When voters go to the polls in November, they may have macaca on their minds, but they will have an opportunity to vote on three amendments to the Virginia constitution. One of the more obscure measures would expand the rights of localities to offer tax breaks to encourage redevelopment of blighted areas. It’s obscure but potentially significant.
According to Pamela Stallsmith with the Times-Dispatch:
“Localities need additional tools to clear out blight and provide better land use for some of the urban areas,” said state Sen. John S. Edwards, D-Roanoke, who sponsored the amendment. Many urban areas have empty lots where buildings have been torn down and not replaced. “The thought was if you can give a real estate tax break for the [new] structure versus the land itself, then you could encourage developers to invest in urban areas where there are vacant lots,” Edwards said.
The logic behind this idea resembles the argument of Henry George. The 19th-century writer/economist is best remembered for his proposal to tax land, not the improvements upon it. But George wouldn’t have restricted his schema just to blighted areas.
Under a Henry George system of taxation, landowners would not be penalized with taxes for adding value to their land, as they are now. The overall tax burden would be the same — but it would be shifted to the land, not the buildings. That would increase the burden on landowners who let their ladn sit vacant or blighted, perhaps speculating that the value would increase. Because their carrying costs on that land would be considerably higher, they would be incentivized to quickly convert the land to its highest and best use.
While people dispute the value of higher density, I don’t know anyone who contends that Swiss cheese-style development, which leaves vacant holes in areas served by roads and infrastructure, is a good idea. One way to tame the rising cost of local government is to fill in those holes.
Fellow Bacon’s Rebellion columnist Ed Risse has argued that Virginia cities and urbanized parts of counties should switch to Henry George taxation across the board, not just for blighted areas. But Risse offers a twist: what he calls “reverse Henry George.” Risse would draw a “Clear Edge” around those urbanized areas. Inside the Clear Edge — cities and urbanized counties — only land would be taxed. Economic forces would move to build on the vacant land and redevelop under-utilized land.
Outside the Clear Edge, in Risse’s scheme, improvements would be taxed. This would relieve the burden on households who depend upon land-intensive farming and forestry for a living. And it would discourage — not prevent, just discourage — developers from plopping subdivisions in the middle of rural areas, miles from public services.
I have yet to hear any persuasive arguments against the idea. A Henry George scheme would help accomplish many of the aims of the Smart Growth community without imposing a new regulations and hiring administrators to enforce them. It would rely upon market forces, not big government.
If Virginians approve this constitutional amendment, they won’t be adopting a Henry George arrangement, but they’ll be accepting the underlying logic. Perhaps at that time, Virginia would be ready for Risse’s idea to go mainstream.
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