Clever but underused progressive tax ideas for urban inequality

vacant-property-tax-ideasAlthough much of the public debate on inequality focuses on national policies, there’s an impressive array of state and local ideas that deserve more attention—partly because they’re so underused that they constitute low-hanging fruit. Showing fluency with property tax policy ideas is also a savvy way to position advocates as pro-business while showing off their nuts-and-bolts economic development expertise.

With that in mind, here are two especially clever property tax innovations to put on the table.

First: state and city governments can impose a vacant property tax. It’s a progressive, pro-business tax idea that makes it more expensive to keep land and buildings on it vacant.

Thus it incentivizes real estate developers and owners to build something that would be more valuable to the whole community, rather than keeping the area hollowed out and sitting idle. As Dean Baker further explains here, “the people who will pay the most tax will be holders of highly valued vacant properties.”

Second: states and cities should levy a property tax on the value of land rather than the buildings on it.

This “split level property tax” is a great idea because it discourages real estate developers from, again, sitting on vacant lots. Instead, those investors would financially benefit more by building something on the land that would benefit the entire community. The tax is already successfully employed in several Pennsylvania cities, but unfortunately it’s not well-known outside the state.

Both ideas align real estate companies’ and investors’ interests with the local community’s interests. Because these property tax types generate revenue and promote urban density, they’re also good for city governments and our climate!

Bonus idea: the District of Columbia is considering a change in the way vacant properties are inspected so that the burden shifts to owners who hold onto vacant or blighted properties. Instead of requiring the city to keep confirming that the property is still vacant or blighted, the owner would have to affirm the proactive steps taken to get the building removed from the vacant and blighted list. More information is available here.