The Wisdom of Taxing Land for What It's Worth

Cities across America are poxed by vacant lots. Dozens, or even hundreds, of perfectly good pieces of land lie fallow, perhaps as parking lots, thus breaking up the urban fabric in cities that are eager to develop and create great places. In some cases, landlords are just lazy. But in many cases, they are reaping a tax windfall. 

Most cities tax land according to the price an owner paid and then according to the improvements—i.e., buildings—that the owner puts on the land. No improvements equal no increases in taxes. The relatively low taxes paid by owners of vacant lots enables them to bide their time, waiting for the distant moment when their parking lot is no longer profitable or when a developer comes willing to pay an extortionate sum.  

Nearly a century-and-a-half ago, economist Henry George devised a "single tax" to solve this problem: tax all land at the same rate, regardless of improvements. If the owner of a parking lot is paying the same amount of taxes as the owner of a skyscraper, that parking lot will be dug up posthaste, or so George's logic goes. In Slate, Henry Grabar discusses a few communities, mostly small, none with great development pressures, that use version of the single tax. They include Allentown, Pa., Harrisburg, Pa., and Fairhope, Ala. They are not necessarily models for the country, but with backers like Peter Orszag endorsing the single tax, perhaps its time may be in the offing.