.

Bibliography

Books and Articles:

Ashley, Richard, Florenz Plassmann, and Nicolaus Tideman. "Improving the Accuracy of Downtown Land Assessment." Cambridge, MA: Lincoln Institute of Land Policy Working Paper. 1999.

Becker, Arthur, P. "Full Employment Without Inflation." Survey of Business. March/April 1977.

Bentick, B. L., "The Impact of Taxation and Valuation Practices on the Timing and Efficiency of Land Use," Journal of Political Economy 87, (1979), 859-874.

Cord, Steven B., "Legal Suggestions for Enacting Land Vale Taxation," Cambridge, MA: Lincoln Institute of Land Policy Working Paper, 1999.

George, Henry. Progress and Poverty, Ed. A.W. Madsen. Abr. ed. http://www.henrygeorge.org/chp7&8.htm [2 Oct. 2002].

George, Henry, Progress and Poverty.1879. New York: Robert Schalkenbach Foundation. 1953.

German, Jerome, Dennis Robinson, and Joan Youngman. "Traditional Methods and New Approaches to Land Valuation." Land Lines, July 2000, Lincoln Institute of Land Policy.

Gillen, Kevin Gillen, "Measuring the Efficiency and Equity of Property Tax Assessment Practices," Unpublished Paper, The Wharton School, U. of Pennsylvania, Philadelphia, April 10, 2002.

Gloudemans, Robert J. "An Empirical Analysis of the Incidence of Location on Land and Building Values." Cambridge, MA: Lincoln Institute of Land Policy Working Paper. 2002

Kunce, Mitch. "A Nash tax game extending the generality of the Henry George Theorem." Economic Letters, 66 (2000) 229- 233.

Lim, Duck-Ho. "The Relative Efficiency of Taxation in a Two-Period Model of Urban Growth." Journal of Urban Economics, 45, 403-420 (1999).

Lindholm, Richard W., and Arthur D. Lynn, Jr. eds. Land Value Taxation. Madison Wis: University of Wisconsin Press. 1982.

Mills, David E., "The non neutrality of land taxation." National Tax Journal, 34, 125-129 (1981).

Mills, Edwin S., "The Economic Consequences of a Land Tax." In Land Value Taxation: can and will it work today?" Dick Netzer, ed. Cambridge, MA: Lincoln Institute of Land Policy. 1998.

Mills, Edwin S., "Is Land Taxation Practical?" Illinois Real Estate Letter, Fall 1998, Office of Real Estate Research.

Nechyba, Thomas J., "Replacing Capital Taxes wit Land Taxes: Efficiency and Distributional Implications with an Application to the United States Economy." in Land Value Taxation: can and will it work today?" Dick Netzer, ed. Cambridge, MA: Lincoln Institute of Land Policy. 1998. 195

Netzer, Dick. "What do we need to know about land value taxation?" The American Journal or Economics and Sociology.. Dec. 2001 v60 i5 p97(31).

Plassmann, Florenz and Nicolaus Tideman. "A Markov Chain Monte Carlo Analysis of the Effect of Two-Rate Property Taxes on Construction." Journal of Urban Economics. Vol 47, No. 2, March 2000.

Reschovsky, Andrew. "Can the Land Value Tax Play an Important Role in the Financing of State and Local Governments in the United States?" in Land Value Taxation: can and will it work today?" Dick Netzer, ed. Cambridge, MA: Lincoln Institute of Land Policy. 1998.

Rybeck, Walter. "United States." Land-Value Taxation Around the World. Ed. Robert Andelson. 2nd ed. New York: Robert Schalkenbach Foundation, 1997. 124.

Welch, Ronald B., "Land Value Taxation: Administrative Feasibility- Retrospect and Prospect." Land Value Taxation. Eds Richard W. Lindholm, and Arthur D. Lynn, Jr. Madison Wis: University of Wisconsin Press. 1982.

Woolery, Arlo, "Tax Policy and its effect on land use." Land Taxation and Land Use. Pierre Laconte and Ann L. Strong, eds. Cambridge Ma: Lincoln Institute of Land Policy. 1982

Wuensch, Jeff, Frank Kelly, and Thomas Hamilton. "Land Value Taxation Views, Concepts and Methods: A Primer." Cambridge, MA: Lincoln Institute of Land Policy Working Paper. 2000.

Newspaper Articles:

Gorenstein, Nathan, "Saidel finds allies for a drastic city tax overhaul," The Philadelphia Inquirer, 10/22/01.

Gorenstein, Nathan, "Saidel offers tax plan challenge," The Philadelphia Inquirer.

Hughes, Mark Alan, "Philadelphia must seize reins of its runaway decline," Philadelphia Inquirer, 5/7/98.

Hughes, Mark Alan, "The Good News About Saidel's Tax Plan," The Philadelphia Daily News, 11/26/01.

Hughes, Mark Alan, and Rebekah Cook-Mack, "City needs a fresh approach to dealing with vacant property," Philadelphia Inquirer, 5/23/99.

Inman, Robert, "As Phila. Faces fiscal pinch, land tax may be in the mix," The Philadelphia Inquirer, 11/9/01.

"Land-value tax is program with local consideration," The Mercury, 6/11/02.

Lotozo, Eils, "The Land Value Tax could be a win-win for the city, but getting it passed won't be easy," Philadelphia Weekly, 1/4/98.

Saidel, Jonathan, "Save our neighborhoods - cut our taxes," Philadelphia Sunday Sun, 5/12/02.

Weyrich, Noel, "Might Makes Blight," Philadelphia Magazine, 2/02.

Primary Documents:

From the second Bulletin sent to City Council Members form Joshua Vincent

Incentive Taxation, May 2002. Published by the Center for the Study of Economics

Harrisburg Bulletin, copy obtained from the Philadelphia City Controller's Office.

Office of the Controller to Mary Braun, personal communication, August 1, 2002.

Smith, Jeffery. "Where the Property Tax Shift Has Worked: 25 Case Summaries." Philadelphia: PA, Center for the Study of Economics. 1990.

Tax Structure Analysis Report, Office of the City Controller, Philadelphia

Testimony in front of city council on February 12t, 2002.

Websites:

Hallwatch, http://www.hallwatch.com

Neighborhood Information System, Cartographic Modeling Lab, University of Pennsylvania, http://cml.upenn.edu/projects/nis.asp

Sunoco Inc., http://www.sunocoinc.com

Appendix A: Interviews and Meetings

§ The City Controller's Office

This meeting, held on August 1st 2002, was called by the Controller's Office in order to bring civic leaders interested in land value taxation together to talk about how to best mobilize Philadelphia residents in support of land value tax. Among those in attendance were Jonathan A. Saidel, Brett H. Mandel, Bruno Moser, Joshua Vincent, Ed Goppelt, Colleen Puckett, Mary Tracy, and representatives from several community organizations loosely affiliated through the Coalition of Philadelphia Neighborhood Associations (CPNA). Throughout the research process I also spoke with several members of the Controller's staff about the Controller's Tax Structure Analysis Report and about land value taxation.

§ Dodson, Edward J.

Affiliated with Philadelphia's Henry George School, and a board member of Common Ground-USA, Ed Dodson is an expert on land value taxation. I spoke with Mr. Dodson on two different occasions, once at the Henry George School and again on November 7th during an interview at his Center City office.

§ Fall 2002 Forum Series of the Henry George School Alumni Association

This October 14th talk on Municipal Sustainability Featured Joshua Vincent and examined the impact of Land Value Taxation on York Pennsylvania.

§ Inman, Robert

Professor of public finance at the University of Pennsylvania's Wharton School, Professor Inman also serves on the Mayor's Economic Advisory Board, and has conducted extensive research on the impact that different types of taxes have on Philadelphia's economy.

§ Strauss, Robert

Professor at Carnegie Mellon's H. John Heinz III School of Public Policy and Management, Professor Strauss conducts research on state and federal taxation. He also has also given lectures on Pittsburgh's experience with land value taxation. Professor Strauss answered a number of my questions concerning land value taxation during our email exchange.

§ Vincent, Joshua

Director of the Center for the Study of Economics, Joshua Vincent travels around the country working to promote land value taxation. I spoke with Mr. Vincent on several occasions, including a lengthy interview at his office on October 3rd 2002.

Appendix B: Assessing Land Value

The development of new technology has revolutionized assessment practices and greatly increased the feasibility of large-scale land valuation. Below is a list of common assessment techniques.

§ Comparable Sales:

The simplest appraisal method involves using recent sales of unimproved land to determine the land value of nearby properties. This technique, especially when coupled with new geographic information system (GIS) and computer-assisted mass appraisal (CAMA) software can be quite effective but as it has been pointed out, there are relatively few unimproved land sales in the city.

§ Residually Derived Land Valuation:

The most common method of calculating land value involves assessing the value of a developed piece of property and then subtracting the estimated amount necessary to replace the structural components in their current condition (how much would it cost to replace the newly finished Huntsman Hall). Another popular method of assessing sites, when the existing structures are decrepit or obsolete, involves subtracting from the total property value the cost of returning the land to an unimproved state (how much does it cost to clean up and abandoned chemical facture so that something else can be built on the land). Both of the methods described above involve residually deriving land values, and are most reliable when improvements are totally depreciated or not depreciated at all. It is much more difficult to assess the value of an old-but-usable structure (how do you determine the cost of replacing high-rise north in its current condition, slow elevators and all).[74]

§ Hedonic Regression Technique:

In the past 25 years the Hedonic regression technique has been developed by economists to estimate the value of houses.[75] Hedonic assessments involve regressing the selling price of a home by its structural characteristics (how many bathrooms, how many cars can fit in the garage), lot characteristics (is property on a corner lot, is it on a busy street, how large is the front yard), neighborhood characteristics (how much crime, how good are the schools), and community characteristics (how high is the tax rate). By using computers and repeating this regression for a number of different houses in any given area, assessors are able to determine how much the different characteristics of the home add to its selling price. This makes it possible to look at the characteristics of any given property and predict how much that property is worth.

§ Computer Assisted Mass Appraisal (CAMA):

Hedonic equations cannot explain 100% of the variation in any given sample of properties, but when combined with new computer-assisted mass appraisal (CAMA) techniques it is possible to predict, with acceptable reliability, land values in urban areas.[76] CAMA models integrate computerized mapping technology with mathematical formulas to, "establish a relationship between property characteristics and sale price, thereby permitting an estimate of the market value of other properties not subject to a recent sale."[77]

§ Geographic Information Systems (GIS):

The development of GIS technology has permitted assessors to develop detailed location-based property records and to coordinate sales data with location. Recently the advent of more sophisticated and less expensive forms of GIS technology has made it easier for assessors in both large and small municipalities to use GIS in their efforts to accurately assess real estate values.

Appendix C: Total Vacant Properties by Neighborhood

[MAP NOT REPRODUCED FROM THE ORIGINAL]

Appendix D: Tax Burden for On the 1900 Block of Market St.

[NOT REPRODUCED FROM THE ORIGINAL]

Appendix E: Taxation and Assessment on Baltimore Street

[NOT REPRODUCED FROM THE ORIGINAL]

Appendix F: Assessments By Philadelphia Neighborhood

[NOT REPRODUCED FROM THE ORIGINAL]

ENDNOTES

[1] This website, created by Ed Goppelt, was designed to bring about greater transparency in local politics by making information more accessible. The accuracy of the information found on hallwatch was checked against data on BRT's web site and against a CD of their most recent assessment data.

[2]Quite distinct from the usual meaning of 'rent', economic rent refers to the excess or surplus of total payments given to any factor of production (land, labor, capital) over and above what that factor could earn in its next best use. That is, if a piece of land can be used to grow either tomatoes or thistles, and if it yields $1,000 per acre growing tomatoes, but only $1 per acre growing thistles, then the land rent while growing tomatoes is $999. If the land is of poor quality and the farmer can (holding all other factors of production constant) only grow a tenth as many tomatoes (his yield is now only $100 per acre for tomatoes, but is still $1 per acre of thistles) then the rent on the poor land is $99. Rent is also expressed in the selling price of land. When land is purchased, the payment which is made for the ownership, or right to perpetual use, is rent commuted or capitalized. If I buy land for a small price and hold it (doing nothing to it) until I can sell it for a large price, I have become rich, not by wages for my labor or by interest upon my capital, but by the increase of rent.

[3] George, Henry. Progress and Poverty, Ed. A.W. Madsen. Abr. ed. http://www.henrygeorge.org/chp7&8.htm [2 Oct. 2002].

[4] Netzer, Dick, "What do we need to know about land value taxation?" The American Journal or Economics and Sociology, Dec. 2001 v60 i5 p97(31).

[5] For our purposes we acknowledge, but disregard, the fact that parts cities such as Tokyo, San Francisco, and New York are built on landfills, and that both the Netherlands and New Orleans serve as examples of locations where land has been "produced" by creating dikes and filling in deltas. For the purpose of this discussion the amount of land created by theses processes is too small to be significant.

[6] Starting with the maxim that the free market results in the most efficient use of natural resources it follows that inefficiencies arise when taxes (or other artificial forces) influence people's production decisions.

[7] Going back to our previous example we see that even if a farmer was forced to pay $998 in taxes he would still be better off growing tobacco than thistles (because his rent is $999), and thus his production decision would remain the same.

[8] Center For the Study of Economics Flyer

[9] Netzer, Dick, "What do we need to know about land value taxation?" The American Journal of Economics and Sociology, Dec. 2001 v60 i5 p97 (31).

[10] Although the United States Supreme Court has deemed it unconstitutional for the government to place a tax or use restriction upon any parcel of land that renders the property valueless, it should be noted that individuals do not have the right to maximize their profits.

[11] Cord, Steven B., "Legal Suggestions for Enacting Land Value Taxation," Lincoln Institute of Land Policy Working Paper, 1999.

[12] Rybeck, Walter. "United States." Land-Value Taxation Around the World. Ed. Robert Andelson. 2nd ed. New York: Robert Schalkenbach Foundation, 1997. 124.

[13] Becker, Arthur, P. "Full Employment Without Inflation." Survey of Business. March/April 1977.

[14] In 1993. 50% of all revenues, 75.6% of local revenues, 23% of state revenues, and 0% of federal revenues came from the property tax in the U.S., Rybeck, Walter, 106

[15] Wuensch, Jeff, Frank Kelly, and Thomas Hamilton. "Land Value Taxation Views, Concepts and Methods: A Primer." Cambridge, MA: Lincoln Institute of Land Policy Working Paper. 2000.

[16] Netzer, Dick 113

[17] Wuensch, Jeff, Frank Kelly, and Thomas Hamilton.

[18] Ashley, Richard, Florenz Plassmann, and Nicolaus Tideman. "Improving the Accuracy of Downtown Land Assessment." Cambridge, MA: Lincoln Institute of Land Policy Working Paper. 1999.

[19] German, Jerome, Dennis Robinson, and Joan Youngman. "Traditional Methods and New Approaches to Land Valuation." Land Lines, July 2000, Lincoln Institute of Land Policy.

[20] German, Robinson, and Youngman

[21] Woolery, Arlo, "Tax Policy and its effect on land use." Land Taxation and Land Use. Pierre Laconte and Ann L. Strong, eds. Cambridge Ma: Lincoln Institute of Land Policy. 1982

[22] Reschovsky, Andrew. "Can the Land Value Tax Play an Important Role in the Financing of State and Local Governments in the United States?" in Land Value Taxation: can and will it work today?" Dick Netzer, ed. Cambridge, MA: Lincoln Institute of Land Policy. 1998.

[23] Becker, Arthur P.

[24] See Mills, D. E., "The non neutrality of land taxation." National Tax Journal, 34, 125-129 (1981). Or Bentick, B. L., "The Impact of Taxation and Valuation Practices on the Timing and Efficiency of Land Use," Journal of Political Economy 87, (1979), 859-874.

[25] Lim, Duck-Ho. "The Relative Efficiency of Taxation in a Two-Period Model of Urban Growth." Journal of Urban Economics, 45, 403-420 (1999).

[26] Lindholm, Richard W., and Arthur D. Lynn, Jr. eds. Land Value Taxation. Madison Wis: University of Wisconsin Press. 1982. xi

[27] Nechyba, Thomas J., "Replacing Capital Taxes with Land Taxes: Efficiency and Distributional Implications with an Application to the United States Economy." in Land Value Taxation: can and will wit work today?" Dick Netzer, ed. Cambridge, MA: Lincoln Institute of Land Policy. 1998. 195

[28] Kunce, Mitch. "A Nash tax game extending the generality of the Henry George Theorem." Economic Letters, 66 (2000) 229- 233.

[29] George, Chapter 3.

[30] Wuensch, Kelly, and Hamilton. P6.

[32] Smith, Jeffery. "Where the Property Tax Shift Has Worked: 25 Case Summaries." Philadelphia: PA, Center for the Study of Economics. 1990.

[33] Smith, Jeffery

[33] Plassmann, Florenz and Nicolaus Tideman. "A Markov Chain Monte Carlo Analysis of the Effect of Two-Rate Property Taxes on Construction." Journal of Urban Economics. Vol 47, No. 2, March 2000. [34] Harrisburg Bulletin

[35] In Pittsburgh this is commonly referred to as the gradated property tax, but for the sake of consistency we will call it a two-rate tax.

[36] Oates, Wallace E., and Robert M. Schwab. "The Of Urban Land Taxation: The Pittsburgh Experience." National Tax Journal. Vol L no 1 1997.

[37] From an interview with Joshua Vincent (see appendix A)

[38] From a series of electronic correspondents with Robert P Strauss (see appendix A)

[39] Incentive Taxation, May 2002. Published by the Center for the Study of Economics.

[40] Hughes, Mark Alan, "Philadelphia must seize the reins of its runaway decline," Philadelphia Inquirer, 5/7/98.

[41] Hughes, Mark Alan, "Philadelphia must seize reins of its runaway decline," Philadelphia Inquirer, 5/7/98.

[42] Federal Reserve Bank of Philadelphia, "A Philadelphia Report Card," 1/01.

[43] Federal Reserve Bank of Philadelphia, "A Philadelphia Report Card," 1/01.

[44] From the Tax Structure Analysis Report, page 60

[45] From the Tax Structure Analysis Report, page 61.

[46] Although there is no guarantee that apartment owners will pass these savings on to their renters, for the purpose of this analysis we will assume that the rental market is competitive (if one owner does not pass these tax savings on to the renter, the renter will move to a new apartment building where the savings are passed on).

[47] The Controller's Tax Structure Analysis Report recommends reducing the Net Income portion of the Business Privilege Tax from 6.5 percent to 4.0 percent, reducing the Gross Receipts portion of the Business Privilege Tax from .24 percent to .20 percent, and eliminating the city Net Profits Tax. The Controller's office did a series of studies on the impact of different types of taxes and found that a reduction in these taxes would most stimulate the city's economy.

[48] Quote taken from an August 1, 2002 letter from the Office of the Controller to the Author. This letter was sent to everyone who attended the meeting earlier that day at the Controller's office.

[49] Quote taken from a transcript of Kathy Harris' February 12, 2002 testimony in support of the Tax Structure Analysis Report

[50] From A report sent to the Mayor, City Council Members, and the Controller's office from the Midlantic Business Alliance

[51] "Land-value tax is program with local consideration," The Mercury, 6/11/02; Hughes, Mark Alan, "The Good News About Saidel's Tax Plan," The Philadelphia Daily News, 11/26/01; Inman, Robert, "As Phila. Faces fiscal pinch, land tax may be in the mix," The Philadelphia Inquirer, 11/9/01; Gorenstein, Nathan, "Saidel finds allies for a drastic city tax overhaul," The Philadelphia Inquirer, 10/22/01; Saidel, Jonathan, "Save our neighborhoods - cut our taxes," Philadelphia Sunday Sun, 5/12/02.

[52] Hughes, Mark Alan, "The Good News About Saidel's Tax Plan," The Philadelphia Daily News, 11/26/01.

[53] Weyrich, Noel, "Might Makes Blight," Philadelphia Magazine, 2/02

[54] Lotozo, Eils, "The Land Value Tax could be a win-win for the city, but getting it passed won't be easy," Philadelphia Weekly, 1/4/98.

[55] "The Land Value Tax could be A win-win for the City, but getting it passed won't be easy," Philadelphia Weekly, April 1, 1998, Eils Lotozo

[56] "Might Makes Blight," Philadelphia Magazine February 2002, Noel Weyrich.,

[57] Joshua Vincent discussed the existence this type of political opposition at length during our interview. The analysis of Sunoco's tax burden presented in this paper draws heavily from research previously conducted by Vincent.

[58] It should be noted that these properties are actually listed as being the property of the Atlantic Refining and Marketing Corp which is a subsidiary of the Atlantic Petroleum Corporation, which was acquired by Sunoco Inc. in 1988. For ease and consistency we will refer to these properties by their common name of the "Sunoco Refineries."

[59] The change in the Sunoco's profits is calculated as follows: 1-(260,000,000-386,073/260,000,000)= 0.001484 or 0.1484%

[60] Inman, see appendix A

[61] From the second Bulletin sent to City Council Members form Joshua Vincent

[62] Mills, Edwin S., "Is Land Taxation Practical?" Illinois Real Estate Letter, Fall 1998, Office of Real Estate Research.

[63] Mills, Edwin S., "The Economic Consequences of a Land Tax." In Land Value Taxation: can and will it work today?" Dick Netzer, ed. Cambridge, MA: Lincoln Institute of Land Policy. 1998.

[64] http://cml.upenn.edu/projects/nis.asp

[65] 1921 is actually sitting as a vacant lot right now, it's not even used as a parking lot. 1900 Market St is more commonly known as the Philadelphia Stock Exchange Building. 1901 Market St. is also known as the Philadelphia Blue Cross Building.

[66] An interesting side note, which is slightly beyond the scope of this paper, is that the Controller's Tax Structure Analysis Report ultimately calls for a reduction of the city Wage Tax. The Controller's Office proposes making up the loss in revenue associated with such a tax decrease by increasing the Real Estate Tax (after it has been transformed in to a land value tax). Thus, the Controller's full plan would have an even greater ability to stimulate demand for office space in the city and would make it even more affordable for businesses to locate in Philadelphia. This would have a tremendous impact on the city's financial viability.

[67] The equation used to determine this crucial ratio is as follows; R= (LV*RET-LV*LVTL)/(LA*LVTB-LA*RET). R= ratio of building to land; LV= land value; LA= land area; RET= real estate tax; LVTL=land value tax for land; LVTB=land value tax for buildings. [68] Remember that land value takes into consideration things such as zoning codes. Thus, as residential property is worth less that commercial property, the capital to land ratio for a neighborhood would be much lower than the capital to land ratio. This means that in a neighborhood a typical two-story house might more than exceed the threshold ratio while in center city the minimum ratio would be much higher.

[69] Tax on Land/ Total Value of the Property = The Land Tax Burden.

[70] This information came from the August 1st meeting at the City Controller's Office. See Appendix A for more information.

[71] http://www.hallwatch.org/profiles/brt

[72] http://www.hallwatch.org/profiles/brt/proptax2/fairness

[73] Gillen, Kevin Gillen, "Measuring the Efficiency and Equity of Property Tax Assessment Practices," Unpublished Paper, The Wharton School, U. of Pennsylvania, Philadelphia, April 10, 2002.

[74] Welch, Ronald B., "Land Value Taxation: Administrative Feasibility- Retrospect and Prospect." Land Value Taxation. Eds Richard W. Lindholm, and Arthur D. Lynn, Jr. Madison Wis: University of Wisconsin Press. 1982.

[75] Mills, Edwin S., "Is Land Taxation Practical?" Illinois Real Estate Letter, Fall 1998, Office of Real Estate Research.

[76] Gloudemans, Robert J. "An Empirical Analysis of the Incidence of Location on Land and Building Values." Cambridge, MA: Lincoln Institute of Land Policy Working Paper. 2002

[77] German, Robinson, and Youngman

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