by Josh Vincent
During the past two years, Georgists have wondered if Harrisburg can serve as a good example of land value taxation. No one, however, was wondering that before the “Incinerator issue” came to the fore. The Georgist Journal reported in 2003 about the remarkable progress that Harrisburg had made after shifting to a two-rate system. Between 1982 and 2003, the total value of taxable real estate in Harrisburg increased by 754%, far more than comparable cities. Homes and businesses sprang up; fires and crimes dropped.
Then, Harrisburg faced a financial meltdown primarily due to the collapse of a bond issue on a municipal incinerator that had to be retrofitted by order of the EPA and refinanced under onerous terms. Time will tell if all financial responsibility for this bond market created monstrosity will be shared equally by the governmental signatories and the assurance firms that guaranteed payment of the bond. The amount in question is huge: nearly $300 million.
The Act 47 (state control of fiscally-stressed cities) made a number of recommendations for dealing with this issue — one of which was to rescind the split-rate land value tax. In our testimony before the panel, the CSE respectfully disagreed with these conclusions. We demonstrated that the tax on labor and capital would double if LVT was rescinded. We showed how reviving neighborhoods, compact, tall commercial buildings, and lower-income neighborhoods would all be adversely affected by rescision.
CSE also made clear that the best way for Harrisburg to grow out of its fiscal problems was for it to develop its economic base, particularly its commercial tax base. The original Act 47 report suggested that low-density and open air commercial development would be retarded by a land value tax. CSE agreed but asserted that the best place for low-density automobile intensive nonresidential development was not inside a city trying to make its way in the postindustrial era, but in the suburbs. This feeling is shared by homeowners, as well as the mayor, the city controller, and many Council people. All reiterated that they were aware that the land value tax was a tax benefit for the hard-pressed residential sector of the city, and an incentive tool to gain new use or at least more revenue from high value vacant or underused commercial land.
Now, the Mayor’s office wishes to pursue the expansion of land value tax as a tool to both ameliorate the pain of the Act 47 implementation and as a way to raise revenue to get out from under this situation in a timely manner. Although the competition between branches of government in Harrisburg is very pronounced, all agree that the land value tax may be a tool for the future of Harrisburg. I should note that CSE supported one very important aspect of the Act 47 plan — to require frequent reassessments by the County. Although the new governor of Pennsylvania, Tom Corbett, has signaled assessment reform is a not a policy he would advocate, he and General Assembly leaders signed legislation forcing the city of Harrisburg to adopt an Act 47 recovery plan. Therefore, CSE will pursue the issue of reassessment down the road. Act 47 is a process that is re-examined continually.
The CGO will be meeting at a time when crucial discussions about the future of Harrisburg will take place. We are going to speak to most of the major players at the municipal level, and at least some County and state officials. I believe these interactions will help more Georgists realize that that the communication of our idea can be complex and sometimes frustrating. In the end, you should know that land value tax is a policy that is in play and has helped the city of Harrisburg get through this crisis.