Taxes Made Easier
by Sam Venturella, Chicago,IL
Chicago Tribune, June 18, 1999
The editorial "A better reassessment
notice" (June 1) shows genuine progress in
trying to inform taxpayers about real estate
taxes. Critics who call those taxes confusing
should follow Cook County Assessor James
Houlihan's example. People can understand
taxes on real estate when someone makes the
effort to explain them.
Taxes on real estate are actually two
different taxes: one on the land value; the
other on the improvement value. The land-value
tax tends to discourage the holding of land for
speculation. The tax on improvements, though,
makes home ownership more expensive. Shifting
to a tax on land value only could make housing
more affordable and without subsidies.
Tax Land Values, Not Buildings
by Dr. Tom Gihring, Seattle, WA
The Seattle Times, June 30, 1999
In a June 9 guest commentary, banker John Fairchild
gave us his advice on how to purchase a house in Seattle's
skyrocketing housing market ("How to purchase a house in
Seattle's grim market").
His "clear solutions to the affordable-housing
dilemma" offered education as the key to addressing the
whole issue: "Do your homework, be smart, be realistic, be
creative." Shrewd advice! But what does this have to do
with solutions to the affordability problem?
The essence of the problem is that since the late
1970s, median housing prices have risen far faster than
median household incomes. The principal cause is soaring
land prices, which are driven up by speculation. A better
example of creative public policy would be to tax land
values more than building values.
Through simulation models, some economists have
concluded that land and housing prices will fall in
response to a land-value tax. My own conservative
estimates show that by placing a heavy property tax on land
and taking the tax off structures, Seattle-area home prices
would come into line with incomes after about 12 years --
the time it takes for existing homes to turn over in the
sales market.
Wouldn't everybody benefit, including the banking
industry, by forestalling a burst in the inflationary
bubble because of an over-heated real-estate market?