(The Center Square) – Replacing property taxes with a land value tax could spur development in Ohio, according to several state economists.
Under a land value tax, property taxes would be levied based on the value of the underlying land and not on any buildings or other improvements at the site.
“The theory is quite clear that land taxes are more efficient than property taxes, so switching to land taxes should increase property development. How much that will happen is unclear,” Kent State University professor Curtis Reynolds said.
A push in the Ohio General Assembly would allow the state Department of Taxation to use a three-year average of property taxes to set rates. That legislation recently passed the House and awaits action in the Senate.
However, legislation that would change the state’s current system to a land value tax has not been introduced.
Generally, according to a Scioto Analysis survey, property taxes can be regressive, causing lower-income individuals to spend a larger part of their income on property taxes than higher-income people.
Nine of the 12 economists who responded believed a land tax would spur development, but only three thought it a more progressive tax.
“The devil is in the details, and I don’t have all the details, but for urban taxes it seems hard to engineer a land value tax to be less progressive than a real estate tax because poorer people spend a larger percent of their income on housing (which is taxed less) whereas richer people own most of the land (which is taxed more),” Bluffton University’s Jonathan Andreas said.
Detroit is pushing to move from property tax to land value tax, saying on the city’s website it would cut homeowners taxes by an average of 17% and pay for the reduction by increasing taxes on abandoned buildings, parking lots, scrapyards and other similar properties.
Legislation in the Michigan General Assembly would allow the Detroit City Council to place the issue on the ballot in the spring. If passed, the city says homeowners would see the full tax cut in 2025.
