THERE'S a tax reform movement afoot -- spearheaded by a group of zealous disciples of nineteenth-century economist and land reformer Henry George -- that's crying to be understood by the general public. This understanding, say these Georgist proponents, could impel the public to pressure City Council to change property tax rates that would, in effect, benefit all but a small minority of selfish landowners.

The tax reform method -- known as land value, site value or incentive taxation -- is based on what Philadelphia-born Henry George called "the single tax," a proposal "to abolish all taxes, save one single tax levied on the value of land, irrespective of the value of the improvements in or on it."

To date, modified versions have worked successfully in five Pennsylvania cities -- Pittsburgh, Scranton, Harrisburg, McKeesport and New Castle -- inspiring a film, Tax Reform Pennsylvania Style -- a Tale of Five Cities, that debuted in Washington, D.C. in September to an audience consisting largely of congressmen and municipal government officials.

Among the film's cast members were a number of pro-land-taxers from Philadelphia, including former City Councilman James Tayoun, who stated in a recent interview that when he had introduced a land value tax bill to Council in 1982 and in 1983, "pressure was put on me by substantial people to get off the kick -- and it's the price you pay. But I'd introduce it again this year if I were still on City Council," he added, noting the tax "would permit the entire city to become a moving entity. Every piece of land would become valuable. There are no negatives about it, other than Council's being limited by a specific time period to work on the budget. When I'd introduced it, the reaction by my colleagues was more in tune with what was happening with the (then) current budget than with things that were esoteric to them. But if they were given time to digest the information about it and if' the public had the time to digest it through the media, then it might have passed."

Land value-tax advocates contend that taxing land more heavily than buildings (rather than at the current one-to-one ratio), will net numerous advantages such as: reducing the cost of construction and rehabilitation, thus spurring redevelopment of cities and invigoration of their central business districts; promoting job-creating investments in new factories and offices; encouraging maintenance and improvement of buildings; discouraging land speculation and underuse of land; stopping urban sprawl into unspoiled countrysides; and saving money for private homeowners and owners of intensively used commercial or industrial land.

Speculators would object

Those who'd object to such a reform, claim the Georgists, would be land investors who speculate in land with no interest in developing it; developers who do extensive land banking, or buying and then saving of land for possible future use; and minimal land users, such as owners of large surface parking lots, dilapidated buildings or large tracts of underused land.

If such a tax system were adopted it could conceivably stimulate the economy by drawing rather than driving away business arid fey increasing individual incentive and production through possibly lower wage taxes. After all, the Georgists argue, it makes economic sense not to tax individuals for working or property owners for making improvements, and it not only makes economic but moral sense as well to tax landowners for the rising values of their property due to the economic activity surrounding the property instead of through their efforts. Hence, initiative should be rewarded by lower taxes and windfalls penalized by higher.

Land value taxation is a good example of supply-side economics, says Edward J. Dodson, a senior mortgage officer with Provident National Bank and avowed Georgist, who teaches at the Henry George School of Social Science in Philadelphia, is a member of the Delaware Valley Chapter of the Incentive Tax League, and is affiliated with the Indiana, Pa.-based Center for the Study of Economics, which is headed by Indiana University of Pennsylvania Professor Steven Cord, the guru of land value taxation in the state.

Supply-side economies

"As the supply-side economics," Dodson explains, "adopting a land value taxation system would be recognition by government that people need incentives to produce -- there would be increased economic activity -- creating more jobs and more products and a ripple effect that would benefit nearly everyone.

"We'd recommend a gradual easing into the system, increasing the land to building tax ratio little by little over a five to 10 year period. "Currently, land and buildings in Philadelphia are taxed at the same rate. For example, if you had an office building in center city with a market value of $11 million, of which $10 million was for the building and $1 million for the land, and the assessed value was say, 50 percent of market value, with equal tax rates of $7.75 per $100 of assessed value applied to both the land and building, then that owner would be paying about $426,000 a year in taxes.

"And if the property next door to that building were occupied by a parking lot with the same square footage but without any building on it, then that owner would be paying about $38,750 a year on the land alone. However, the owner of the office building would be penalized for any improvements since his taxes would increase in proportion to how much he spends to improve or maintain the building, while the parking lot owner would be paying a relatively smaller share of taxes and not contributing anything to the overall economy since his lot would be underused in terms of what the best use of that site could be.

"But if the city were to shift the taxation so that a higher percentage would be paid for the land versus the building," Dodson continues, "then the office building owner would he encouraged to improve his property and the taxes on the parking lot owner's property would become too high for him to afford to keep it as a parking lot -- thus making it more desirable to develop it more fully."

Educating legislators

This view is personally shared by David Zwanetz, a lawyer who sits on both the Philadelphia Board of Revision of Taxes and Board of Review. Zwanetz maintains that switching to land value taxation would be a relatively easy and painless procedure, but that educating the public and legislators is what's essential to getting it implemented.

"If the people knew about it and were convinced that it worked, they'd have the legislators pass it," he says. "There's no reason the legislators would oppose; it -- they want to do what's good for the city. And the best part of the land value taxation system is it can't go wrong. You've got a fix right there since you can change the rate back to an equal rate any time you want. So, it's a painless type of reform … one that's ready to roll in very short order. All we'd have to do is have a study made on a large scale to determine what it would take in the first year under land value taxation to raise the same revenue as by the conventional method of taxation. The study could be done in less than six months for less than $100,000."

"We'd calculate the ratio of how much we'd have to tax land with a smaller amount on buildings until we reached a formula. Then, each succeeding year, we could continue to increase land taxes and decrease improvement until reaching an optimum system. If we did it gradually, we'd lose the fear of change-no one need be frightened by the consequences since we can correct as we go along," he stresses.

"This land value tax system is an old idea (first proposed in 1879 in George's best-selling masterwork, Progress and Poverty), not something new, and it doesn't seek to penalize anybody -- any class or group. It simply seeks to bring fairness and equity and morality into our tax system rather than penalize owners on investment in improvements made to their property.

"Once the Council passed them, we'd have I he same tax rates apply throughout the city; however, land values would differ depending on location, so properties in center city would be taxed higher than in certain other areas. And we're now in the first year of a four-year program lo achieve uniform assessments of about 35 percent of market value throughout Philadelphia," Zwanetz points out.

According to Dodson, passing such legislation became permissable under the stale constitution when Philadelphia was given the right to establish separate rates of taxation for land and improvements. Setting the new tax rates would be up to City Council, he states, and would require a two-step process.

"The Council would first have to adopt local legislation to require the two rates and then would have to determine the city's budget needs and come up with the rates of taxation to raise the needed revenue," Dodson explains.

Will Council act?

But getting Council to act on the legislation is not that easy a task. Witness James Tayoun's twice-unsuccessful efforts, and current Councilman l.ucien Blackwell's recent remarks when asked about the feasibility of implementing such a system.

"People tell us that it's working in Pittsburgh," answered Blackwell, "but in Council we need the cooperation of Council. I don't know how it would affect Philadelphia. There are a lot of unseen intangibles -- a lot of groundwork that has to be done. I think it's a long way off. According to my information, it's better than what we have, but Council needs to be informed and then we need cooperation from influential people, the Inquirer and Daily News, the Chamber of Commerce and the Mayor's Office as well as the Council."

This need for public awareness about land value taxation seems to be the dominant comment from all those questioned. People react negatively to the term "land reform," assuming it will mean higher taxes, Dodson explains, and they have to see how this reform could be beneficial.

"Historically, George's ideas never caught on because his credibility was questioned," he elaborates. "His writings were critical of the economic theory of his day; he castigated the academics of his time and he wasn't considered scientific enough but rather radical and populist.

"In this century'" Dodson went on, "there's been too much pressure for government. There's been a belief that government has to play a leading role in the economy, and this hasn't let the free market system work. But today, following the stagnation -- growing inflation and unemployment -- of the '70s, the academic community and political leadership have become more receptive to market-oriented solutions to economic problems. And with less federal support, cities have had lo support themselves more and to find ways of raising revenue without discouraging business and development.

"I believe we're closer than ever to implementing land value tax reform in Philadelphia," he asserts. "And I think there's a good possibility that it'll pass within the next five years. In fact, if the Goode administration were to adopt the tax in the city today, then by the end of this administration, Philadelphia would surpass any comparable city in the United States in new construction activity."

Dodson's optimism notwithstanding, there are those in both the local business and grassroots sectors who have expressed reservations about the overall effects of such a tax policy. Although the system has worked in the previously mentioned live Pennsylvania cities (Pittsburgh is usually cited as the most dramatic example, with implementation of the tax in 1979 given partial credit for the Steel City's "second renaissance" that saw numerous new office skyscrapers pop up within a relatively short period), as well as in Australia, New Zealand and South Africa (and it's about to become law this January in Washington, Pa.), not everyone familiar with the concept of land value taxation thinks it will work in Philadelphia.

Will business community act?

Ralph Widener, executive director of the Greater Philadelphia First Corp., which represents Philadelphia's largest companies and is devoted to the region's overall economic development, admits the business community "hasn't systematically given the concept any time and hasn't expressed a view, since it's been more occupied with wage and business taxes.

"There really hasn't been much of an opportunity to discuss it, with regional tax reform taking up all of the business community's energy at this moment. "I've spoken with advocates of site value taxation and on its face it makes a certain amount of sense, and has had some impact in Pennsylvania, but some scholars around Ihe country have found marginal changes at best. And if you look at it carefully, there's the equity issue lo consider.

"A poor person living on the land might be displaced by the tax consequences," Widener cautions. "And you have lo worry about issues like that. Proponents use western Pennsylvania as evidence of the system's working, but I don't know if that's necessarily relevant to Philadelphia -- and it would be an administrative nightmare to differentiate Pluladelphia's different neighborhoods if the system were to be implemented.

"Right now, land value taxation is an invisible or non-issue here. This is a secondary issue compared with the need for a fair and uniform tax system. I am personally fascinated by Henry George and his life, but I don't see his views as simplistically as the Georgists present them. One must take a hard look at the issue before making any decisions, and because of the diversity of the business community's land use, business leaders wouldn't speak with one voice on the issue."

Will it harm homeowners?

As for the grassroots community, Jim Wilcos, executive director of the Philadelphia Rehabilitation Plan an organization that helps qualified low income families renovate residential property concurs with Widener that land value taxation might be harmful to those homeowners who can't afford the higher taxes on their land.

"I'm a little concerned about the negative effects on residential neighborhoods," he says. "Philadelphia's center city area is more diversified than those in more monolithic cities where the tax has been implemented. We've got beautiful residential neighborhoods right next to the commercial center, and I'd hate to lose that residential nature to see center city go sterile -- to have the residents or the aesthetics of the city hurt.

"It might be different in some of the more transitional, neighborhoods," he adds, "but in any event, I don't see a political movement yet. I know there are several people working on the issue quietly, but the issue hasn't really made itself aware to the public."

Which is what those until now, "quiet" Georgists are currently up to. With their newly released film ready be shown as evidence of the land value tax's successes, and an increase in their efforts to interest the news media in interesting the public in interesting City Council to implement a higher tax on land than improvements system, these devoted followers of Hemy George hope to lop the "non" right off of this so-called non-issue and raise consciousnesses and land tuxes through the land.