Why Pittsburgh Real Estate Never Crashes
the tax reform that stabilised a city's economy
By Dan Sullivan
Originally published in Fleeing Vesuvius: Overcoming the Risks fo Economic and Environmental Collapse
and Cleveland have adopted diametrically opposed strategies, with
dramatically different results. In Pittsburgh, foreclosure rates are
low despite the downturn, home prices are climbing slightly and
construction rates are increasing. Cleveland, meanwhile, is struggling
to stem a complete collapse of its housing market. The difference lies
in the fact that Pittsburgh has had a site-value tax, which steadies
the market, and Cleveland has not.
130 miles apart, Pittsburgh and Cleveland are similar cities in many
ways. Pittsburgh lies at the junction of three major rivers and
Cleveland on a natural harbour on Lake Erie. These navigable waters
connected them to coal and iron ore mines and made them industrial hubs
but the decline of steelmaking and related industries has left them as
the two largest "rust belt" cities. At the beginning of the last
century, Cleveland was the nation's fifth largest city and Pittsburgh
was eighth, and Cleveland was the third largest corporate headquarters
(behind New York and Chicago) until it fell in rank to Pittsburgh. Both
have seen their populations decline with migrations to the suburbs and
to the south and west of the United States. Both now have fewer than
half the residents they had during their peak years.
Cleveland has never fully recovered from the collapse of "big steel,"
while Pittsburgh rebounded easily. This was because Ohio never gave
Cleveland the option of having a land tax similar to that in
Pittsburgh, and as a result, it relied less on real estate taxes for
raising revenue. Its lack of a land tax means that its property prices
tend to be higher than in Pittsburgh and purchasers consequently have
to borrow more. In 2005, Cleveland had an affordability index [median
house price divided by median household income] of 3.61 compared to
2.44 in Pittsburgh. Although 3.61 was not high by national standards,
it was the highest of any northeastern industrial city.
In 2008, just after the housing bubble broke, Cleveland led the nation
in mortgage foreclosures per capita while Pittsburgh's foreclosure rate
remained exceptionally low. Since then, the foreclosure rates in Las
Vegas and many Californian cities, none of which collect significant
real estate taxes, have passed Cleveland's foreclosure rate. However,
on September 15, 2010, The Pittsburgh Post-Gazette reported that while
at the end of the second quarter of 2010, 21.5% of America's
single-family homes had underwater mortgages (the American term for
negative equity), only 5.6% did in Pittsburgh. As a result Pittsburgh was top of a list of the ten markets with the lowest underwater mortgage figures.
How land value tax prevents speculation
Land value taxes discourage the bidding
up of land prices and it is cheap land coupled with lower taxes on
productivity that attracts productive investors to Pittsburgh. During
the boom decades, land-taxing cities like Pittsburgh could not offer
the speculative gains that California did, but now they not only offer
lower land prices and lower productivity taxes, but, importantly in
these volatile times, they also offer land prices that are unlikely to
fall in the future simply because they never became inflated in the
This came about because investors are not just interested in the return to their investment but in the after-tax
return. If land is increasing in value by 9%, and there is a 1% tax on
land values, the net return is 8%. However, a 5% tax on land values
cuts the net return to only 4%. Similarly, if the return to a
productive investment such as a building is 9% and the taxes on
productivity are only 1%, the net return is 8%. If the productivity
taxes take 5%, they reduce the return to only 4%. If an investor has
the choice of putting all his money into building a small number of
houses or into buying up a much larger number of vacant lots, he will
choose whichever course of action yields the highest after-tax return.
That is, he will choose to build in a land-tax economy and choose to
buy up land in a productivity-tax economy.
Pittsburgh has not always done so well during recessions as it is doing
today. It suffered badly in the real-estate crashes up to and including
the 1906 depression but its property market has been remarkably stable
ever since and is continuing to attract investors despite the present
recession. This transformation is linked to a series of economic
reforms adopted between 1906 and 1913. Before 1906, Pittsburgh gave
special tax breaks to large landholders under "agricultural" and
"rural" classifications. During Pittsburgh's reform era, the city not
only eliminated those breaks but also changed its property tax to fall
more heavily on land and more lightly on improvements. Productive land
use became less costly while idle speculation became unprofitable. As a
result, city real-estate prices did not crash during hard times because
they hadn't inflated during boom times.
America's early depressions were sometimes as severe as the Great
Depression, which was "great" partly in the sense that it was global,
just as World War I was originally called The Great War because it was
global. (In fact, far more Americans lost their lives in the Civil War
than in both "great wars" combined.) America's most severe panic was
probably in 1837, which closed more than 40% of the banks and wreaked havoc on the economy.
According to historian Stefan Lorant, "The panics of 1819, 1837 and
1857 hit the city [Pittsburgh] with particular severity. Business
slackened and factories closed; and workingmen and merchants alike felt
the impact of the hardships."
Lorant notes that the depressions of 1873, 1884 and 1893 were also
severe in Pittsburgh. He quotes The Growth of the American Republic, by
professors Morrison and Commager:
Prices and wages hit rock-bottom and there seemed to be no market for
anything. Half a million laborers struck against conditions which they
thought intolerable, and most of the strikes were dismal failures.
Ragged and hungry bands of unemployed swarmed the countryside, the
fires from their hobo camps flickering a message of warning and despair
to the affrighted townsfolk.
In 1894, "Coxey's Army" of unemployed began its march on
Washington, D.C., from western Ohio, with members having arrived by
train from as far as Texas. Their ranks nearly doubled when they passed
through Pittsburgh and Homestead.
The Russell Sage Foundation's famous Pittsburgh Survey of 1910 showed
how severe the poverty was here. "One third of all who die in
Pittsburgh... die under five years of age. One fourth... die under one
year of age."
Fighting land monopoly and speculation
Until recently, Americans had always opposed the kind of land monopoly
that had oppressed Europe. The Articles of Confederation called for
even the federal government to be funded from a tax on the value of
privately held land.
The minor parties that formed the Republican Party also formed the
roots of the progressive movement. They regarded land monopoly as a
second form of slavery, and opposed both forms vigorously. The Free
Soil Party advocated "the free grant to actual settlers," as opposed to
selling large tracts of land to privileged elites.
Abraham Lincoln had gained his reputation defending homesteaders
against "land sharks" who would file counter-claims and demand payment
to drop the challenges. In 1843, Lincoln wrote:
An individual, or company, or enterprise requiring land should hold no
more than is required for their home and sustenance, and never more
than they have in actual use in the prudent management of their
legitimate business, and this much should not be permitted when it
creates an exclusive monopoly. All that is not so used should be held
for the free use of every family to make homesteads, and to hold them
as long as they are so occupied....
The idle talk of foolish men, that is so common now, will find its way
against it, with whatever force it may possess, and as strongly
promoted and carried on as it can be by land monopolists, grasping
landlords, and the titled and untitled senseless enemies of mankind
After the Civil War, progressives witnessed the closing of the
frontier and saw land speculators out-bidding those who wanted to put
the land to use during the boom years, fueled by the expansion of bank
credit that contracted during recessions. Besides monetary and banking
reform, progressives advocated real-estate taxes, particularly on land,
to make such speculation unprofitable.
The Pittsburgh battle for reform
Although land speculation was a problem everywhere, it was particularly
bad in Pittsburgh, which had been carved up for the benefit of officers
in the Revolutionary War. Speculators and large estates in the city got
special "farmland" and "rural" tax rates at the expense of urban
properties. The price of land, and the taxes on urban real estate,
became so high that workers lived in tiny houses on tiny lots.
Henry W. Oliver, president of the Pittsburgh Common Council, complained
in an 1872 speech of "the great landholders and speculators, and the
great estates which have been like a nightmare on the progress of the
city for the last thirty years."
The same Pittsburgh Survey that exposed Pittsburgh's poverty showed
that this classification system had "enabled big real estate holdings
to get out from under the full share of their local responsibilities."
Corrupt assessment practices also shifted taxes off of speculators.
However, that government was swept away after perhaps the largest
municipal scandal in American history resulted in 41 indictments
against city councilmen, bankers and industrialists.
In 1911, the reform government abolished special tax breaks for large estates and abolished the taxation of machinery.
In January 1912, the Pittsburgh Civic Commission, headed by H. D. W.
English and H. J. Heinz, reported that land prices were extraordinarily
high in Pittsburgh at that time, second only to those in New York City.
"Industries will be slow to locate in Pittsburgh if rents or prices of
land are higher than in other cities," the report stated.
It also noted that a few individuals and families had owned large
tracts and that some owners, by making ground leases or by improving to
a very small extent, had received sufficient income to enable them to
hold their land for increases in value due to the city's rapid growth.
A few individuals have been enabled by circumstances to place and hold
land prices at a figure which prevents the profitable use of the land
by others. Can this paralyzing grip on Pittsburgh's growth be broken?
We recommend twice as heavy a tax on land values as on building values
as the remedy. This means to place a penalty on holding vacant or
inadequately improved land and to offer special inducements and
premiums for improving land.
Mayor Magee endorsed the measure on learning that Vancouver,
British Columbia, had enjoyed considerable success after replacing
their building tax with a land value tax (LVT).
Supporters got a state law introduced for second-class cities
(Pittsburgh and Scranton) requiring those cities to adopt the Civic
Commission's proposal, with a phase-in spread over ten years.
Even the Pittsburgh Real Estate Board (now known as the Association of
Realtors) had joined with the Single Tax Club of Pittsburgh, the Civic
Commission, the Pittsburgh Board of Trade, the Civic Club of Allegheny
County and other organizations in support of the bill. The Pittsburgh
Dispatch wrote: "The realty board endorsed the act and recommended its
passage and is anxious to have the Governor approve it." They sent a
delegation to Harrisburg to urge passage of the bill.
It passed in the House by a vote of 113 to 5 and in the Senate by a vote of 40 to 0.
A repeal campaign was launched by the largest landowners, including
agents of the Schenley estate, the biggest of all. Some opponents of
the graded tax said that "unimproved landowners are the poorest of
property owners" and that the graded tax was disturbing to the economic
and financial situation in Pittsburgh and that it would bring
depression and hard times.
Former Mayor Magee traveled to Harrisburg to defend the bill. He said
the opposing delegation from Pittsburgh didn't represent the small
property owner but the large interests of the city. "They come here
weeping and wailing," said Magee, "and you would think the small
property owner would be wiped out of existence. They tell you it is a
The Pittsburgh Press also defended the law, stating:
The law is working to the complete satisfaction of everybody except a
few real estate speculators who hope to hold idle land until its value
is greatly increased by improvements erected on surrounding territory.
Everybody endeavoring to gain a big profit in this parasitical manner
is naturally opposed to the law and to the principle which it
represents; it is nevertheless endorsed by and is clearly in the
interest of the vast majority of the public.
The repeal bill passed both houses, but was vetoed by Governor Brumbaugh, who said:
This repealer is opposed by the largest group of protestants that have
been heard on any bill.... It is advocated by those in charge of the
fiscal policy of one of the two cities concerned. Inasmuch as there is
such a conflict of opinion, and inasmuch as the law has scarcely yet
been tried, it is well to allow it to operate until a commanding
judgment decrees its fate. To disturb it now, when a preponderance of
opinion favors it, is unwise."
Pittsburgh's experience with land value tax
Land prices only rose 14% in Pittsburgh during the 12 years after the
graded tax was adopted in 1913, while they boomed in the rest of the
Real-estate interests complained that LVT was robbing Pittsburgh
landowners of gains enjoyed elsewhere. However, Mayor Magee saw these
gains as speculative, and stood by his actions. He noted in 1924:
I am principally interested in two things regarding taxation: the
progress of the graded tax law and the problem of assessments for
public works. Both concern the unearned increment, the profit of land
owner who becomes rich through growth of the community without effort
on his own part. I am frankly opposed to him.... [H]e is a parasite on
the body politic."
Magee was proved correct. National land prices peaked in 1925
and plummeted with the Great Depression, except in Pittsburgh. Despite
the great flood of 1936, Pittsburgh's land prices fell only 11% between
1930 and 1940, compared to 58% in Detroit, 50% in Los Angeles, 46% in
Cleveland, 28% in Boston, 27% in New Orleans, 26% in Cincinnati, 25% in
Milwaukee and 21% in New York. Land prices in Pittsburgh even fell less
than in Washington, D.C., where the New Deal was booming.
Of course, times were still tough in Pittsburgh, especially for those
who depended on steel or other industries tied to the global economy.
Still, Pittsburgh was spared the added problem of a real-estate crash
because its graded tax had discouraged speculators from bidding up land
prices during the previous boom.
After World War II, other industrial cities got hammered once again,
but even though Pittsburgh had been the world's number-one supplier of
armor plate during the war, it enjoyed a renaissance that was the
subject of at least 26 national and international news articles.
The most amazing aspect of Pittsburgh's renaissance is that it had a
construction boom without a real-estate price boom. In 1960, when real
estate went into another recession, Pittsburgh continued building.
During that recession, House & Home,
the construction industry's leading trade journal, recommended that
other cities prevent land bubbles by doing what Pittsburgh was doing -
taxing land values more heavily than building values. It quoted
Pennsylvania governor and former Pittsburgh mayor David L. Lawrence as
There is no doubt in my mind that the graded tax law has been a good
thing for the city of Pittsburgh. It has discouraged the holding of
vacant land for speculation and provides an incentive for building
Over the years, Pittsburgh adopted other taxes that eroded the
effect of LVT on speculation. In December 1978, however, Pittsburgh
council president William J. Coyne rejected the mayor's call for
increased wage taxes and convinced council to nearly double the LVT.
The next year Pittsburgh raised the LVT to five times the building tax
rate, and two years after that raised it again. These were also
Pittsburgh's last overall tax increases for twelve years.
Another spectacular surge in construction followed as owners of
underused land became more willing to sell. The only eminent domain
controversy involved land acquisition for the PPG complex the year before LVT increases went into effect.
1978 was also the year that California passed Proposition 13, which
sharply curtailed real-estate taxes in that state. From that point on,
cities in California got smaller shares of their revenue from property
taxes than cities in any other state. While Pittsburgh enjoyed steady
land prices in the midst of a building boom, California was consumed by
a land-speculation frenzy. Foreign interests acquired more California
land within the first 18 months after Proposition 13's passage than
they had accumulated in the entire history of that state.
Most foreign land acquisition was by Japanese concerns. How did they
get enough US dollars to buy up California land? Early in 1980, US
Steel chairman David Roderick accused Japan of "dumping" cars on the US
market, noting that Toyotas sold for 17% less in the US than in Japan.
Japan had already been increasing exports to the US for some time, but
lightly taxed California land made American dollars even more
attractive to Japanese land speculators.
In 1979, Pittsburgh's largest employer, the Jones & Laughlin steel
mill, shut down. Even this didn't prevent Pittsburgh from enjoying the
biggest construction surge in its history. The real-estate editor of Fortune credited the LVT with playing a major role in Pittsburgh's "second renaissance."
Councilman Coyne was elected to Congress in 1982. In 1983, council
president Ben Woods convinced council to reduce taxes on buildings and
make up the shortfall from higher taxes on land values, even though
there was no need for more revenue.
However, Pittsburgh and its school district also levied an aggregate 4%
wage tax, and research requested by mayor Masloff indicated that this
tax was driving renters and potential home buyers out of the city at an
alarming rate. In 1988, Masloff determined that the city had a surplus,
and reduced the wage tax by five-eighths of one percent.
In 1989 she proposed to lower the wage tax by another 0.5 % and make up
the revenue with a conventional property tax increase of 10 mils (1
percent) on both land and buildings. Council president Jack Wagner
proposed to put the entire increase on land values instead. A storm of
protest raged at the public tax hearing against increasing overall
property taxes, but most testimony with regard to Wagner's LVT
alternative was in favor of it. In a compromise with the mayor,
Wagner's council increased the tax on land value by 33 mils and on
buildings by 5 mils. Pittsburgh's real-estate values and construction
levels remained steady during the recession of 1990.
As Pittsburgh's economy continued to grow and land values remained
stable, California's land prices rapidly rose and its economy became
strained. California's housing affordability index (median house price
divided by median income) had been only 10% higher than the national
average when Proposition 13 passed. By 2005, it was three times the
national average. 23 of the nation's least affordable cities were in
California. The median house price in San Francisco rose to 12.8 times
the median income. Even dusty, miserable Bakersfield, the most
affordable city in California, had an affordability index of 5.6.
Pittsburgh's index was 2.44, among the lowest of any northeastern
Once again, the real-estate collapse missed Pittsburgh because LVT
prevented the bidding up of Pittsburgh's land prices during the
national boom decades of the '80s and '90s. In 2008, with the nation's
construction industry coming to a near standstill, the business agent
of Pittsburgh's Carpenter's Union announced that they were looking for
250 additional carpenters and apprentices to fill the increased demand
Pittsburgh was enjoying. Meanwhile, California, which had curtailed
real-estate taxes at the behest of those who said that those taxes were
"forcing people out of their homes," led the nation in housing
Undoing the graded tax
Support for taxing land values more than buildings remained so strong
in the City of Pittsburgh that efforts to repeal the policy
many years, the chief city assessor was also the head of the Henry
George Foundation of America, which championed LVT throughout North
In 1942, however, responsibility to assess land values was shifted to
the county, where opposition to LVT was stronger and support weaker.
A provision of Pennsylvania law was added to the second-class county
code requiring Allegheny County to assess the value of land and
improvements separately. Although the law reflects preferred assessment
practices anyhow, it was put in place to protect the city's LVT.
County assessors gradually came to ignore land values, keeping those
the city assessor had put in place and putting subsequent changes onto
building values whenever possible. 1980 assessments were a fairly
accurate reflection of 1950 land values.
This meant that land values became relatively over-assessed in
declining neighborhoods and under-assessed in advancing neighborhoods.
However, the city's shifts to LVT in the 1980s were followed by
substantial land-assessment reductions in Shadyside, the trendiest
neighborhood in the city, and smaller reductions in Oakland and
Squirrel Hill, the city's two most prosperous and politically prominent
neighborhoods after Shadyside. This marks the point when county
assessors crossed the line from neglect to overt malfeasance. Even so,
home owners in the poorest neighborhoods still saved under LVT, and
many in the richest neighborhoods paid more. Middle-income
neighbourhoods saved the most.
However, opponents of LVT dominated the county board of assessors. They
hired a private assessment firm, Sabre Systems, which assessed land
values with such a terrible lack of uniformity that the city was forced
to abandon the tax in 2001. Sabre Systems assessed lots with buildings
on them six to ten times as high as identical, adjacent vacant lots.
They did this only in Pittsburgh, even though there were three smaller
cities in the county, Clairton, Duquesne and McKeesport, that also
relied on LVT.
Wildly erratic land-value assessments forced Pittsburgh City Council to
abandon LVT in 2001. The increased cost to home owners was partly
offset by special exemptions, but this was done at the expense of
renters and business properties, who have had to pay higher taxes into
a shrinking budget. Many council members blamed the assessments and
said the tax change was temporary. Only one council member blamed the
After losing a long series of court cases and appeals, the county is
today finally addressing assessment irregularities under court order.
The city controller and several city council members have expressed
interest in returning to LVT if realistic land assessments are made
because, if Pittsburgh is to be protected from the next recession, it
must end these abuses and reinstate LVT before the next boom era.
Pittsburgh is not alone
Every one of the 19 land-taxing cities in Pennsylvania enjoyed a
construction surge after shifting to LVT, even though their nearest
neighbors continued to decline. Clairton, Altoona and Aliquippa have
shifted farther than any other cities toward a pure LVT, and are
enjoying unrivaled economic renewal. LVT has also been far more
extensively employed in Canada, Australia, New Zealand, Denmark and
other countries, with similar success. Those who dispute the effects of
LVT and suggest that Pittsburgh is prospering for other reasons have
not put forward an answer as to why virtually all land-taxing cities in the world out-perform their neighbors.
Even states that rely heavily on conventional property taxes (with
equal rates on land and buildings) have done far better than states
that have curtailed property taxes.
Claims that Pittsburgh is prospering because of its efforts to become a
"green" city do not explain how Pittsburgh held its land values during
the Great Depression, when it was the dirtiest, smokiest, most polluted
city in the nation, nor why Pittsburgh land values failed to inflate as
it cleaned itself up during what were boom years for other cities, nor
why the much greener cities of Portland and Seattle have suffered
serious economic setbacks.
Claims that Pittsburgh was saved by its economic development projects
try to gloss over the many disastrous projects, where one subsidy after
another went to businesses that opened, sucked out the subsidies and
then failed, or to over-subsidized corporate businesses that drove out
competing, fully-taxed smaller businesses in a process known as
"economic cannibalism." Those who suggest that the new casino helped
the economy have to admit that the city with the highest foreclosure
rate in the U.S. is Las Vegas, the casino capital of the nation.
If anything good can be attributed to our changing policies, it is that
the changes were either thwarted or came too late to do the damage done
in other cities. Pittsburgh fought unsuccessfully to get a "commuter"
wage tax like the 2% tax in Cleveland or the roughly 4% tax in
Philadelphia. However, those cities' commuter taxes drove out
businesses even faster than residency taxes drive out residents. Some
suburbs of Cleveland even made a science of stealing businesses by
charging the tax on workers and then rebating half of it back to the
employers. Meanwhile, Philadelphia's flight of businesses has been so
bad that even the Philadelphia Association of Realtors has advocated
shifting from wage tax to LVT.
What will become of Pittsburgh?
If Pittsburgh can either force the county to assess land properly or
retake control of its own assessments, it will once again be able to
boast the most recession-proof real estate in the nation. However, if
it does not do so before the next real-estate price boom, it will not
be able to prevent the next crash either. This is because LVT prevents
booms and preventing the booms is the only way to prevent busts.
Lessons for environmentalists
Extending LVT to air, water and non-renewable resources
Some pollutants are so noxious that they must be banned outright, but
most must merely be reduced. The principle that the earth is a commons
applies to air, water and non-renewable resources. A pollution tax on
emissions begins with the premise that everyone has an equal right to
enjoy the air and water, and that those who use the air and water to
hold their pollutants owe rent to the rest of use, whose enjoyment of
that air and water is diminished. Thus, while a local LVT might not
prevent factory pig farms, local taxes on water pollution certainly
The difference between land and non-renewable resources is that the
latter are consumed, while land is merely held. Therefore, non
renewables cannot be rented. Still, the principle that resources are
part of the commons means that it is proper for the community to decide
how quickly or slowly it wants those resources to be consumed, and to
set royalty charges accordingly.
Cap and trade and the Enclosure Acts
Cap and Trade, on the other hand, is based on the idea that those who
have been polluting all along have somehow earned a "property right" to
continue polluting, and that those who want to pollute, even if they
produce more and pollute less, must purchase "pollution rights" from
the entrenched polluters.
It is put forward as a liberal environmentalist idea, but it has its
origins in the "pollution tax credit" schemes of Ronald Reagan and
Margaret Thatcher. It is a very dangerous approach, as it not only
rewards past polluters, but enables them to punish cleaner, greener
For example, a company that can produce electricity with half the
emissions must first purchase pollution credits from the established
polluters. If the established polluters don't want to sell, or want to
charge enough to make the greener alternative unprofitable, their Cap
and Trade privileges actually hinder the transition to greener
The burden of Cap and Trade falls on ordinary people for the benefit of
the privileged. It is analogous to the Enclosure Acts of England and
other countries, where, "for the sake of game," ordinary people were
prohibited from hunting or disturbing wilderness land, while nobles
were allowed even more latitude to run roughshod over the environment.
There are various sound alternatives to Cap and Trade, from pollution
taxes to Cap and Share, in which every citizen gets pollution tax
credits to sell to the polluters. The differences between these
proposals are minor, and the best alternative is probably the one that
is simplest to administer. The essential feature is that polluters must
pay the community to pollute, rather than greener industries paying
dirtier industries to pollute less.
LVT vs. rural building restrictions
Many environmentalists think of sprawl as building in rural areas, and
try to fight sprawl with restrictions that hamper the economy.
Supporters of LVT see the demand for rural land as caused by the
failure to build compact development in urban and inner suburban areas.
Rural land is prized by developers for one reason only: it is less
expensive to buy than urban and suburban land. A tax on the value of
land draws that development inward and reduces the demand for rural and
agricultural land. Removing land speculation as an obstacle to urban
development has a positive effect on the economy, compared to imposing
restrictions on rural land. The notion that "good environmentalism is
good economics" is true with regard to LVT. It is hard to make a case
that it is good with regard to building restrictions and the
bureaucracy that inevitably accompanies them.
Problems with exemptions
Some environmentalists argue for exemptions for land owners who hold
their land as farmland or in a "clean and green" state. Those who hold
"clean and green" land are invariably wealthy, for who else can afford
to hold large tracts of land out of use? Often, land is held back where
demand is high, forcing development to "leap frog" over that land into
more rural areas. As the editors of House & Home noted half a century ago,
Suburban sprawl is what makes homebuyers drive past miles of unused or
underused countryside to get home to their tiny 60' x 120' lots. (Open
fields, cow pastures, private golf links, and millionaire estates are
fine, but it is much better to drive out five miles beyond your home to
enjoy seeing them when you want to than to have to drive five miles
past their "No Trespassing" signs when all you want is to get home.)
House & Home thinks
"development easements" are the worst idea yet. They just aggravate and
perpetuate the sprawl by using tax money to keep golf links, orchards,
and cow pastures where houses should be built, and push homebuilding
out beyond to where the golf links, etc., should be. Green belts should
be planned for maximum, not minimum, public use and enjoyment of the
land. The 1,200 acre Field estate will make a fine state park, but as a
fenced-in private property it was little or no good to anybody except
Many who first hear about LVT fear that it will lead to
"overdevelopment" of land, with no green space or human scale. However,
Pittsburgh is reputed to have more trees than any other city in the
U.S. While this is partly due to the city's hilly terrain, it is also
due to very large city parks, many of which were sold or donated to
Pittsburgh by its largest land owners.
Municipal parks are an appropriate way to maintain green space; that
is, space that is maintained for the benefit of all should be under the
control of democratic institutions. In contrast, open land has often
been held by private interests that enjoyed tax breaks while waiting
for land values to "ripen," and was then sold at a profit. Meanwhile,
development leap-frogged over that land.
"Special farmland assessments" whereby land is assessed at its farm
value instead of its market value, are similarly flawed. In genuine
farming areas, the farm value is
the market value. Farmland assessments mostly protect farms within or
adjacent to the suburbs, and force the suburbs to leap-frog into
"Smart growth" development zones and density zoning
Development zones, often based on the Portland model, are artificial
attempts to offset the effects of automobile-based sprawl. They impose
incentives for developing within the zone and penalties for developing
outside the zone. However, where land is inadequately taxed, the price
of land inside the zone will simply rise until it swallows the value of
the incentives, and the price of land outside the zone will fall until
it offsets the cost of the penalties.
The problem is further aggravated by density limits within the
smart-growth area. Laws that prohibit high-rise buildings in low-rise
zones, low-rise apartments in townhouse zones, and townhouses in zones
for free-standing houses with minimum lot sizes, prevent development
from occurring within the zone, both by preventing the developer from
doing more with less land, and by keeping land prices high within the
smart-growth zones. Abolishing density limits within urban areas is a
lot smarter than imposing arbitrary smart-growth zones.
These smart-growth zones assume that development should occur within a
large circle, but a look at development patterns prior to the
automobile reveal that this was rarely the case. Rather, development
was dominated by small, self-contained towns, connected to urban hubs
by rivers, rail lines, or even roads. However, the roads were lightly
traveled, as people tended to work and shop in the same small towns
where they lived, and buy a substantial share of their foodstuffs from
The bottom line is that it doesn't matter how far a new development is
from the center city. What matters is how far the people in the
development will travel from their homes to the places where they
routinely work and shop. This is impossible to manage via zoning laws,
but substantial taxes on pollution and resource consumption will give
people an incentive to arrange their lives accordingly, while
substantial LVTs would make it easier for them to do so. Meanwhile,
taxes on their own productivity could be reduced.
Alternative energy subsidies
Alternative energy subsidies take money from ordinary taxpayers,
including those who have arranged their lives to consume very little
energy and give it to people who consume energy, merely because they
consume "less." Thus the person who bundles up and lives in a cold
house subsidizes high-efficiency furnaces, and the person who mostly
gets around by walking and bicycling subsidizes electric and hybrid
vehicles for those who cling to the automotive lifestyle. Replacing
productivity taxes with LVTs and resource consumption taxes still gives
the owner of the high-efficiency furnace and the electric car an
advantage over the person with a dirty furnace and a gas-hog car, but
it also gives the sweater-wearing walkers and cyclists an advantage
over all energy wasters.
The same is true of public transit, which is extended via subsidies
into sprawling suburbs where it just doesn't work. Taxing land values
and eliminating zoning creates the kind of environment where transit
can compete with very little subsidy. What subsidies transit needs can
come from the land-value increases that transit creates.
The bottom line is that ecology and economics come from the same root
and mean almost the same thing, the former from "study of the house"
and the latter from "management of the house." However, it is not
enough for environmentalists to insist that good ecology is good
economics, for the corollary is that bad economics makes for bad
Environmentalists naturally rankle at economics, which has been a tool
for maximizing wealth from the time when kings sought to out-produce
rival nations to modern times when corporate monopolies seek to
out-produce rival corporations. That obsession has caused economics to
become increasing divorced not only from environmentalism, but also
from principles of justice and even from rationality.
Still, disdain for economics on the part of environmentalists
perpetuates that logical disconnect. Fortunately, environmentalists do
not have to wade through neoclassical econobabble. Rather, if they
start with the same key premises that classical liberal economists and
philosophers started with, the solutions become clear. Those premises
1. that the Earth is a commons and that the rent of land belongs to the whole people,
2. that the right to the Earth is a usufruct right, not a right to leave it in worse condition than one found it in, and
3. that what a human being produces is entirely his own, so long as he
has compensated the community for what he has taken from them or
foisted on them.
Following these principals, one no longer has to argue whether global
warming is apocalyptic or merely detrimental. The one form of energy
that is wasted when it is not consumed is human energy. So long as
human energy is taxed, following these principes make it obvious, even
to global warming deniers, that taxes on non-renewable energy should
replace taxes on human energy. So long as human beings sit in forced
idleness, it becomes obvious that keeping non-renewables out of use is
preferable to keeping human beings out of use.
The limits of resource consumption were not an issue in Thomas
Jefferson's day. Yet Jefferson recognized that forced idleness was
caused by monopolization of the earth. Observing wretched poverty in
France, he wrote:
Whenever there are in any country uncultivated lands and unemployed
poor, it is clear that the laws of property have been so far extended
as to violate natural right. The earth is given as a common stock for
man to labor and live on. 
The global warming issue has been polarized into a battle
between what may be called the alarmist camp and the denier camp, to
the detriment of all. Stepping back from this battle, environmentalists
can "cut the Gordian Knot" by realizing that it is not necessary for
others to agree with their analysis of the problem, but only for others
to agree with their solutions.
Shifting taxes off labour and legitimate (labour-produced) capital by
placing as much of the tax burden as practible on land, natural
resource extraction and pollution is a proposal that many in the
"denier" camp can support.
Lorant, Stefan, Pittsburgh, The Story of an American City, 1999 edition, p. 101
ibid, p. 196
Ibid. p. 287, citing Homestead chapter of The Pittsburgh Survey.
Articles of Confederation, Article VIII, "All charges of war, and
all other expenses that shall be incurred for the common defense or
general welfare, and allowed by the United States in Congress
assembled, shall be defrayed out of a common treasury, which shall be
supplied by the several States in proportion to the value of all land
within each State, granted or surveyed for any person...
Article 14, Free Soil Party Platform of 1848
Letter from Lincoln to Martin S. Morris, Springfield, March 26, 1843, included in Basler, Collected Works of Abraham Lincoln
Terence Powderly, head of the Knights of Labor, wrote that, if
not for banking privilege, there would be no need for labor unions. The
KoL listed one of its purposes as
To prevail upon governments to establish a purely national circulating
medium, based upon the faith and resources of the nation, and issued
directly to the people, without the intervention of any system of
banking corporations, which money shall be a legal tender in payment of
all debts, public or private...
On land monopoly, Powderly wrote,
The demand of the order of Knights of Labor is, 'that all lands now
held for speculative purposes be taxed to their full value.' The great
difficulty is to ascertain to what extent lands are now held for the
purpose of speculation.... If the Knights demanded that 'all lands held
by parties, other than the government, shall bear an equal proportion
of the taxation required for the maintenance of the government, and
unimproved lands shall be assessed at the same rate as the nearest
improved land,' they would come nearer to the establishment of a just
rate of taxation, and whether lands were held for speculation or not,
they would not escape their just proportion of taxation.
See also, George, Henry, Progress and Poverty, Book V, Chapter 1, "The primary cause of recurring paroxysms of industrial depressions."
Some of these tiny-house neighborhoods survive today, most notably in the bottoms of Lawrenceville.
Henry Oliver Evans, Iron Pioneer, Henry W. Oliver, New York, Dutton, 1942, pp. 65-6.
Civic Frontage: The Pittsburgh Survey, "The Disproportion of Taxation in Pittsburgh," pp. 156-213; 455-68.
Pennsylvania Laws, 1911, p. 273, approved by Governor John K. Tener, May 11, 1911.
ibid, pp. 287-88, approved, May 12, 1911.
Pittsburgh Civic Commission, Civic Bulletin, January, 1912; also An
Act to Promote Pittsburgh's Progress, published by Pittsburgh Civic
Commission in 1913.
"But before finally committing himself to the plan, he [Mayor
Magee] sent a special investigator, Thomas C. McMahon, a member of the
board of assessors, to visit municipalities in western Canada where
similar tax systems had been in operation and were attracting favorable
attention. The City of Vancouver had entirely exempted buildings from
taxation by gradual steps over a period of fifteen years. That
community was enjoying a remarkable building boom, conditions were very
prosperous, and the city was receiving ample revenue under its new tax
"Mayor L. D. Taylor of Vancouver came to Pittsburgh about this time to
address the Oakland Board of Trade and gave a first-hand report which
was decidedly in favor of shifting the tax burden from improvements to
land values. Mayor Magee then gave his endorsement to the proposed law
and ever thereafter was a consistent supporter of the graded tax plan,
bringing to its support many of those who were closely associated with
him in political life."
-Williams, Percy, The Pittsburgh Graded Tax Plan, Its History and Experience,
citing Robert M. Haig, The Exemption of Improvements from Taxation in
Canada and the United States, 1915, pp. 170-1 (a report prepared for
the Committee on Taxation of the City of New York).
Pittsburgh Dispatch, May 6, 1913, headed "Real Estate Board Committee Goes to Confer with Governor"
Pennsylvania Legislative Journal, 1913, Vol. 2, pp. 1635-36, 2453
Pittsburgh Post, April 28, 1915
op.cit., Williams, Percy
"Graded Tax Repealer Jolted," Pittsburgh Press, May 18, 1915
Pittsburgh Press, June 10, 1915, p. 1.
op. cit., Williams, Percy, appendix, table 2, "Assessed Valuation - Land and Buildings - City of Pittsburgh"
Saturday Evening Post, August 3, 1946; June 9, 1956; Commonwealth, September, 1947; Pittsburgh Bulletin Index, January, 1948; Business Week, March 12, 1949; June 21, 1952; April 2, 1955; Greater Pittsburgh, April, 1949; National Geographic, July, 1949; Time, October 3, 1949; Architectural Forum, November, 1949; The American City, July, 1950; Town and Country, August, 1950; Harper's, January, 1951; August, 1956; The Atlantic Monthly, May, 1951; Fortune, June, 1952; The Spectator (London), December 19, 1952; Real Estate, March, 1953 ; January, 1960; Collier's, May 30, 1953; USA, Tomorrow, October, 1954; National Municipal Review, March, 1955; Reader's Digest, May, 1955; Liberty Magazine, February, 1956; Life, May 14, 1956; Look, January 8, 1957; The Nation, February 8, 1958; Holiday, March, 1959; Engineering News-Record, November 19, 1959; Esquire, September, 1960; Newsweek, October 24, 1960
House & Home, August, 1960, Time-Life Inc., p. 139
"Plan in Pittsburgh on Building Fought; Merchants Oppose Taking of
Their Property for Downtown PPG Industries "Headquarters Protest from
Diocese," New York Times, June 3, 1979, page 51
California Department of Agriculture. (Further citation needed.)
"Steel exec thinks Japan 'dumping' cars in America," The Bulletin, Bend, (Deschuttes County), Oregon, Feb. 5, 1980, p. 24
"Pittsburgh raised its tax rate on land from 4.95% to 9.85% of
assessed valuation in 1979, while leaving the rate on buildings at
2.475%. New construction, measured by the dollar value of building
permits issued, rose 14% as compared with the 1977-78 average. In 1980
the city widened the differential still more, to a tax rate of 12.55%
on land vs. the .475% building rate, a ratio of 5.07 to 1....
Construction in 1980 leaped 212% above the 1977-78 average, reflecting
ground-breaking for a new crop of office skyscrapers that is giving the
city its so-called second renaissance (the first came in the 1950s with
the redevelopment of the Golden Triangle). The adoption in 1980 of
three-year tax exemptions on all new buildings - but not the land -
also boosted construction. In 1981 construction peaked at nearly six
times the 1977-78 rate. "Some of the dozen new office towers that have
gone up in Pittsburgh would have been built with or without tax
concessions; downtown office space had been growing scarce. But the
widening differential between the taxes on buildings and land
undoubtedly helped. It cut the annual bill for owners of some
skyscrapers by more than $500,000 a year when compared with
conventional 1-to-1-ratio taxation."
Buffalo is the only large northeastern industrial city with a
lower affordability rank, but Buffalo is notoriously slum-ridden. See "Housing Affordability Rank of 243 US cities with populations of over 100,000."
A study by the Pennsylvania Economy League (Weir and Peters, 1986)
alleged that a consensus of experts claimed land value tax did not aid
development and hurt home owners in poor neighborhoods. However, this
study was so tortuously contrived and so easily refuted that city
council ignored it and continued shifting the tax burden to land
values. Statements from development experts who had contradicted the
PEL's desired conclusions were either twisted or ignored by the
researchers. For example, former director of economic development Ed
DeLuca had said land value tax did encourage development, but thought
that further shifts would be necessary to have a sufficient effect.
They claimed there was a consensus that the tax had no effect and that
further shifts would also have no effect. Donald Stone, professor of
economic development at Carnegie-Mellon University's School of Urban
and Public Affairs said that interviewers responded to his positive
comments about land value tax by changing the subject. Also, a check of
the poor neighborhoods cited in the PEL study showed that most
properties paying more were absentee-owned, and that owner occupants
actually saved in those neighborhoods. A subsequent study by city
finance director Ben Hayllar suffered from exactly the same failure to
distinguish owner-occupied from absentee-owned properties.
Owner-occupied properties in Hayllar's own sample also saved in poor
districts where he alleged land value tax was punitive.
was executive secretary of the Pittsburgh Real Estate Board from 1918
to 1921. A Democrat, Williams was appointed to the board of assessors
by Mayor Magee, a Republican, in 1922. The first Democrat mayor
Appointed him Chief City Assessor in 1934, where he remained until the
county took over assessing in 1942. He had been Secretary and a trustee
of the Henry George Foundation since it was chartered in 1926 until his
passing in 1978.
Almost all of the testimony against land value tax in the city's
public hearings came from non-city residents within the county,
particularly from the affluent Mount Lebanon Township. These suburban
residents either owned city real estate or represented organizations of
real estate interests. In contrast, most civic leaders and ordinary
voters in the suburbs do not live in the four cities that have taxed
land values (Pittsburgh, McKeesport, Duquesne and Clairton) and are
oblivious to the issue.
House & Home, Time-Life, Inc., August, 1960, page 115
"Property and Natural Right," Letter to James Madison, Sr. from Fontainebleau, France, Oct. 28, 1785