Joshua Vincent of the Center for the Study of Economics talks about how a land value tax could give Baltimore residents relief from the wealth extraction that absentee landlords perpetrate.
Story Transcript
JACQUELINE LUQMAN: This is Jacqueline Luqman with The Real News Network.
Henry George, the American economist and journalist, famously said: “There is a fundamental and irreconcilable difference between property in things which are the product of labor and property in land.” He argued that: “the one has a natural basis and sanction, while the other has none. While people who labor for a living don’t seem to accumulate much wealth as a product of their labor, a select few have been able to accumulate massive wealth from the ownership of something natural that does not actually work at all and that’s land.” Henry George’s ideas about ending private land ownership to disrupt the hold on private wealth of landowners is gaining–or regaining–in popularity of late and in a lot of cities across the country. That’s important because a lot of these cities are in desperate need of new ideas for how to address historic inequality. One of those cities is Baltimore.
Here to talk to me about how land value tax might help Baltimore is Joshua Vincent. Josh is the executive director of the Center for the Study of Economics at CSC. Josh has worked as an advisor on land value taxes and other fiscal reforms for over 75 municipalities, states, nongovernmental organizations, and national governments. Josh, thanks so much for joining me.
JOSHUA VINCENT: Thank you for having me. It’s an honor.
JACQUELINE LUQMAN: So let me try to wrap our viewers’ heads around the basics of land value tax. This is the second part of a conversation that we began a few segments ago and I want to narrow it down to what it might mean to Baltimore. But first, can you explain why is the taxation of immovable property land a problem that needs to be addressed?
JOSHUA VINCENT: It’s a great question. And the problem really started for our cities after World War II. Immovable property is the land and we barely tax it. And every other thing that we do tax, wages, jobs, property, that can leave a city, it can go beyond the city limits. I work in Philadelphia for example, and over the past 50 years we have lost about a quarter of our population because the tax on wages locally and the sales tax on food and other things was so high, all people had to do was step over city line. And that’s the same case in Baltimore. And so there is one thing as you just mentioned, land and land doesn’t go anywhere. If you’re some sneaky international banker, you can’t pile a bunch of land into the back of a truck at night and drive it to the Cayman Islands. It’s the one thing that we can tax and get revenue from that will never leave.
JACQUELINE LUQMAN: Now that’s very interesting, the idea that most taxes are mobile where property or land tax, and I just said the word property and you mentioned property before and I think we need to differentiate between what we understand as property tax today and the kind of taxation that land value tax proposes. What’s the difference? What is the difference between property tax as we understand it and land value tax?
JOSHUA VINCENT: The property tax is a smooshing together–my technical phrase–of two wildly different things. Land, land value, and the building. And that’s property. In other words, you’re the proprietor of your house. And property I think is best understood as what you have on top of the land. The land was always there, and it will be there long after the property is gone. So I’ll say land and property to differentiate. And that’s what I usually do in community meetings, things like that.
JACQUELINE LUQMAN: Okay. So we’ve got the mobile taxes that move with the people and where people can go to a different area where the taxes that they have to pay are lower. And then there is this immobile object that can be taxed that doesn’t get moved anywhere and that’s land, that we don’t take a lot of advantage of. So, there’s already a lot of investment. There’s a lot of talk of community investment programs. The current presidential administration has these opportunity zones, which is another community investment program in so-called distress communities around the country. If we are not using the taxes on land to benefit the municipality, how does LVT strengthen the market or the development of those distressed areas as opposed to these investment programs?
JOSHUA VINCENT: That’s a great question. And in fact, these investment programs as we’ve come to understand them, again, since the end of World War II, is to put out rewards, subsidies, and abatements on particular places or for particular people, and they do get a tax benefit. They don’t have to pay property taxes on whatever building they put up, but those are always limited. They are limited to usually 10 years, maybe 20 at most. And what we think ought to be done is to spread that idea universally to every person that lives in a city, everybody with four walls and a roof essentially. And the problem is that, an opportunity zone is going to benefit those that own the land in the opportunity zone.
I don’t know if you remember, but I lived in Baltimore some years ago and on Washington Avenue, the old Montgomery Ward office complex was rehabbed as part of an enterprise. And it sat for years unbuilt. It is now, of course, and that’s a good thing. But the owner of the land at that time said, “Wow, I’m in an opportunity zone. I’m going to give myself an opportunity and I’m going to ask for a higher price for that land.” So we just want to undo the special relationship between people that enjoy the benefits of an opportunity zone and those who do not directly benefit, the citizens.
JACQUELINE LUQMAN: So, now you just mentioned an investor owning land and not developing it, just letting it sit and then when the opportunity arose, the owner of that land said, “I’m going to charge a higher rate for the development of that land.” How does land value tax address that particular issue? What is the relationship between taxing the value of the land in particular and how it spurs development or whether it spurs development?
JOSHUA VINCENT: Two things spur development with a land value tax. But first of all, we have to get the land into use. And one good way to do that is to make it too expensive to sit on. And there’s some owners of land in Baltimore, they can sit on a valuable vacant lot until kingdom come and there’s no penalty for that. Even though the land value is not of their own creation–it’s created by the community–they get to bank that land for as long as they want. We subsidize private land banking under the current system. On the other side of the coin, the property tax is a depressant to investment, which is why we do give away subsidies and abatements. It’s much cheaper to build in Anne Arundel County or Baltimore County or Harford County than in the City of Baltimore. And the property tax as applied today is, over the course of say 10 years, it’s equivalent to a sin tax–like a tax on cigarettes or a tax on booze. And so essentially, what you’re saying is new building is a bad thing because the tax man comes for it.
JACQUELINE LUQMAN: I hope we adequately explained how land value tax would take the profiteering off of just a private owner just holding on to land until they can make the most money off of leasing it for development because it would just cost too much money for a private land owner to just have an empty lot. They would be encouraged to develop on it under a land value tax proposal. Is that pretty accurate?
JOSHUA VINCENT: You called it. And also more likely because speculators don’t like to work too hard, they would end up selling to somebody who does want to come into the community and build. And that’s the option they have.
JACQUELINE LUQMAN: So, let’s talk about how that affects residents, people who live in the community. How does this land value tax proposal, how does this benefit them? Because obviously it takes away part of the property tax, multilayered package of property tax that we understand it, the idea that the homeowner or the resident will pay taxes on the land. But how does a LVT benefit residents?
JOSHUA VINCENT: LVT has had, we’ve had track records of course in Pennsylvania and really lots of other places around the world. And the reality is that homeowners or renters even, that the majority of the property tax is the building. So if we take the building out of the equation, you end up having sometimes very significant tax relief. In the city of Allentown, Pennsylvania. This was brought in by a popular vote when Allentown was about to go bankrupt, 1996. And in each neighborhood we looked at except for two, over 90% of the homeowners saved on their taxes after this was adopted. And that experiment has been repeated all over my state of Pennsylvania.
JACQUELINE LUQMAN: Wow. So you said that there are examples and models of this all over the world. It’s interesting that you brought that up because in the UK, our political counterpart I guess so to speak, Jeremy Corbyn seems to be a Georgist. He proposes land value tax, but the pushback he gets from the conservatives in the UK is that land value tax will actually cause the tax on homes to skyrocket, is there merit to their argument?
JOSHUA VINCENT: The tax on homes will go up for a tiny percentage of Brits. It’s an interesting place, the Labor Party lasted, championed a national land value tax in the 1930s and the Lib Dems going back to 1910. So they’ve been pushing for it for years because the United Kingdom is in many ways still very feudal. And the Daily Mail, which is a right-wing tabloid in Britain, actually had to apologize for calling the land value tax, a garden tax. “We’re going to take away your garden.” And the truth of the matter is that if you’re a steel worker and you’ve been out of work for 30 years, your land where you live in North of England is not worth much. So if there’s a national land value tax, the tax revenue comes smack from where we want it to, which is the most valuable real estate on earth, the city of London, downtown London. They have the value. That’s the important part.
JACQUELINE LUQMAN: That’s the important part. All right, so let’s bring this into a very local focus and let’s talk about Baltimore. Tell us about why land value tax is such an important issue in Baltimore in particular, considering the history of this city with housing issues.
JOSHUA VINCENT: Baltimore, of course, was independent almost. It was the engine that drove the entire state for a long, long time. And as I referred earlier to the end of the Second World War, the federal government subsidized highways, they subsidized cheap lending, VA loans, but only in the suburbs. They wouldn’t lend in the cities. And so that, of course had families leaving. And if you go out to a Baltimore County today, you’ll see acres and acres of homes that were put up right after World War II, it emptied out a lot of the city. And then you have decline in manufacturing of course. So today, what do we have? We have a city that used to be a city of homeowners, now a city of renters because there’s not enough wages, there’s not enough jobs, period. And the land is owned to a great extent by absentees. And they’re using this as a casino, the city of Baltimore, people’s homes, people’s lives. It’s just a casino to them.
JACQUELINE LUQMAN: So you have actually describe Baltimore as an example of a modern colony or a modern colonialism. Can you explain that in terms of the history of just what you said that the flight of working class and mostly white people from Baltimore and how that ties into property or land ownership? Who benefits from it? Who doesn’t? And how land value tax really addresses those issues.
JOSHUA VINCENT: Right. The homeowner in Baltimore right now, if they’re living near Mondawmin Mall for example, they are struggling with fairly high property taxes, also taxes on their wages. And then across the street there is an absentee landlord who probably owns 200 other real homes in the rest of the city. And this is their business model and it’s pernicious and I would say almost evil. It is evil. People buy a property and rent it out and they rent it out at pretty high rates, and they take the rent out, but they never put anything back into the house. And so that’s Baltimore’s problem, you have had for decades now, landlords who are absentees have no stake in the neighborhood or the city taking rent out, not putting anything back in. And if you don’t put anything back in, investment in the building, the building falls over, it burns down, it’s abandoned.
And that’s the consequence of not having a community based property tax because you can skip out so easily on your obligations with the current property tax. And if I were a Baltimorean and I had a raw home that I was keeping up and I was trying to make my streets safe for kids and go to PTA meetings, make sure the schools are nice, why am I getting punished for higher taxes? And the ones that actually don’t do anything for the community, they get a free ride, essentially.
JACQUELINE LUQMAN: That does sound like colonialism.
JOSHUA VINCENT: Yeah. Well extracting rent or extracting resources, what the King of Belgium did to the Congo in the 1800s, is almost what landowners are doing to the citizens of Baltimore. I don’t mean to exaggerate, but I’m barely if I am at all.
JACQUELINE LUQMAN: So let me ask you this, and this is about land ownership and the wealth that it does create because we’re talking about inequality in housing in particular, and we know that, especially in Baltimore that has a particularly unique and pernicious history that has disenfranchised black people. What do you say to people who will push back and say that owning land is key to black economic growth, especially given the history of denying or stealing, denying the ability to buy land or stealing land from black people in the US? What do you say to people who will counter and say that eliminating the possibility of owning land is really harmful to the very people who are the victims of the inequality in this capitalist property ownership scheme?
JOSHUA VINCENT: Well, under the Henry George idea and a lot of other places, the idea is to still let you have title in the land. In other words, people can’t run in and take it, such as what happened to farmers in the reconstruction South or post-reconstruction South. And if you have free legal title to the land, that is a basis for building wealth. Making money in land per se is what we’re against, that speculation. But people that are working class and struggling to get along in a hard environment, they need to have land cheap, which is what a land value tax does, because the tax on land is high enough that it will reduce land prices, therefore making it easier for people to actually get a house or build a house themselves.
And Baltimore back in the day–or Philly or wherever, Providence–houses were built with sweat equity; people rolled up their sleeves. And one thing we know Baltimore has are plenty of people willing to roll up their sleeves and do for themselves and their neighborhood and their families. But because of the banking situation today and the financialization of real estate and the runaway prices for land, it’s very hard. And so if we strip away some of the negative externalities, the economists call it, of taxing houses, wages in business, by getting rid of those taxes, you’re essentially making it easier to purchase land to get free and clear title.
JACQUELINE LUQMAN: So it sounds to me like land value tax is a way to get rid of the massive financial institutional middleman, so to speak. And I think in the simplest terms for our viewers to grasp this concept, because I don’t think it’s something that a lot of people are familiar with, but I really appreciate you taking the time, Josh Vincent to come and talk about this with us today. This is a huge subject and it just sounds like it might not solve every problem, but it sounds like it could be really promising for changing the outlook and the outcome for residents of Baltimore and so many cities like it around the country. So thank you so much.
JOSHUA VINCENT: It’s my pleasure, hope to come back.
JACQUELINE LUQMAN: Absolutely. And thank you for watching. This is Jacqueline Luqman with The Real News Network in Baltimore.
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