.

Is Passage of a Land Value Tax feasible in Philadelphia?

Although it would be an interesting intellectual exercise, it is of little practical value to evaluate the impact of a tax reform that has absolutely no chance of being implemented. Thus, before any further effort is made to determine how a land value tax would impact patterns of land use in Philadelphia, it is necessary to determine whether the passage of a land value tax is politically feasible. Although the Controller is a passionate supporter of this type of taxation he must convince a majority of city council members, and the Mayor, to support his proposal.


The Controller's Ability to Reform Philadelphia's Tax Structure

The State Legislature has ultimate taxing authority in Pennsylvanian. However, a series of enabling acts has given Philadelphia's City Council discretionary power over many different city taxes. Thus, a simple majority vote within City Council, and approval from the Mayor, would change the real estate tax into a land value tax. Although Jonathan Saidel is an expert on Philadelphia's finances, as City Controller he can do little more than make recommendations about how to change Philadelphia's tax structure. Neither the Mayor nor members of the City Council are under any obligation to heed the Controller's recommendations.

Recognizing the importance of getting others to support his proposal, Saidel and his staff have developed a two-pronged plan of attack. The first prong involves meeting directly with Philadelphia politicians, and their staff, in order to explain the benefits of land value taxation. The second "secret" part of Saidel's plan involves organizing a coalition of businesses and residents who are willing to vocalize their support for the Controller's proposal and who will pressure their elected representatives to embrace the idea.

The Controller's Office understands that, while support from Georgeist organizations (such as the Center for the Study of Economics, The Henry George School of Social Science, and the Earth Rights Institute) is helpful, city council members are more likely to be swayed by a chorus of city residents and neighborhood groups crying out in support of land value taxation. Last August, I attended a meeting at the Controller's Office where a group of neighborhood and civic leaders had gathered to discuss different strategies for drumming up public support for land value taxation. For political reasons the Controller's Office could not appear to be directly encouraging Philadelphians to oppose their councilmen, yet at the meeting Saidel and his staff explicitly offered to help these groups in any way possible. Specifically Saidel stated that he was, "more than happy to come to any events you are able to organize to make the case for land value taxation."[48]

The Controller has made himself available to attend community meetings because he realizes the importance of educating Philadelphians about this topic. Often "humanitarian" concerns about land value taxation spring up at these meetings. Many people worry that this tax will hurt the elderly and other individuals living on a fixed income. It is true that, if their land to structure ratio is sufficiently low, an elderly person could see an increase in their taxes. However, in Pennsylvania, all senior citizens living on less than a certain amount of money per year qualify for a property tax freeze. Because of this state wide tax freeze, land value taxation will not force any senior citizens into the streets. Another question commonly directed at the Controller during these educational neighborhood meetings has to do with community gardens. Although the tax burden on many neighborhood gardens could increase with land value taxation, by obtaining a conservation easement, changing the deed so as to legally prevent future development, or giving the property to a non-profit trust, the tax burden on the garden would be greatly reduced (if not completely eliminated). Residents would avoid having to pay heavy property taxes and they could guarantee that their garden would always belong to the community.


Support for Land Value Taxation Within Philadelphia's City Council

Although there has been little systematic discussion of the Controller's tax reform, Philadelphia City Council has heard testimony about the desirability of implementing land value taxation several different times. On February 12th 2002, the first in a series of hearings devoted to the discussion of the Controller's Tax Structure Analysis Report were held. At these hearings, called for by Councilwoman Jannie Blackwell, community members spoke in favor of land value taxation. Kathy Harris, an Olney resident, Philadelphia native, and committeewomen in the 61st Ward, passionately argued that those residents who work to improve their property and their neighborhood should not be punished with higher Real Estate Taxes. As she told council members, "it is just not fair that the ones trying [to stay and revitalize the city] are the ones being penalized!"[49] Harris went on to state that she believed a land value tax would shift the burden onto the source of the problem, the owners of abandoned properties, which would help revitalize her neighborhood and the entire city.

By and large, council members have supported such discussions because they realize that property owners are voters; under Saidel's plan, between 59.49 and 94.54 percent of property owners in each district would see a modest decrease in their total Real Estate Tax. The idea of not having to cut spending in order to give so many voters a tax break appeals to many council members looking towards the next election. In the city at large (represented by 7 council members), as well as in the first, second, fourth, sixth, seventh, and ninth council districts, more than three quarters of all property owners would face lower taxes if a land value tax was implemented (see Table 2). Another reason for supporting a land tax is that, in many parts of the city, those residential properties which would face the largest tax increase are owned by negligent or absentee land lords, and such landowners make an unsteady voting base.

[TABLE 2 NOT REPRODUCED FROM THE ORIGINAL] Figure 1Table 2: The Impact Of Land Value Taxation On Residential Properties by Council District

Because the commercial and industrial properties are the much more likely to see increases in their real estate tax, support from the business community has helped to convince several council members that land value taxation is worth considering. Organizations such as the Chamber of Commerce, the Board of Realtors, and the Midlantic Business Alliance have all made public statements in support of land value taxation. Representing over 4,000 small businesses, nearly 25% of them within city limits, the Midlantic Business Alliance claims that, in conjunction with the Saidel's proposed business tax cuts, the land value tax will, "create a climate that keeps Philadelphia's businesses, large and small, competitive with those of surrounding states and counties."[50]


The Power of the Press

In addition to the Controller's Office, community members, and local businesses leaders, a barrage of newspaper articles have argued land value taxation is exactly what Philadelphia needs. Some of the headlines have read: "Land-value tax is program worth local consideration," "The Good News About Saidel's Tax Plan," "As Phila. Faces fiscal pinch, land tax may be in the mix," "Saidel finds allies for a drastic city tax overhaul," and "Save our neighborhoods - cut our taxes."[51] In the year and a half since Saidel's tax reform proposal was first made public, articles and editorials supporting land value taxation have appeared in many of Philadelphia's major and neighborhood newspapers.

Politicians are under no obligation to follow the advice of newspaper editors, but it becomes difficult to ignore or discredit something which the press so strongly supports. Daily News Columnist, Mark Allen Hughes, states that, "the Tax Structure Analysis Report issued today by City Controller Jonathan Saidel is the best policy statement issued by any city government in my twenty years of policy analysis and research."[52] Noel Weyrich of Philadelphia Magazine writes that the Saidel's land tax proposal is "a smart, practical approach, because supermarkets, manufactures, and other big landowners with productive businesses will see little difference in their overall tax burdens, while slumlords, land speculators, and to a lesser extent, parking-lot operators would really get whacked."[53] Philadelphia Weekly's Eils Lotozo describes land value taxation as being, "a simple shift in tax policy that could lower property taxes for middle-class homeowners and turn inner-city neighborhoods into natural empowerment zones."[54]


The Influence of Special Interest Groups

In 1998 a prophetic Philadelphia Weekly article warned that if a serious proposal to implement a land value taxation ever developed, Philadelphians should:

"Expect a chorus of objections and a well-funded derailment effort from those who would be likely to pay more -- owners of abandoned industrial sites, surface parking lot owners, owners of big box stores with acres of parking lots, owners of mothballed center city office buildings, big time speculators clinging to dreams of riverboat gambling and sitting on prime riverfront property and small-time speculators holding abandoned houses and lots in the city's neighborhoods."[55]

In February 2002, the Philadelphia Magazine reported that Mayor Street "gets a good chunk of his campaign contributions from the owners of many of these unused, underused and abused properties."[56] Although Mayor Street purports to oppose land value taxation on the grounds that implementation of such a tax would be economically infeasible, a lingering suspicion remains that his stance on the issue is heavily influenced by several key campaign contributors. It may initially be tempting to disregard such allegations as sensationalistic, but a shift to land value taxation dramatically increases the taxes paied by a minority of landowners. Thus, land speculators, like the infamous Sam Rappaport, have a strong financial incentive to fight against land tax proposal.

Urban land speculators typically buy downtown property and either demolish the existing buildings (often constructing surface parking lots in their place), or they allow the buildings to deteriorate so that they can pay less in real estate taxes. Rather then trying to productively use the land, speculators bet that, if they wait long enough, the city's fortunes will change and someone will be willing to pay a high price for the land that they paid next to nothing for years ago. The more a speculator has to pay in taxes before they resell the property, the less profit they make. Thus, a rational land speculator would follow this formula when deciding how much to give to politicians to oppose the land tax:

P = ( LVT - RET ) * n * y

P= the payoff a speculator is willing to give to politicians in order to oppose land value tax; LVT= the expected tax per year per property under a system of land value taxation; RET= the current tax per year per property under the existing real estate tax structure; n= the number of properties owned; y= the average number of years the speculator expects to hold each property before selling it again.

In addition to opposition coming from land speculators, pressure to oppose land value taxation comes from land intensive industries. Several City Council members have expressed concerns that this tax would drive out industrial companies such as Sunoco.[57] Since many of Sunoco's structures are not classified as buildings, the company would see a significant increase in their real estate tax bill under the controller's proposed land value tax. The following is a table showing the increased property tax Sunoco would have to pay on their two main Philadelphia refining properties.[58]

[TABLE 3 NOT REPRODUCED FROM THE ORIGINAL] Table 3: Sunoco's Tax Burden

A $386,072 tax increase may initially seem quite steep, but it is important to look at how this, or any tax increase, would affect the company's profits. As Sunoco's North East Refining Division posted a $260 million profit in 2000, the proposed tax increase would result in less than a 0.15 percent decrease in the company's profits.[59] Council Members may believe that the city cannot afford to pass any tax reform which would drive away Philadelphia's remaining industrial companies, but it remains to be seen if a 0.15% decrease in profits would cause Sunoco to move their refineries out of the city. As argued by Joshua Vincent, given the high cost of relocation, and the fact that Sunoco could have a hard time finding another municipality which would welcome the construction of an oil refinery, it seems unlikely that Sunoco will be leaving Passyunk Ave any time soon.

Politicians should not take exit threats seriously if, for any one business, the cost of leaving is higher than the cost of staying in the city.[60] For example, according to Vincent, at least one taxicab company has threatened to leave the city if a land tax is implemented. The company alleges that they would not be able to pay the increased taxes on the parking lots they own and that they would have to leave the city. It is ludicrous to assume that a taxi-cab operator would be better off leaving the city than paying an increased tax on their parking lot. How much demand could there be for a suburban taxi service? If taxi-cab operators truly found that the new tax was cutting too steeply into their profits, they could marginally increase their fares; the elasticity of demand for taxis would determine proportion of the tax assumed by taxi-cab owners and by tax-cab riders.


Is it Possible to Accurately Determine Land Value?

In unanswered Council Testimony, on March 11, 2002, David Glance of the Bureau of Revenue and Taxation cited an article by Dr. Edwin S. Mills, which claimed that it was not feasible to tax land separately from building values. Glance emphasized the fact that even a theoretical supporter of land taxation like Mills had to concede that this type of taxation is not possible.[61] After reading the article mentioned by Glance, as well as several other pieces by Edwin Mills, it seems like a dubious proposition to claim that Mills is a supporter of land value taxation. Though Mills admits that taxing land might remove the economically inefficient distortions caused by conventional real estate taxation, he argues that the difficulty of correctly assessing land value and implementing a land tax would make the efficient implementation of such a tax inconceivable.[62]

Skeptics such as Edwin S. Mills claim that, because there is an insufficient number of unimproved land sales, it is impossible to accurately determine the market value of urban land, and therefore urban property assessments are bound to be imperfect.[63] Though assessment perfection may be an impossible goal, a series of new land valuation techniques have helped municipalities develop legally defensible land and property assessments. A review of the appropriate literature indicates that an accurate land assessment is possible (for more information see Appendix B). Although there is a substantial one time and recurring cost associated with switching to, and periodically updating, land value assessments, this has been budgeted for in the Controller's tax shift proposal and therefore should not be considered a valid reason for opposing the tax shift.

How Will a Shift to Land Value Taxation Alter Patterns of Land Use?

Generally, a shift to land value taxation will result in more dense urban land use. In Philadelphia, a city with an abundance of vacant property, a land value tax will give property owners an incentive to use their land more productively. This will result in a construction boom and a increase in the city's overall building to land ratio. The impact of land value taxation on patterns of land use is expected to be most dramatic in areas with high land values. This is because the magnitude of the total change in tax bill for a vacant lot will be greater in areas where the land is worth more. Throughout the city, the tax rate on land would uniformly increase from 8.264% to 18.33%, However, in zip code 19113, a vacant lot worth the average amount of a parcel of land in that zip code would see an tax increase of $55 per year, while a vacant lot worth the average amount of a parcel of land in center city (zip code 19103) would see a tax increase of $4,970 per year.[64] Because the impact of land value taxation would be the most dramatic in center city, where property values are high, the 1900 block of Market St. is used as a case study to illustrate how the tax shift would influence land use patterns.


The 1900 Block of Market St.: Changing The Tax Burden

The 1900 block of Market St. was chosen as a case study because the effects of land value taxation are readily apparent in areas where land value is high, and because on this block there is a wide rage of building densities and land uses. The 1900 block is broken down into three different properties, 1900 Market St. (an office building with no garage), 1901 Market St. (an office building with a garage), and 1921 Market St (commercial parking lot).[65] On the north side of the street are 1901 and 1921; each lot is approximately 33,000 sq.ft. On the south side of the street is 1900, this building sits on a lot that takes up the entire block and is 69,696 sq.ft. Because it could be deceiving to simply look at the size of each property, it is necessary to note that the building to land ratios of the two different office buildings vary dramatically; 1900 has a 6.3 ratio while 1901 has a 26.7 building area to land area ratio. A cursory visual survey confirms the difference in these ratios as the 1901 appears to be much taller than 1900 Market St.. Because the proposed land value tax taxes land more heavily than buildings, property with large building to land ratios are likely see a decrease in their real estate tax bills, while underused or vacant properties will see a significant increase in their real estate tax bill. If the land value tax proposed by the City Controller were implemented, 1900 Market St. would see an increase in its real estate tax of $398,488, 1901 Market St. would see a decrease of $539,286, and 1921 Market St. would see an increase of $196,456. See figure 4 for a graphic representation of how the tax burden on these properties would change.

[FIGURE 4 NOT REPRODUCED FROM THE ORIGINAL] Figure 4: Change in Tax Burden on the 1900 Block of Market St.

Even though the property with the largest building sees the greatest reduction in its tax burden (for 1901 Market St. the proposed land value tax is equal to 88% of the current real estate tax) the magnitude of its tax bill remains the greatest. This occurs because, unlike a pure land tax, the Controller's proposal is designed to collect 50% of the city's real estate tax revenue from land and 50% from buildings. The underused property (1900 Market St.) sustains a higher tax increase than the vacant property (1921 Market St.) because no building tax can be collected from a undeveloped property and because the 1900 lot is twice the size of the lot on 1921. Although the magnitude of the tax increase is greatest for 1900 Market St, this only represents a 130% increase in the property's tax burden; under the Controller's proposed land value tax the vacant property would sustain a 222% increase in its tax burden. See Appendix D for a complete break down of how these properties would be affected by a change in the tax structure.


The 1900 Block of Market St.: An Incentive to Develop

In theory, the owners of 1901 Market St would be induced to do something more productive with their land if they had to pay a higher tax on it. Whether or not a $196,456 increase in tax burden is enough of an incentive remains to be seen. Often there are advantages associated with waiting to develop a property, but the greater the holding cost the smaller the advantage of postponing development becomes. For this analysis it is assumed that the city benefits from increased development. Not only are more jobs provided during the construction process, but also the cost of rental space decreases as the supply increases. Thus, building more office space in downtown Philadelphia will decrease the average rental cost and make it more profitable for businesses to locate in the city. This brings even more jobs to Philadelphia. As figure 5 shows, the amount of office space available in the city has declined by nearly 2,000,000 square feet in the past decade. Some office space has been converted to loft style apartments or hotels, which is good for the city's economy, but other office buildings have shut their doors completely.

[FIGURE 5 NOT REPRODUCED FROM THE ORIGINAL] Figure 5: Office Leasing Activity: Center City and the Region, 1989-1999

During the 1990's, the amount of available office space has shrunk in Philadelphia and dramatically grown in the Pennsylvania suburbs. Although the suburbs and the city are influenced by the same general economic trends (as shown in Figure 5, both the city and the suburbs peak and recess at the same time), in the past decade office space in the region has gradually migrated to the suburbs. This has primarily been a demand driven shift. Lower rents and no city wage tax make it more profitable for businesses to locate outside of the city. Although a shift to land taxation will not completely reverse this trend, by encouraging the development of vacant and under-used properties, and thus increasing the amount of leasable space, land value taxation will bring about a reduction in the average rent and make it more affordable to locate in the city.[66]

The findings in the next section build from the assumption that the owners of 1921 Market St. found that it was no longer profitable for them to let this property sit without bringing in some sort of return on their investment. Once the landowners decided to develop their property, it becomes necessary for them to determine the size of building they will build and how this decision would be influenced by the tax structure. Before delving too deeply into this analysis, it is important to point out that most developers look at more than just the tax structure when deciding what type of building to construct. When making this decision they look at the lot's zoning regulations, the cost of construction, the character of nearby buildings, the demand for space in those buildings, the number of other buildings of a similar type being constructed in the area, and the tax structure of the municipality in which they will be building. In the following analysis all but one of these factors, the tax structure, will be held constant. This is done in order to isolate the effect which the adoption of a land value tax would have on the developer's choice of land to building ratios.

Another assumption made for the sake of simplicity is that the developer of 1921 Market Street can only build a building similar to the one built on 1901 Market St. or like the one built on 1900 Market St. Proposed Building A has a similar capital to land ratio as 1900 Market St. and Proposed Building B has a similar ratio as 1901 Market St.. Table 4 illustrates how property's tax burden would change for both building A and B if a land value tax were implemented. It is important to remember that in this table, the land value tax is the identical to the one being proposed by the Controller's Office, it is not a pure land value tax. Under a pure land value tax, the tax burden would be constant regardless of the size of the building.

[TABLE 4 NOT REPRODUCED FROM THE ORIGINAL] Table 4: The Tax Structure and Downtown Building Decisions

This table shows that the property's total tax burden would increase if either building A or building B were constructed and that, no matter what the tax structure, the tax burden will be greatest in magnitude if building B is constructed. However, this should not be taken to mean that the developer would automatically choose to build the building with the lowest capital to land ratio. Let's assume that other factors made the developer more inclined to construct building B; if this were the case, than he would have a strong preference for the passage of a land value tax. Under the current real estate tax structure, building B would bring about a 1,782% increase in the property's annual tax bill; under a land value tax structure building B would only bring about a 589% increase in the property's annual tax bill. If a land tax were implemented, the developer would save over ¾ of a million dollars each year. Essentially, a developer is rewarded for using their land in the most efficient way possible.

However, if the developer feels that there is not sufficient demand to justify building a large office building at that location, and if she could choose between buildings A or B, than she would not profit from a change in the tax structure. Under these conditions, if a land value tax were implemented, the developer would have to pay an extra $63,447 per year of additional tax. This example illustrates the fact that land value taxation primarily benefits property owners who have, or plan to have, above a minimum capital to land ratio. Relaxing the initial assumption (that the developer can only construct one of two buildings) we find that, at 1921 Market St., any building with a taxable capital to land ratio of more than 198.64 $/sq.ft. would see a reduction in its overall tax burden if a system of land value taxation were adopted.[67] This threshold capital to land ratio is determined by the value of the land, the size of the lot and the tax rate.[68]

An important characteristic of land value taxation is that, even before a proposed development surpasses its threshold capital to land ratio, developers have an incentive to build as much as possible on any given lot of land. For each extra dollar the developer invests in construction, she can either pay an extra 8.264 cents per year per dollar of real estate tax or an extra 5.33 cents per year per dollar of land value tax. For multi-billion dollar projects, which are expected to remain structurally sound for several decades, this extra 2.934 cents per dollar per year really adds up. Furthermore, from the developer's point of view, under both the real estate tax and the land value tax, the tax on land is essentially fixed (it is just fixed at a higher rate under land value taxation), so the greater the total property value the less burdensome the land tax becomes.[69]

The Need For Accurate Land Assessment

As illustrated by the Market St. example, land value taxation would promote new development on vacant lots and larger capital to land ratio in buildings throughout the city. The impact of land value taxation is most pronounced in areas with high land value, yet in every part of the city land owners would be given an incentive to use their land more productively. In theory this tax could have a major impact on land use patterns in Philadelphia. However, an examination of the 4700 block of Baltimore Ave illustrates why the true impact of this tax will be greatly diminished if flaws in Philadelphia's property assessment system are not corrected.


Assessment Inequality On The 4700 Block Of Baltimore Ave.

Like many residential streets in Philadelphia, the 4700 block of Baltimore Ave is lined with row houses. Also like many streets in Philadelphia, mid-way down this row lies a gaping hole filled by nothing more than vacant land. This unused and neglected piece of property spans three lots. The owner does not live in the neighborhood, is not currently using the land, and has no plans do anything with the land at any time in the near future.[70] The owner of the adjacent property has made several offers to buy these vacant lots in order to turn them into an outdoor garden and seating area for a restaurant which is slated to be put into the bottom floor of her building. She has repeatedly been told that the property is not for sale.

If a land value tax replaced the current real estate tax, the tax burden paid by the owners of the row houses located at 4722, 4724, 4726, and 4728 Baltimore Avenue would increase slightly. Because each of the lots is not exactly the same size, and because the houses have not all been kept in the same condition, the yearly tax bill for each property would change between $4 and $57. Meanwhile, if a land value tax were implemented, the tax burden paid by the owner of the vacant lot would more than double. See Appendix E for a full breakdown of how these properties differ and how their tax burdens would change. From this information it might be tempting to conclude that the land value tax has a big impact, but in order to truly understand what is going on it is necessary to look more closely at the magnitude of the tax change and at the manner in which each of these properties is assessed.

The land beneath each of the four row houses has been assessed at between $10.87 and $8.27 per square foot. This price represents the residual value per square foot of the total property after you taken into account the value per square foot of the building. Although it may seem somewhat surprising that the land under four nearly identical row houses should be assessed differently, for the time being let us assume that there are perfectly sound reasons for this discrepancy in the land assessments.

[FIGURE 6 NOT REPRODUCED FROM THE ORIGINAL] Figure 6: Land Values Per Square Foot On Baltimore Ave.

As illustrated by Figure 6, the difference in land value between all four row houses is not nearly as drastic as the differences between the developed land and the vacant lot. At $0.83 per square foot, the assessed value of 4730-34 Baltimore Ave is less than a tenth the assessed value of the surrounding properties. Because nothing is built on this land, one would expect the total property assessment per square foot to be lower, but there is no reason why the land assessment should be so much lower.

Unequal land assessments reduce the impact of land value taxes. Even if a land value tax were implemented (holding the current land assessment fixed) the tax burden on the vacant lot would only increase to $176 a year. It is true that this represents a 222% increase in the property tax burden, but it seems unlikely likely that having to pay an extra $97 per year will induce this property owner to use his property more productively or sell it to someone who will. Table 5 shows how the tax burden on each property would change if the tax assessments were fixed. For this analysis, the average assessed value of $9 per square foot is assigned to each lot.

[TABLE 5 NOT REPRODUCED FROM THE ORIGINAL] Table 5: Fixing The Assessments On Baltimore Ave.

If each property on the 4700 block of Baltimore Ave is given a uniform $/sq.ft assessed land value, there would be a shift in the property tax burden faced by each property owner. The combined real estate tax bill for the four row homes would decrease by $36 while the tax bill for the vacant property would increase by $784. Under a system of land value taxation, the change in tax burden becomes even more drastic. If a land value tax were implemented, and if land values were accurately assessed, the combined real estate tax bill for the four row homes would decrease by $81 while the tax bill for the vacant lot would increase by $1,737. It is clear that only after fixing the egregious inequalities associated with current property assessments will it be possible for a land value tax to be implemented effectively.


The Prevalence of Faulty Philadelphia Assessments

As implied in the analysis of Baltimore Ave, fixing questionable land assessments would make land value taxation more effective. In order to generalize the findings, and to support this paper's claim that the impact of land value taxation will be marginal unless Philadelphia's assessments are fixed, it is necessary to prove that the inequitable assessments found on Baltimore Ave are not an anomaly.

In Philadelphia, the Board of Revision of Taxes is responsible for determining how property is assessed. Although the BRT is comprised of more than 200 city employees, a seven-member board runs the agency and decides whether to grant appeals from disgruntled property owners. According to Ed Goppelt, a local good government activist committed to fighting for greater accountability from city hall:

"Boardmembers are not elected by the people of Philadelphia. Rather they are appointed by the 90 judges who sit on Common Pleas Court. My impression is that party bosses use an appointment to the Board to reward party loyalists. This is not to say that Boardmembers are incompetent, merely to acknowledge that politics plays a large role in who sits on the Board."[71]

Even though Goppelt is willing to concede that BRT's Boardmembers might be competent, he is convinced that Philadelphia's assessment practices are not fair. After compiling and comparing data on the actual retail value of recently sold properties and the BRT assessed value for each of these properties, Goppelt has concluded that Philadelphia's inequitable assessments result in inequitable tax burdens on residents throughout Philadelphia . Goppelt reasons that, "if the tax is fairly administered, you would expect everyone in the City to be paying the same effective tax rate of 2.64%."[72] However, just about everyone in the city is paying less than the official tax rate. The would be fine if everyone was uniformly underpaying, but as the table in Appendix F shows, different neighborhoods have different assessments rates and thus different effective tax rates.

Goppelt's finding that gross discrepancies in land and property assessments can be found throughout the city has been supported by other, more academic, research. Kevin Gillen, a PhD Student in the Real Estate Dept. at the Wharton School, found evidence that, "systematic variation in assessment errors results in an inequitable distribution of the property tax burden, imposing real and significant dollar costs on homeowners"[73] Refer to appendix G to see Gillen's map of assessment inequality by Philadelphia neighborhoods. As this map makes visually apparent, there is a wide discrepancy in how Philadelphia property is assessed.

Conclusion

Economic theory leads one to believe that implementing a land value tax in Philadelphia would result in greater economic efficiently and greater equity. This research has not addressed the issue of greater social equality; rather, it has focused on how land value taxation would increase economic efficiency. Throughout this paper, land usage has been used as a crude indicator of economic efficiency. This assumption stems from the academic finding that land speculation hampers economic progress and from the casual observation that "healthy" cities don't typically have vacant lots next to skyscrapers.

In theory, if all available land was being put to its best use, implementation of a land tax would not change patterns of land use in Philadelphia. However, the prevalence of vacant properties throughout the city indicates that all of the available land is not currently being put to its best use. The Market St. case study illustrates that, as it becomes relatively more expensive to hold land and less expensive to invest in structures, there will be an increase in the number of new building permits in Philadelphia and in the value of each permit. Thus, implementation of a land value tax would spur urban redevelopment. This change will be most noticeable in parts of the city where land is relatively expensive, such as the Center City District. Unfortunately, the prevalence of inequitable land assessments throughout Philadelphia will make the positive effects of a land value tax less noticeable. The Baltimore Ave. case study clearly illustrates that unless assessments are fixed, so that there is more accuracy and consistency in land valuation, the impact of a land value tax will be nominal.

Because the controller's land tax proposal would positively affect so many residents, it seems likely that this idea will not be categorically rejected by politically savvy city council members. Ultimately, even though special interest groups can buy the attention of politicians, each city council member is a public servant and must be accountable to his or her constituents. In other words, if Philadelphians call out loudly enough for the adoption of a land value tax, it will be difficult for elected officials to vote against it.

Recognizing that a land value tax will have less of an impact with inaccurate assessments, the Controller's Office and neighborhood groups interested in supporting a land tax should link these two causes together. If the current fury over property assessments were successfully harnessed Philadelphians could have a more equitable property assessments practices and a more efficient tax structure.


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