How to Get More Money From New Development Without Killing the 10-Year Tax Abatement

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This line from Claudia Vargas’ piece on how Philly Councilman Wilson Goode’s misplaced campaign against the repugnant-but-necessary 10-year tax abatement on property improvements could end up scotching the new skyscraper on Broad and Spruce implies a good solution to the bad abatement politics:

Property owners with tax abatements still pay for the tax on the land, but not for improvements. But the land value is minimal compared to the improvement, especially in luxury buildings.

If we want these property owners to contribute more to public services during this 10-year abatement period, then we should raise the tax they’re already paying  - the land tax!

Land isn’t as valuable as a building in some cases, but if we jack up the millage rate on land, we can get a lot more tax money out of these properties.

As Isaiah Thompson established in his reporting on AVI, land is woefully undertaxed in Philly, abatements or no abatements. That lax tax treatment of vacant land lowers the cost to speculators of holding vacant lots off-market in expensive areas, leading to underbuilding in rich neighborhoods – the key cause of gentrification.

The inequality problem isn’t nearly as much about income, as wealth. We have an opportunity to have an impact on this at the city level by shifting the tax burden away from taxes on sales, income, and actual investment in building, and onto wealth taxes on land.

This is going to require a paradigm shift in liberals’ thinking about who counts as “wealthy.”

The popular but mistaken idea that people who own or inherit expensive properties, but have little cash-flow from their actual jobs, should count as “poor” is holding us back from pursuing a more robust equity agenda.

This entry was posted in Miscellany.

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