Philadelphia City Council is considering a new approach to property taxation that creates an environment of shared and increased prosperity. See below for excerpts from a pair of articles explaining more (click the headlines below to view the full articles)…

How a land value tax could make Philadelphia a more equitable city

By Josie Faass
October 3, 2020

Excerpt:

“So why would Philadelphia touch its real estate tax now?

Because through a simple mathematical rejiggering of the tax code, Philadelphia could alleviate tax burdens on its most at-risk populations without reducing the overall revenue stream one dime — effectively creating a free stimulus for homeowners and businesses struggling to make ends meet. Philadelphia can create an environment of shared and increased prosperity.

This “rejiggering” involves flipping the proportion of an owner’s tax bill that comes from the value of their buildings, currently 76% — versus the land itself — right now, just 24% of the bill, to one that favors taxing land value.

What difference would this make? Well, as it turns out, a world of difference.

If Philadelphia shifted to just a 50-50 ratio of tax on buildings to tax on land, homeowners would see a savings of over $60M each year, and with land value tax or LVT, that total jumps to about $123M — that’s over 10% less than residential property owners pay now, and in a city where the median household income is less than $48,000 a year, this will have real impact.

Businesses would save, too — just shy of 20% under a full LVT scheme. Of course, to maintain overall revenues, someone has to make up those savings, and here that “someone” is exactly who you’d hope: Land speculators and those who’ve traditionally benefited from tax abatements at others’ expense.”

A ‘progressive’ approach to taxing land gains traction in Philly Council

By Taylor Allen
May 4, 2021

Excerpt:

“After years of drama over unfair property taxes, Council considers a land tax that advocates believe could lower assessments for some property owners.

City Council is considering a new approach to taxing real estate that advocates believe could lower assessments for less affluent property owners without reducing the city’s overall haul.
“We need to look at how we can grow out of poverty, especially for businesses of color, ” Councilmember Derek Green said at a hearing he spearheaded on the feasibility of a so-called land value tax.

Green believes now is the time to rethink Philadelphia’s approach to property taxes, after a pandemic year that cost the city hundreds of millions in lost wage and business tax revenue and raised significant questions about the wisdom of relying on those streams in a world where remote work is increasingly an option. Without $1.4 billion in federal aid delivered by President Biden’s America Rescue Plan, the city would have faced significant budget shortfalls.

Philadelphia “needs to be looking at how we do taxation in our city, especially considering the significant impact that the pandemic had on the economic fortunes on the city,” Green said.
Unlike a traditional property tax, land value tax is assessed based on the value of a piece of land, rather than the value of the “improvement” or building. Instead of seeing taxes rise and fall based on the condition of a building, a property owner pays based on the value of the location, taking into account public infrastructure and other nearby assets. Advocates describe the approach as “progressive” and believe it discourages speculation and blight while lowering the tax burden for property owners in areas with less public investment and lower market values.

That issue of equity has haunted the city’s ongoing effort to overhaul the city’s property tax system. A 2019 report from the city’s Controller Office found the city’s Office of Property Assessment does a “worse job” assessing properties in areas with lower home values. “Less expensive homes in these areas tend to be over-assessed relative to more expensive homes,” stated the report from City Controller Rebecca Rhynhart. Higher tax assessment translates to greater tax burdens, which means lower-income residents are “likely paying more than their fair share of property taxes.”

City assessors have particularly struggled to get the numbers right in West Philadelphia, Southwest Philadelphia, and North Philadelphia, according to the Controller’s report. These sections have more regressive and less uniform assessments while also having the lowest median income in the city, ranging from $18,000 in North Philadelphia to $26,000 in West Philadelphia, Rhynhart’s office found.”