending tax burden long enough to induce development, it reinstates the disincentive that discourages the next normal round of repair and renewal.
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Reform by Obeying the Law
ROSSLYN, VIRGINIA, ACROSS the Potomac from Washington, DC, and Southfield, Michigan, bordering on Detroit and ten miles from its downtown area, are often cited as land-value tax success stories. These jurisdictions did in fact realize impressive development by increasing their public collection of land values. Some accounts, however, fail to clarify that they each accomplished this under cover of the conventional property tax.
As noted several times, the property tax evolved from a tax mainly on land values to one that falls mainly on improvements. An added point must be stressed. A majority of US assessors was consistently undervaluing land relative to improvements; and the more poorly land was utilized, the more they understated its market value. They magnified the injurious part of the tax and weakened the wholesome part despite laws mandating uniform appraisal of all properties.
A. Rosslyn
Across the Key Bridge from the classy Georgetown section of the nation's capital was an unappetizing hundred-acre tract of Arlington which, as this story begins, was filled with pawn shops, palm readers, slummy residences, lumber yards, cleaning plants, storage tanks, and warehouses.
Lyle C. Bryant, economist and behind-the-scenes guru of Arlington planning circles, brought together an advisory group that understood real estate market incentives, among them, Max Wehrly of the Urban Land Institute, Harold Buttenheim, planner and editor of American City, Treasury economist L. L. Ecker-Racz, land economist Homer Hoyt, and economist E. Howard Evans of the US Chamber of Commerce. Their activities led to a countywide reassessment by the state of Virginia with rigorous attention to the true market value of sites, regardless of their current use.
This 1950 reassessment led to a colossal rise in Rosslyn valuations. A 154-acre tract had its appraisal increased from $300 to $2,300 per acre. Valuation of a five-acre commercial tract increased sixty-five times from $3,000 to $196,000 an acre. The system survived such shocks for several reasons:
* All new assessment notices were mailed simultaneously; owners could see they were being treated alike.
* The assessment specialists read the market better than most owners. Arlington's new assessments ranked among the tops in quality in the nation. [31]
