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The 237 Report
by Steven B. CordDedicated to Allan Hutchinson of Australia and H. Bronson Cowan of Canada, who first devised and used the method for making empirical studies of LVT possible.
This is a compendium of 237 studies (there are more) substantiating that land value taxation (hereafter abbreviated as LVT) has produced spurts in construction and renovation, as measured by building permits issued. It has taken me some 30 years to collect all these studies.
Frankly, 237 studies may well be considered overkill. The sheer number and consistency of their findings is positively overwhelming. Fewer empirical studies would suffice to show that we could gain at least these three advantages by taxing land assessments more, construction and renovation less:
- Construction & renovation spurt because they would be taxed less
- They also would spurt because all land-sites would be used more efficiently
In addition, most homeowners get tax reductions because they don’t own valuable land. This report also documents other LVT advantages.
The empirical studies reported here have been taken from back issues of Incentive Taxation (published eight times a year since 1974); I only reviewed about a quarter of those back issues. I stopped after #237, thinking that few people will read more. There are additional unpublished studies in my files.
A representative 74 of these studies have been reprinted in a new book, The Golden Key to Continuous Prosperity. I have encountered absolutely no anti-LVT empirical studies.
These studies have been fully corroborated by independent sources. For instance, before Fortune Magazine ran its 1983 article supporting LVT, it sent two of its researchers, Gurney Breckenfeld and Ed Baig, to visit the city halls that I had visited and found that the figures were exactly as I had reported them in Incentive Taxation.
Professor Nicolaus Tideman of Virginia Tech. University and his then-graduate student, Florenz Plassman of Virginia Tech University (now a professor in Binghamton) confirmed my 18 Pennsylvania studies and published their research in the peer-reviewed Journal of Urban Economics (March 2000, pp. 216-47; see IT 12/00).
A 1985 study by the prestigious Pennsylvania Economy League contained facts supporting the conclusions of this compendium (see p. 16 of their 1985 study). Later, the P.E.L. was instrumental in getting two cities (Clairton and DuBois, Pa.) to adopt a two-rate building-to-land shift in their property tax.
Note also that Allan Hutchinson, the author of many of these studies, used government sources exclusively for his Australian studies. He and H. Bronson Cowan of Canada (who visited Australia in 1943) discovered that the Australian Bureau of Statistics annually published the building permit issuance of every area in the country. I also used government sources for these studies.
Hutchinson thereupon compared the performance of land-taxing areas with their neighbors both before and after the adoption of LVT. He found that the statistics literally came to his mailbox; he didn’t have to go to them.
Perhaps this question has crossed your mind: “If LVT is so good, why hasn’t it been more widely adopted?” Well, if you don’t act after reading this tremendous mass of empirical evidence, then you have the answer.
If a very partial shift produced all these wonderful economic results, one can assume that a 100% LVT could produce even more wonderful economic results.
Note that about six researchers have contributed to this compilation. We have examined the rather extensive literature on this subject and have not encountered any contradicting empirical studies. We will gladly send you a copy of a report containing a representative 23 empirical studies (free, 6 pages, easy-to-read).
After reading these studies, act.
(1) The accountancy firm of Price, Waterhouse & Co. performed a study for H.U.D., which found that the abatement of building taxes was conducive to new construction (p. 4, as reported in the summer 1975 issue of Incentive Taxation (hereafter referred to as IT).
P. 8: “Based upon the evidence collected it appears that the Fairhope Single Tax Corporation’s practice of site value rental has been effective in that it has encouraged more intensive development of its property.”
(2) In the early 1970s, the General Council for Rating Reform of Australia (GCRR) reported that in Kilmore Shire, Victoria, the dollar value of construction and renovation increased 3.19 times in the three whole years immediately after it shifted from taxing both buildings and land income as compared the three whole years immediately before when it taxed both types of income (IT, summer 1975).
Local property-tax switches in Australia were made in April, so there was a year in which both systems applied.
(3) In Buninyong Shire (Victoria), the GCRR found that, comparing the three whole years immediately prior to the shift from taxing the income from both building and land to the first two whole years after the shift when only the land value was taxed, there was an average 5.90 increase in the annual dollar value of new construction and renovation (Ibid.; the Australian Bureau of Census was the ultimate source).
(4) In Orbost Shire (also Victoria), the GCRR compared the three whole years before the shift to taxing only land values to the year immediately after the shift. It found that the average annual construction and renovation increased 1.74 times (ultimate source: Australian Bureau of Census).
(5) Harry Gunnison Brown, a prominent American public-finance economist in the 1930s, found that those districts in the states of South Australia and Victoria which taxed land values were markedly superior in new dwelling construction.
He also found that in the state of Victoria, “although at the 1921 census only 16 per cent of the state population was in the fourteen districts rating land values, these districts accounted for 46 per cent of the total increase in dwellings for the State between the two census years [1921 and 1933].”
(6) Brown’s figures on the Melbourne suburbs were even more striking. He found that those suburbs which are about five rail miles from Flinders Street in the center of Melbourne and which tax land values only, had 50% more dwellings constructed per available acre in the 1928-1942 period than those which did not. Making a similar comparison for suburbs seven miles out, the land-value-tax suburbs did 2.33 times better; LVT suburbs 9.5 miles out did twice as well (IT, 9/75).
(7) Melton Shire (Victoria) switched from taxing real-estate income to taxing only land values in 1973 (as the result of a poll of landowners only) and then saw the Aus. dollar value of its building permits increase 1.68 times in the first year after the switch as compared to the year previous (Land Values Research Group, successor to GCRR, hereafter referred to as LVRG) – IT 10/75. All of LVRG’s studies come from the Aus. Bureau of Census).
(8) The average 1954-61 population growth of rural LVT towns in Victoria was 21.8%, but for their non-LVT neighbors it was only 13.4%. Their 1955-63 dwelling construction was 38.3% higher (source: GCRR, using Victoria state govt. statistics).
(9) New York State taxpayers spent more than $400 million to build the New York Thruway, but land values along the route increased by considerably more than $400 million (Perry Prentice in Architectural Forum – IT 1-2/76)
(10) Life editorial (1965): “Since the [Toronto] subway was built the neighborhoods around the stations have experienced a small construction boom and land values have skyrocketed. A 100-square-foot plot purchased in 1947 for $22,000 sold ten years later for $257,000.” This was reported in IT, 1-2/76.
(11) “The landowners on Staten Island in New York City pocketed a $700 million windfall because other taxpayers put up $350 million for the Verrazano Narrows Bridge; now their land is much more accessible than before. And one can wonder about the increase in land valuation on the Brooklyn side of the bridge.” So wrote Perry Prentice, vice-president of Time, Inc., in an article in The Commercial and Financial Chronicle, 8/22/68, as reported in IT, 1-2/76.
(12) In the seven years following the construction of New York City’s IRT subway from 135th St. to Spuyten Duyvil, the rise in land value was $69.3 million. Subtracting the normal increase during the previous seven years - $20.1 million – leaves an increase of $49.2 million directly attributable to the opening of the line. But that section of the line cost only $41.8 million (Gilbert Tucker, The Self-Supporting City, quoting a City Club study). This was reported in IT, 1-2/76.
(13) According to one public official in New Jersey quoted by Gilbert Tucker in The Self-Supporting City, the opening of the George Washington Bridge in 1928 increased land values on just the New Jersey side by $300 million, or more than six times the original construction cost (IT, 1-2/76).
(14) Less than two years after the property owners of Wangaratta (in Victoria, Aus.) had voted 4-1 to adopt LVT only, the following headline appeared in the local newspaper: “Building ‘Wave’ Envelops Whole of Town.” This occurred during a building recession in the general area (IT, 9/75).
(15-30) IT (5-6-7/76) reported on random-sample studies in sixteen U.S. cities substantiating that most homeowners pay less with a two-rate building-to-land property-tax shift.
(31) Two years after adopting an LVT-only property tax, 1957 construction in Mildura City (351 miles northwest of Melbourne, Aus.) broke all records, “and at the present rate, the 1957 record will be broken this year” (source: researcher Elizabeth Read Brown in the Am. Jrnl. of Econ. & Sociology (1/61, p. 12). See IT 9/76.
(32) “As a means of encouraging owners of sub-standard dwellings to install improvements, the City of New York adopted in 1936 a law granting property-tax exemption for five years upon the value added to existing buildings by improvements completed before October 1, 1938, provided the improvements did not increase the size of the building. Mayor LaGuardia estimated that renovation work in that year ran as high as $75,000,000...” (source: Harold S. Buttenheim, founding editor of the American City Magazine, as reported in IT 11/76).
(33) A Pittsburgh City Council study showed conclusively that a 1% earned income tax would hit the city’s homeowners 3.59 times harder than an equivalent-in-revenue LVT increase. The same study also found that a two-rate LVT would down-tax 73.6% of homeowners (IT 12/76).
(34) Then there’s Horsham, a city in rural Victoria, Aus. To quote from Progress (an Australian monthly magazine, 6/74):
“Horsham made the change to site value rating during the rural recession. For the three years before the un-taxing of buildings, the numbers and values of permits issued to private homebuilders had fallen drastically (from [A]$718,000 down to [A]$418,000 immediately before the change). The rot was stopped in the first year of untaxed buildings and the slow climb back commenced. For the year ended 30th June 1973, the numbers of privately-built dwelling units approved rose to 94 and their value to [A]$1,153,000.
“This is almost double the numbers of approvals and almost triple their values of the last year of taxed buildings. Site value rating has done much to beat the rural recession in this area.” (source: Australian government building-permit statistics; see IT 12/76).
This ends our examination of the first bound volume of Incentive Taxation (there are nine such volumes). This first volume covers a period before many two-rate building-to-land shifts occurred in the United States, and so in these early studies, Incentive Taxation had to rely primarily on statistics of the impact of such a tax shift from distant Australia.
(35) A Washington, D.C. study done in the 1970s shows that if the current property tax were shifted from land and building assessments to land assessments only, then there would be these tax reductions: single-family homes = 18.1%, two-family homes = 20.9%, row houses = 14%, walkup apartments = 38.9%, elevator apartments = 22.5% (IT W/77).(36) From 1921 to 1933, 7% of the municipalities in Victoria, Aus. taxed only land values, but they accounted for 46% of home construction. In the years 1947-54, the LVT municipalities had increased to 12%, but they accounted for 42% of the home construction. During 1954-58, 19% were using LVT, but they accounted for 62% of new home construction (source: building-permit issuance per GCLR). See 1T, 10/77.
(37) In 164 localities outside Melbourne, Aus., during the two-year period 1955/56 to 1957/58, there were 42 new factories, of which half were in the 17 localities using LVT-only. Not only that, but factory employment in these 17 LVT-only localities increased by 445 whereas in the remaining 147 localities, factory employment decreased by 361 (source: Aus. govt. statistics in “Public Charges Upon Land Values,” a 1961 study of the GCLR). See IT, 1077.
(38-49) Twelve studies in rural Victoria show that LVT-only towns averaged a construction-and-renovation growth of 29%, as against their land-and-building-taxing neighbors’ growth of a modest 2.6% in the same periods of time (source: GCLR study of building-permits issued as reported in Progress, 3/75). LVT-only was adopted in each case as a result of a poll of only landowners (see IT, 10/77).
(50) Wellington, New Zealand taxed land values while Auckland did not. In 1965, Wellington had £219 in improvements for every £100 in land value while Auckland had only £143 in improvements per £100 in land value (source: N.Z. govt. statistics per GCLR). See IT, 10/77.
(51) LVT-only Sydney and building-taxing Melbourne in Australia could also be compared in this way. In 1965, Sydney had £222 in improvements for every £100 values whereas Melbourne had only £125 in improvements for every £100 in land values (source: GCLR, ABS – Aus. govt.), see IT, 10/77.
(52) Ken Synett (former mayor of Marion, Aus): “For many years the Marion area remained static. Much of the land now being developed was in the hands of speculators.
“They held it as a lock-up investment. Tax rates were low…Then in 1954, the year after we achieved city status, our rating system was changed from a rental basis [i.e., real-estate-income tax] to one based on unimproved land value [LVT]. This sent the tax rates up [on land values]…The land investors decided it was time to sell…We are now watching Marion’s phenomenal expansion with pride.” See IT, 10/77.
(53) After Camberwell, a suburb of Melbourne, Australia, adopted LVT-only in 1922, its development was meteoric. For twenty years, it headed the Victoria building-development figures both in numbers and values until displaced by Moorabin in 1946 after that city also changed to LVT-only. In addition, Camberwell exhibited another advantage of LVT-only – it was fully in accord with ability-to-pay (source: Progress per LVRG, using Aus. govt. statistics; see chart in IT, 11/77.
(54) A 1965 study sponsored by the California General Assembly (prepared by Griffin, Hagen and Kroger) revealed that over 92% of the homeowners and renters in Fresno, CA would get tax reductions with a building-to-land tax shift. See IT 12/77.
(55-59) A GCLR study of five towns in rural Victoria, Australia between 1965 and 1966 showed that they exceeded the construction growth of their neighbors by 18%, 23%, 52%, 66%, and 48%.
(60) In November 1964, the property owners of South Melbourne voted in a switch to the LVT-only system. In the first six months of 1965, building values increased 2.4 times over what they had been in the four preceding six-month periods. The expenditures for alterations and additions to houses were 2.8 times the average in the four preceding six-month periods. The total value of construction permits for industrial buildings increased 3.3 times.
Not only that, but the growth in construction continued unabated in the ensuing years (source: Aus. govt. statistics per GCLR).
Many decades ago, South Melbourne had been a fashionable spot in the Melbourne area. Then it ran down, went to seed. After switching to LVT-only, it revived and became known as the “Cinderella City.” The Melbourne Herald (12/2/72) called its renaissance “The Kiss of Life” (headline). See IT, 1/78.
Studies 61-110 There are at least 237 empirical studies substantiating the benefits arising from shifting local taxation to land values. They all have appeared in the publication Incentive Taxation. 50 such studies (numbered 61-110) are summarized in this section.
(61) The Local Government and Shires Association of Australia reported that “a survey made by the city of Sydney [LVT-only] in 1950, showed that the building taxation system would have penalized the factory owner, the house investor, the homeowner, and the small shopkeeper, to the benefit of the large business interests in close proximity to the City [downtown].” See IT, 1/78.
(62) H. W. Eastwood (Chief Assessor in the 1970s of New South Wales Province, Aus.) strongly supported local land value taxation, primarily because re-assessments could be made every two years. His testimony appears in the 1966 Royal Commission of Inquiry into Rating Valuation and