THE FUTURE FOR LVT THROUGHOUT PENNSYLVANIA

Pennsylvania is a state struggling to retain and attract new businesses. With a population of 12.4 million, the state is still among the most populous in the nation; however, seniors now comprise a higher percentage of the total population than in any state except Florida. Although the state’s economy is ranked among the top ten states, economic output per-capita is just 26th.

The demands on state government to play an increasing role in raising and distributing revenue to financially-troubled communities are considerable. Seniors, in particular, have become very frustrated by constant increases in property taxes, and elected officials concerned about re-election to office have responded with a broad range of proposals to address these concerns. Pennsylvania established a state lottery in 1972, and thru 2003 the lottery raised $13.8 billion for state programs. Casino gambling has now been introduced into the state as well, with one-third of the state revenue reserved for property tax relief.

Virtually ignored by the current Governor, Edward Rendell, and his team of advisers is the real potential to stimulate Pennsylvania’s economy by encouraging its taxing jurisdictions, particularly the school districts, to look at LVT as an important component of the solution to the state’s problems.

Another development has recently occurred with important implications for all Pennsylvania communities.  Common Pleas Judge, R. Stanton Wettick, has ruled that the failure to keep property assessments current with changes in market value is unconstitutional. This decision has prompted Allegheny County officials to file an appeal to the state Supreme Court. 

In 2009, the higher court affirmed the ruling of the lower court, all counties in the state would be required to modernize their assessment systems (Allegheny will be required to reassess by 2012). Accurate assessment of land values would appropriately and effectively shift the burden of taxation from property owners living in areas with declining land values to those benefiting by rising values. There is almost always a strong correlation in such cases between land values and the quality of public goods and services available.

The history of LVT in Pennsylvania provides strong evidence that communities adopting even a modest tax shift in the direction of land values experience real benefits. The greater the tax shift, the greater the benefits. The Allentown case demonstrates that when the logic behind the tax shift is clearly explained, they will vote to continue its use even when powerful vested interests are mobilized against the idea. However, Pittsburgh’s recent experience demonstrates that even the best public policies can and do suffer when elected officials feel threatened by public outrage over wholly unrelated matters. Harrisburg has benefited by having knowledgeable and dedicated leadership holding the Office of Mayor for almost three decades; his successor has vowed to continue this beneficial policy.

What happens in these and other cities in Pennsylvania in the future will continue to depend on thoughtful civic leaders willing to support change from what their communities have been doing almost since they were settled. Every year that goes by adds to the body of data available to compare the experience of two-rate cities to neighboring one-rate cities. 

Our sister organization, the Center for the Study of Economics monitors construction permit data across the state and consults with communities expressing an interest in adopting the two-rate property tax. The Center’s newsletter, Incentive Taxation, reports on the progress achieved by new and existing LVT (two-rate) cities. 

Concluding a study on LVT for officials of the City of Johnstown, Pennsylvania prepared in February, 2005, The Center’s director, Joshua Vincent addressed the question of how this measure helps those at the lower end of the socio-economic ladder:

“The poor own little or no land and use very little. They will pay the smallest share of land tax. The middle class owns the land under their homes. They will pay modest land taxes. Corporate, absentee or wealthy individuals own the most valuable land. They will pay most of a land tax. “