Op-Ed: Transit-Oriented Gentrification Should Be Taxed

In the wake of a local vote against regressive tax hikes to fund transit, Paul Finch considers another way. "Land Value Capture, also known as an Area Benefiting Tax. To translate in plain terms: pay for transit improvements by taxing some of the property appreciation that those improvements produce."

In essence, land value capture would cut into the profits of developers speculating on transit-oriented gentrification. "Public infrastructure causes windfall gains for nearby property owners and developers. We could finance construction through government bonds, then repay those bonds over time with an incrementally higher property tax on nearby developable sites."

Finch argues that taxing higher land values doesn't significantly harm the economy. "Such a scheme has no 'dead weight loss' — that is, unlike income and sales taxes, it doesn't stifle the economy and taxes speculation rather than productive activity."

Transit's critics often deride its tendency to operate in the red, at least as far as fare revenues go. Land value capture has the potential to make transit's beneficiaries pay for what they're getting.