Want less sprawl and more urban infill? Try a land value tax!

0:05All righty, all righty, all righty. Hello, everyone. This is Volts for July 15th, 2026. Want less sprawl and more urban infill? Try a land value tax. I'm your host, David Roberts. Have you ever driven through an American city and wondered why so much land near and around the urban core remains either undeveloped or covered in low-value uses like parking lots? Many people point reflexively to zoning, and Lord knows I have done many pods over the last few years on the evils of restrictive zoning, but there is more to it. than that, you also need to look at the tax code. Property taxes are determined by a mix of two values, the value of the land and the value of the structures on the land.

1:09One perverse outcome of this arrangement is that if you own a vacant lot and you put a building on it, you raise your property taxes. The higher the value of the building, the more economic activity or community benefit it produces, the higher your taxes. In effect, property taxes as currently constructed penalize building and reward leaving land underdeveloped. It is perverse. That's why even many cities that have reformed zoning still suffer from this problem. The obvious solution, which is gaining momentum in cities and states across the country, is to shift the tax burden away from the buildings to the land.

1:57The total property tax bill can remain the same, i.e. the reform can be revenue neutral, but the resulting land value tax will penalize landowners who leave their lots empty and reward those who build. It will incentivize building on the highest value land near urban cores. The idea is simple enough, but the details get pretty hairy pretty quickly. So we are going to dive into some of those details. With me today, I have Greg Miller, co-founder and director of the Center for Land Economics and a driving force behind the resurgent discourse around land value taxes. and Kitty Klitsky, a city council member who is pushing for adoption of a version of a land value tax in Spokane, Washington, just down the street from me.

2:57I'm going to talk with Greg about the conceptual rationale behind land value taxes and Kitty about the challenges of getting them implemented on the ground. I'm super excited for this one, so let's get into it. All right. With no further ado, Greg Miller, Kitty Klitsky, welcome to Volks. Thank you so much for coming. Thank you for having me. All right, Greg, let's start with you. So in the name of keeping my introduction tractably short, I did not get into Henry George. But why don't you briefly tell us who Henry George was and what his basic insight was and why that basic insight has come back?

3:48Henry George is a political philosopher, a journalist, whatever you want to frame him has from the 19th century. And in the 1890s, he lands down in San Francisco and he's asking himself this question. It's the industrial ages. We are producing things faster than ever. And this is supposed to bring about all this progress, all this prosperity. And he's asking himself, why do I see so many people living in such terrible conditions with so much poverty? And so he writes a book called Progress and Poverty. What he realized is with the industrial age, we had discovered a new frontier. That frontier is everybody moving to an urban core.

4:24There's all of a sudden agglomeration effects around living near a factory. And because everybody wants to live near a factory, the people who own the land are the people who are able to benefit the most because they can charge increased rents. And as those factories become more productive, as we discover assembly lines and new methods and mechanisms to make factories more productive, so too do the profits, and so too do the wages to the workers. And all of that means that the rents can go up even further because now more people want to be near that factory that pays higher. And we see this today, right?

4:58We see this in San Francisco in our big cities. That's where we see the highest agglomeration and the highest value of land and the highest rents that people pay for units that you could go into a rural area and have a house eight times the size of. And so Henry George is a political philosopher who understood that land was a big deal. And he invents what he calls the land value tax. Why don't we tax this value, this locational premium in our cities? And this wasn't a novel idea necessarily. I mean, Adam Smith, Thomas Paine talked about variations of this policy, but he really popularized it and becomes one of the most notorious figures.

5:34He actually runs for mayor in New York City, marches down the streets and has a huge parade. He ends up finishing second, but he's this figure that has lasted and his ideas have proven themselves throughout the past century. And now is the resurgence here is his idea around land value tax that I think we're seeing right now a huge resurgence of. Georgism. He's even got an ism named after him. Yeah. And I think the key thing for people to understand there is if you're sitting on this piece of land, if you own this piece of land and people develop around it, the factories come in and then the public invests in infrastructure and people invest in schools and libraries, all that stuff raises the value of your land, even though you didn't do anything, you're just sitting on it.

6:25And so basically that public investment is going to your private profit. I think that's part of what he, that was part of his insight. Yeah, that's exactly the way I understand it too, right? Is that land, it is, people sometimes get confused. What do we mean by land, right? What we really mean is location. and nobody creates location. It's a natural resource. I mean, we have$50 trillion of land in the United States. That's our largest natural resource and nobody created that land. And then when we go to New York City, you don't create that value. Everybody around you does, the roads, the people, the schools.

7:05And so I think that's where sometimes what we say is land value return. We're returning the value of land to the community that makes that land valuable, right? And we use a tax as the mechanism, by which, to do that. But yeah, I think that's where you sometimes hear this concept of land value return. One other thing to say is the reason a lot of economists love this, even conservative economists, is the sort of basic economist insight that when you tax something on the margins, you get less of it. If you tax income on the margins, you get less income. If you tax sales on the margin, you get less sales.

7:42If you tax carbon on the margins, you get less carbon. but you can't get less land, right? You can tax land all you want and you can't reduce the supply of land. So Milton Friedman was a fan even. He called it the least bad tax. So George wanted all taxes on land. He wanted that to be the sole tax. I don't think anybody today is proposing that. I mentioned this briefly in the intro, but tell us sort of how property taxes currently work about this balance of values and how kind of how they're assessed. Yeah. And good news for the United States, we have a property tax system. The European nations, some of them can barely relate, right?

8:26When we have quite robust one and a property tax includes two taxes in one. We add together the value of the land for each parcel and the value of buildings for each parcel. And we add those together and we apply one tax percentage to those. We say, okay, your total market value is$500 ,000, we'll tax that 1%. But this is hiding two taxes in one, and there's no reason we need to do that. We can split those taxes into a building tax and a land tax. In a lot of our assessment jurisdictions, we already value both separately. And we can decrease the building tax at a time when we're asking, how can we get more development?

8:59How can we help solve the housing shortage? And then we can increase the land tax at a time when we're asking, how can we have less land speculation, less vacant landowners, less surface parking loss in our downtown corridors. And I think that's the idea that when we're talking about land value tax nowadays, it's really important to say we're talking about shifting taxes from buildings to land. We're talking about decreasing the building tax. We're not trying to raise taxes overall. Some people are, some people aren't. For me, it's not a question of how much money the government takes in. I'll let the city government decide that or the county government decide that.

9:29It's a question of how we collect that money and how we collect that money is an extremely important question for how our urban environments get built. And that's why I think property taxes are very important for this conversation. Right. And so, like I said, the basic insight is if you shift that ratio, if you reduce the building side of that tax and increase the land side of that tax, you are raising the penalty for sitting on an undeveloped piece of land, basically, and you are reducing the penalty for building. That's the idea is around the margins, you'll get more building. Yeah. And to put this tangibly, if you look at a downtown and you go drive through your downtown and you'll notice that there's either a vacant lot or a surface parking lot somewhere there.

10:11And you'll notice that there might be an apartment complex and a hotel and a mixed use apartment complex with a storefront right next to it. And if you look at how much taxes the vacant lot pays today under the current property tax system, it's paying usually 10 times to 20 times less than the apartment complex sitting right next door. So the person who decided to, you know, invest in their property and build this downtown is paying 10 to 20 times more in taxes. As we shift that tax burden from buildings to land, we're saying these should be paying pretty similar. We should stop penalizing that development so the vacant land would pay more compared to our current system.

10:47But that's just because that's the way that we set up our current system. We've penalized that development. And so that's the ultimate impact of this shift. When you look, you know, when you drive through your downtown, that's what you should be thinking about. And I guess maybe one other thing to say is that the effect of this would be felt most intensely on the most valuable land, right? Which tends to be pretty mechanically the closer you are to an urban core, more or less. So the natural effect of this would be to push more building toward the core. Precisely. This is the infill development we're looking for.

11:26Right. And so say a brief word. Some of the questions I got, I threw this out online as I tend to do and got a bunch of questions. And one of the questions I got is sort of, how does this relate? What is the sort of relationship to, of land value taxes to kind of the YIMBY zoning, upzoning, all that stuff that, you know, I've covered on previous, previous podcasts that they, that the YIMBYs want to do upzoning around transit, all that kind of stuff. Are they complements? Do they, do they need one another? Can they, stand separately? How do you look at that relationship? Perfect complimentary. In fact, thank you to the YIMBYs for their past decade of activism.

12:10I don't think we would be seeing all the states considering land value taxes today without that urbanist movement and that grassroots momentum. When we upzone, when we make it easier to develop, land becomes more valuable. There's good studies on this. When you do transit-oriented development upzoning, you see all of that land become a lot more valuable. And because it becomes more valuable, folks can still sit on that land. I mean, we've seen this out in D.C. with some of the developments in the WMATA from the D.C. area, and we've seen folks just sit on vacant land. Why? Because they can wait 20 years and still double their money on that vacant plot of land.

12:47And so when you do this upzoning and we do this transit investment, the next question is, is, OK, how do we ensure that this windfall that we've created, this huge amount of money that we've created for private landowners. Right. We've created value. Again, I just got to put an exclamation point in that. When you upzone and when you develop land, you're creating value, right? And so how do you distribute that value is the question. Yes. Yeah. And then how do you both distribute that value while also incentivizing the upzoning to also materialize? And so I think this is that question is we've raised the land values, but we also want to encourage this person to develop the multifamily house rather than sit on it and wait for their neighbor to develop first because then they can sell for more later, right?

13:32And I think this is all about incentives and the questions around incentives. And so I view these as perfect complementary. We work with a lot of YIMBY chapters, a lot of housing policy, housing abundance folks. And I think there's a reason why these are policies that go hand in hand. Is there anything to say about the order, kind of the order of operations or like if you're a city contemplating these things, is it better to do one before the other or does that matter? Like, is there kind of a sequence? Is there a sequencing? Anything to say about sequencing? Yeah, there is. I think some folks would argue, you know, if you implement the split rate right before and upzoning, then that could be good because then you capture some of that windfall you've created right away and then are also immediately incentivizing that development.

14:22But I also think that you can upzone and then a year later pass some sort of policy of a land value tax shift and still see those good benefits. And so I think that the housing solutions is not a one-size-fits-all solution. And so cities should do what's politically feasible, but also should be working on this problem from every different angle, right? And a lot of our cities, you know, I believe upzoning is really important in a lot of our cities. But a lot of our cities are asking themselves, you know, we have this surface parking lot downtown that technically could be developed into something, but it's not.

14:55So is zoning really our problem? And zoning still is, you know, if you universally upzone, it's a good thing. But a lot of our cities aren't San Francisco and aren't New York City and aren't going to see all that development right away. And so we also have to ask ourselves the incentives question. So I think, you know, whatever the order is, these are complementary policies, but they're also policies that can both help to get at the solution independently. There are some examples of this happening in the wild, not a ton, but some. And so Pennsylvania, for instance, let's talk just briefly about Pennsylvania.

15:31Pennsylvania is one of the rare cases where there's state law that basically says if cities want to do this split rate, i.e., increase the land tax, reduce the building tax? They can. So presumably we have some examples on the ground, some experience. What have we learned from Pennsylvania's record? Yeah, Pennsylvania has had 20 plus cities implement what we call split rate tax, again, taxing land more than buildings. And those cities, there's good economic evidence from those cities. Now, economic evidence comes from the 1980s to the 2000s. I mean, the economic studies come after, but this is when the implementation is.

16:16So take some of this with a grain of salt. But you saw the cities, these post-industrial cities like Pittsburgh, which is the largest city to have implemented one from 1960 to 2000, really was able to continue to build and survive this post-industrial decline of a lot of neighboring cities a lot better. And so the economic evidence suggests that you saw an increase in housing infill development, more units per acre. You saw more permitting. You saw less vacancy, less vacant land. And you saw an overall increase in property values. So this is the gist of the economic literature from the Pennsylvania experiment.

16:51Now, some people ask, well, Pittsburgh got rid of it in 2000. The question is why? And so I always have to preempt this with it's kind of ironic that Pennsylvania is the one state where this has been done, because Pennsylvania also has the worst, some of the worst reassessment policies. Some of their cities right now have assessments dating back to 1960s. And when we say assessment, this just means that when we talk about the value of the land and the value of the buildings, somebody's got to go in and determine that. That's not it's not an obvious number. There's some judgment involved and some expertise involved.

17:25And that's what assessors do. And that is also governed in some sense, in some ways by law and procedure. You know, if you want to be impressed by your local government, drive around and notice how many independent properties there are and tell yourself, wow, the assessor assesses all of those properties pretty frequently. And that's a hard task. Yes. So so the assessors have a hard task and they're oftentimes, you know, very low staffed to do this very, very hard task. But if you're Pennsylvania, you avoid that by just never doing it. Now, Washington State, for instance, does that every year.

18:00Right. And so Pittsburgh does this huge reassessment. They finally, you know, the first time in 20, 30 years, they're like, OK, what is each property worth now? And of course, you saw massive increases. And so there was a huge populist backlash against the reassessment. We're seeing this today. In Syracuse, New York, they did a reassessment and they voted against their reassessed values because there was a backlash to the increase in tax burden. And the assessor is not at fault. The assessor is just telling you what the market tells you. But Pittsburgh got mad. They were wondering why they're doing this weird split rate system.

18:34They said the skyscrapers should pay more. Let's get rid of this weird system we have. And so it is ironic that Pennsylvania is the one state with this, considering they don't mandate reassessments while other states do mandate annual, triennial, you know, once every four years, once every three years, once every year reassessments on all properties. Yeah, we're going to get back to assessment in a bit when we talk about Spokane. But one other example that I want to briefly discuss, which I found really fascinating, is Vancouver, B.C. Vancouver, B.C., back in the early 20th century, had like a fully Georgist system.

19:14They only valued land was the only thing taxed in Vancouver. And what you've seen in Vancouver is not this sort of one-off backlash that got rid of it. What you saw in Vancouver, B.C. is over time, the land value tax got kind of whittled away. The building tax grew over time. And then eventually, I think it was in the 80s, it finally went away entirely. And then, ironically, as anyone who lives in Vancouver knows, they proceeded to have a giant affordability crisis through lack of building. But as I understand it, and tell me if I'm wrong, what kind of what happened in Vancouver is that homeowners, the ones who, you know, get penalized by this over time more and more as the cycle goes on, are also an incredibly powerful political constituency.

20:15And the people who benefit from this policy, as is so often the case with public policies, are sort of diffuse. They don't really know they benefit from it. Some of them are future renters, so they don't even know, you know, they're not organized, etc. Is that accurate about what happened in Vancouver? And I guess my question would be, how do you prevent that from happening? How do you prevent sort of the people who see the penalties organizing to fight it and the people who benefit being diffuse and unorganized? that's my understanding of vancouver and probably the extent of my understanding of the vancouver situation is similar to the way you've described it um i will say i've had people reach out to me from vancouver recently uh trying to revive the land value tax in the same way that people are reaching out in pittsburgh and you know even the pittsburgh gazette's editors came out and said We need to revive our land value tax.

21:13So it's curious that these cities are now looking back towards what they once had. Of course, there's winners and losers with these policies. I think one of the things we'll get into in a second with Spokane is sometimes these shifts are actually beneficial. You see a tax decrease for single family houses because single family houses are sometimes good uses of land in a lot of our cities. For in San Francisco, a single family house is not a great use of land. But in other parts of our cities, single family houses are decent uses of land, probably not as good as row homes, right? But they're not as bad as vacant land or surface parking lots.

21:49All of this is relative to each other, right? And so I think that there are some ways that you can get rid of some of the boogeyman's around this policy. It's like, oh, this, of course, single family homeowners are going to hate this. And then you do the data analysis and you say, well, they decrease in taxes. So why are they going to hate this? And, oh, of course, this is a progressive policy. So industry would hate this. But actually, this is a pro-development policy. So why would, you know, development hate this? And but then you do have a landed class. You have landowners and those landowners want to get that money from land.

22:22Right. And so we see this in Florida with there's a huge push to abolish property taxes that ended up just being a two hundred fifty thousand dollar exemption for homeowners. Why? Because homeowners, as you said, are the class of people who vote and who have political power. And they want more wealth. They want more money. And so the homeowners are going to vote for these types of things at the detriment of renters, at the detriment of commercial businesses, small businesses who help make the economy work. And so I do think that there's an aspect of that, but I also think that there's an appetite to push back on that.

22:57And we even saw in Florida, you know, host of the Charlie Kirk show come out and talk about how this was a massive wealth transfer from Gen Z to the boomers. How this is just creating a ton of money. Right. And so the land and there's an element of like killing the killing the golden goose. Right. Like the reason the land is valuable in the first place is I mean, this is something I come back to again and again, like cities. agglomeration, as you said, creates value. That's why the value exists. That's why the land is valuable in the first place. And if you kill agglomeration and you disincentivize building in urban cores, you're killing the golden goose that gave your land the value in the first place.

23:43It's long-term self-destructive. Definitely. And so to answer your question, there's pushback. There are people who don't want this to happen. But there's also reasons why a lot of people should support this. And there's a lot of boogeyman's around the policy that I think are inaccurate. I think you need a lot of folks in support of a revenue neutral shift to land. Final background question is just, is there any other country? Are there international examples of this happening or experiences to learn from? Or is this a U.S.-centric kind of problem? no that there are estonia has a national land value tax that has been implemented for a while they just did a massive reassessment at a national scale um and so you know there's a huge a german state that just implemented a land value tax i think that there's a lot to look towards um but a land value tax is not the only way to do what we're trying to accomplish what we're saying is that the public creates value and should regain and recapture that value and then return it to the community.

24:49Singapore does this through owning all of the land and having variable rate leases. And so these variable rate leases effectively operate as a land value tax. And Singapore has seen tremendous prosperity and pretty good sustainable financing because they own 80 % of the land and are able to do variable rate leases on top of those lands. And so there are a lot of different examples of the sort that you can look at to realize that this isn't a crazy system that nobody's done. There are folks doing this. So you lease the land, it gets built up, it creates public value, that public value goes to the state and the state reinvests it in schools and infrastructure, et cetera, raises the value of the land more, gets more revenue, invests more revenue.

25:36You can get a cycle going there, ideally, instead of the state invests, raise the land value, and then a Precisely. And one of my favorite examples of this recently, we have a fellow, Elle Griffin, who also does a lot of her own great work. She's been studying the Scottish islands. Scottish islands bought themselves, some of them. And the way they were funded was through the Scottish lottery. The lottery had a provision that a lot of the proceeds would go to a national land bank. And so residents would come together, the island of Stornaway, for instance, they bought the island, but because they own the island and there was a huge, massive land trust, they also had to provide for themselves.

26:18They had to provide the businesses, the schools, the infrastructure, their own housing. And so they had this incentive, though, because they owned the trust and they benefited from the trust to also make it attractive. So they built a golf course, and that golf course is now part of the Scottish Open, I believe. And so, you know, you create these good dynamics where cities want to improve. They want to be better because the residents all gain from that. The city gains from that. But in this case, it's a trust. But, you know, same principle is I find it funny that a lottery system funded this. But there's there's things to take away from that model.

26:53Yeah. OK, let's so let's focus in a little bit on an example in Washington. Let's talk about Washington state where I live. One of the barriers to this in Washington state, as I understand it, this is true in many state constitutions. The state constitution has what's called a uniformity clause, which basically says that taxes on property must be uniform and that all real estate is one class. So you have to have one rate, one rate on all classes. So legally, you cannot tax the land at one rate and buildings at a separate rate. Legally, you cannot do a straightforward land value tax. So then how do you get around that?

27:45Yeah, the other way of doing, of shifting taxes from buildings to land, what if we just exempted all buildings from taxation? The only thing left to tax is land. And so we actually do this in a lot of cities. We have random exemptions for multifamily. Washington state has a multifamily tax exemption. But we're saying, what if we exempted everyone from their building taxation? What if when you build an ADU in your backyard, you're not taxed on your improvement? And so the Washington state constitution gives broad authority to the state legislature to determine what property can be exempt from property taxes.

28:19And so that also gives the state legislature authority to say cities can choose to exempt portions of every building from taxation. So what this would look like in principle is saying, is the state passing this law and then a city like Spokane saying, we want to exempt 50 % of every building from taxation. And what that does is it decreases the taxable base. If you otherwise had$200 million in property value, now you only have$150 million you can tax. But you still need to get$50 million to fund your city government. And so you raise your tax rate from 1 % to 1.2%, 1.3%. Effectively, what that's doing is that 1.3 % is now being applied to land.

29:05So this is sort of a goofy way of going about it. But what we're doing is we're saying buildings are exempt from taxation or a portion of buildings are. And so we're going to raise taxes, the tax rate overall. And that raised tax rate is mostly going to apply to the value of land. And it effectively accomplishes the same thing. Right. So it's revenue neutral. You're still raising the same amount of tax revenue, but less of the taxes applied to the buildings, more of the taxes applied to the land. It's sort of a backdoor land value tax. One other technical detail in Washington, in our wisdom, we have a rate cap, a cap on the amount you are allowed to charge property taxes and an increase cap or a cap on the rate that you're allowed to increase property taxes.

30:00Talk just a little bit about how those constrain movement here, constrain what Washington cities can do. Yeah, parcels in Washington City, a piece of property cannot be taxed at more than 1 % of its full market value by typical means. So a city council can vote among themselves for a property tax. The state has a property tax, the county has a property tax that they vote for, that among themselves, among the elected leaders for. And the Constitution caps the total amount of that across all of the different, the state, the county, the city. When you add those all together, you can't go over 1%.

30:37And additionally, the city can't collect. If the city this year collects$50 million, next year it can't choose to collect$100 million. It could only raise its total revenue collected by 1 % every year. These are citywide or districtwide restrictions. It's different for listeners who know about Prop 13 in California to that, where that's parcel level. That means that each parcel can't increase in taxes more than 1%. California has it a lot worse, right? That parcel level means that you'll have two properties sitting next to each other. One will be taxed at$2 ,000 and one will be taxed at$100 ,000.

31:12And they're both$5 million homes not paying their fair share because they've been owned for five decades. This is a different question. But importantly, in Washington state, the city can vote for levies. And this happens frequently, oftentimes for school districts. And when they vote for levies, those voted levies do not apply to either of those restrictions. And so there are a lot of voted levies, both in Seattle and in Spokane, that are not restricted by that. And so that just means that the people who are actually residents there need to vote in favor of that levy increase, which does happen.

31:47So although it's unfortunate that you have some of these restrictions, it's also democratic in a sense. When I talk to conservatives, I say this is the most beautiful tax because you know exactly where your tax is going, right? And in some states, like Washington State, you quite literally vote for it. And so if you're going to want any tax, this is a great one. But yes, there are restrictions in Washington State, but voted levies get around some of those. Yeah. And I guess it's good that we can get around them, but I just have to say for the record that it is crazy. If you have a city that experiences big, rapid growth, you would think, What a good thing.

32:28We can now get more tax revenue and invest more in our city and get in that virtuous loop. And instead, you have a city that grows really quickly and you are capped in the amount you can raise property taxes. So almost by definition, you are starving the cities that are growing the fastest. It's an insane, an insane thing to do. But that's constitutional, I guess, and very difficult to, very difficult to undo. But as you say, if the voters levy it on themselves, they can get around those caps, which is like not an easy thing necessarily to get voters to vote to raise their own taxes. But if you can talk them into it, you can you can get around these these rate caps.

33:19So, Kitty, sorry, Greg and I nerded out a little bit there, but I want to talk to you now. Now, you have a long background in land use work, land use advocacy, worked for FutureWise, done a lot of transit campaigns, et cetera, et cetera. But as I understand it, you had not really heard about land value taxes until relatively recently, until after you were on the city council. So maybe just tell us briefly about kind of your history with land use and how you came to find out about this and why it appealed to you. Hey there, everybody. Don't worry, I'm not going to tell you about a new mattress or push a credit card on you.

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35:30Yeah, well, that's not exactly true. It's been brewing for me for a little over 20 years. About 20 years ago, FutureWise is a statewide organization, and I was in our Seattle headquarters walking on Capitol Hill with a coworker. and we were walking by this old Scientologist church that was being renovated into condos. And the developer happened to be there and very frustrated and somehow knew who we were. And he came out on the sidewalk and sort of accosted us and said, look at this, the Seattle tax system is making it very hard for me to develop this beautiful building of lasting value and turn it into something that continues to be a lasting value Meanwhile, you're making it super easy for people to build these corrugated steel, articulated, crappy, wealthy family buildings that in 10 or 15 years you're going to look at them and say, oh, these are so 2000s.

36:34And they're not going to have any lasting character or value. He said your tax system is incentivizing this. You want to know why no one builds with stone or brick anymore. It's because you make it so expensive for us and so cheap for people to build with crap. And it kind of came out of nowhere. He let us tour the building. It was beautiful, but he was really struggling. We didn't even know if he was going to be able to complete the project. But it stuck with me. I had no idea what to do with it. And then over the years, I had been involved in Spokane in my job in participating in these kind of steering committees that were supposed to figure out infill for Spokane.

37:19Because we outsized our urban growth boundary early on, shortly after the passing of the UGA. So we had this enormous urban growth boundary and a sprawl problem and an infrastructure and traffic problem and not the most affluent tax base to address all these problems. So we, as a city, they were deciding to try to get it together and strive for infill and try to grow up and not out and be a little more prudent, protect our remaining forests and farmland, all the things. Sounds good. So we tried upzoning. We tried to take advantage of every incentive the state allows us to give. We did a lot of public investment in transit and streetscaping and other things.

38:04And it wasn't always manifesting in the way that we had hoped. We weren't seeing any redevelopment and we still had a ton of vacant lots. Yeah, I should say just I've been to Spokane and even relative to other big cities you see, there is a striking amount of weirdly underdeveloped land right in the middle of the city. It's a striking feature of Spokane, I think, to this day. Yes, and it's a thorn in my side. And it has been for a very long time. So this was before you got on the city council? Well before, yes. This was a 20-year process for me. But I think what I started to notice over the years is just like public policy, taxes can be kind of an unintentional source of social engineering.

39:03Yeah. And so when we tax the value of a building, we disincentivize quality. We disincentivize good materials and we disincentivize maintenance. So that's why that gets to what the guy said to you before. The reason people now are building with cheaper materials and building cheap, ticky-tacky buildings rather than nice quality buildings is that they get taxed more the higher the value of the building they build, basically. That's surely a part of it. I think it also affects the way that things are financed. I don't see raising the land value as the thing that we tax over the building as penalizing.

39:49I think what we're doing is we're actually changing the stakes. When we upzone and incentivize land, it increases the expectations for speculators, right? So I can't tell you how many times I've gone and, you know, an area has been recently upzoned. zoned, a landowner owns this huge piece of land, and I'm coming in and talking to them about why they need a street vacation so they can maximize the use of the lot, have all these stories about what they're doing. And so we do the street vacation, and then the land just still sits there for sale. All they're trying to do is maximize the value of that lot.

40:26They had no intention of developing it because developing things is a lot of work. And so we're raising the value and keeping the stakes extremely low for someone who wants to speculate. They're paying almost nothing in property taxes, but they're raised. They're slowly like building the value of this piece of land by us upzoning it, incentivizing it, and then maybe doing a little bit of administrative work. And the land just goes up hugely in value. Right. So Spokane, Spokane is raising the value of the land. Yes. And they are benefiting from it. with very little risk, right? And meanwhile, the neighborhood's sitting there experiencing this vacant lot, like on all the nuisances that come with that, whether it's raccoons and stray cats or squatters and crime, we experience all those nuisances associated with that vacant lot that is usually in a prime location.

41:24And it just sits there because they're waiting for the person to pay the right price and they're doing a minimal amount of work to get more money out of that. But when you take away the risk of higher property taxes and all of the things from the part of the building, we're doing what we can to incentivize a higher quality building and make it easier to build that building. They don't have to consider it in their finances, having their property taxes go up. So I think it's kind of a virtuous cycle. And like that experience in Capitol Hill, this made it very real for me that these kinds of policy decisions that are very hard to change because they involve taxes.

42:09And I feel like there are a lot of boogeyman with taxes. But if we don't get serious about what we're doing wrong, what we're truly incentivizing and disincentivizing with our tax system, the problem is just going to continue to fester. I was in Peru the last few weeks, and I noticed that there's a lot of unfinished looking buildings everywhere. There's rebar sticking out of the beams, tops of buildings and things. And someone in my bus that I was on finally asked someone why this is. They don't tax buildings that are incomplete as highly as complete buildings. And so people just don't complete the building.

42:52You'll see the two or three story window with rebar sticking out of the top floor to imply that there's going to be another floor someday. So please don't tax me. And I think they were probably trying to make it easy for developers, trying to ease the burden on somebody who's trying to build their building or their house. But what has resulted across the country from Lima to Cusco, these weird-looking, unfinished, substandard-looking housing that might be nice inside, but looks terrible from the street. Yeah, tax policy is full of unanticipated consequences. But I feel like we have gone as far as we can in Spokane with upzoning and incentives.

43:33We're trying to diversify the building types we allow. We're trying to make our code more flexible. We went to a form-based code a while back, and it's still not resulting in the type of turnover. But we have some landholders in the community that just sit on land and are happy to do that for decades or generations until the golden goose turns golden enough, I guess. And that's really just not great for the community. So I've been talking about this issue for years under different names. At first, we started talking about it as a universal, or no, we first called it highest and best use. And that conversation kind of got shut down.

44:17Like, what about the vacant lot next to my house that I might someday want to build for my grandma? Okay, how badly do you need that? And if you're serious about it, why can't you pay taxes on it? But then we started talking about land value tax and the constitutional things came up. And it wasn't until I got connected with land economics and Greg and some other folks that we started thinking about this universal building exhaustion concept, which has been really helpful because it was starting to seem impossible to get a policy that really reflects the goals and values of our community rather than making it harder for everybody.

44:58to get there. So it's the split value thing that is somewhat new to you then. So this is a proposal now that you've put on the table at the city council level. It didn't get through this time. What's the sort of political state of play of the proposal specifically? Well, we weren't really able. We don't have the statutory authority to reform taxes at the city level. For almost everything, we do have to go to the state for permission, even if it's something we're going to ask voters for. Unless it's something that the state has already carved out our ability to do, we can't after it. So you're pushing for a state law, some sort of state reform.

45:46We are trying to get the authority from the state to be able to do this in our city, either as a pilot project just for Spokane or as we're finding there are many cities that are interested in this as either a pilot project or just a permissive legislation for cities who want to opt into this. And so what is the state of play at the state level then? It didn't get through this session. Is it still, I mean... We've had difficulty getting it drafted because we feel that we need some cooperation from the Department of Revenue to do that properly. And the code revisors at the state level don't necessarily have the confidence to just sit down and draft Department of Revenue laws without the cooperation of the Department of Revenue.

46:34So we have a kind of steep learning curve that we need to get folks over to understand the why and the what of this. And that we're not trying to raise taxes or create any inequities. We're trying to increase opportunity and build a tax code that makes more sense for the goals of our cities. Well, if there's one thing I have learned about Washington cities is that single-family homeowners have a lot of power in them. There are a lot of single family homes in them and single family homeowners homeowners have a lot of power and they tend towards nimbyism. I'll just say as charitably as possible.

47:20So what do you say to single family homeowners who say, look, if you're going to incentivize building, that means people are going to build a bunch of big apartment buildings in my neighborhood. This is, of course, the terror of all single family homeowners in Washington is that someone builds an apartment near them. What do you say to the single-family homeowners who are worried that this is going to induce a bunch of development in their neighborhoods? Well, first of all, it doesn't affect the zoning at all. So if you're not zoned for multifamily, you're not going to see multifamily just because of a land value tax.

47:55In Spokane, we don't have any single-family zoning. So a fourplex could be allowed anywhere. And so that could already be a fear of someone who's afraid of those types of things in their neighborhood. But what I will say about this is this makes it easier for someone in your neighborhood to build another bathroom, to re-roof their house if they need to, to upgrade their facade, to maintain the homes that they have without fear of their property taxes going up or their next door neighbor's property tax going up just because they made some improvements. So and their property taxes will go down. So there is some benefit to single family homes.

48:39It also makes, I think, a person who has purchased a vacant lot and wants to build a single family home. That's going to be easier for them to do because the taxes are not going to go up significantly on that lot when they build a house on it. So it's it doesn't do what people think it's going to do. It's there to get rid of the speculation and the very woeful and obvious underdevelopment. We have some huge surface lots where there should be buildings in our downtown. We're about to make significant investment on our division corridor that goes through the center of the city, our biggest main street.

49:19for we're going to build bus rapid transit there and do station improvements and streetscaping and all of those kinds of things in that area is just an eyesore. It's full of vacant lots, gender block, empty buildings. There's only really one significant multi-story building, and it just stands there by itself compared to this kind of depressing single story and vacant lot area. And we don't want to make that kind of public investment. It's going to be a quarter of a billion dollars of public investment and then see nothing grow out of that. And that's what could continue to happen if we continue to make it incredibly cheap for those landowners that own a ton of land on that corridor to do nothing until someone else does and makes it more profitable.

50:06So getting back to the assessment question, it's kind of technical, but it turns out to be like one of the real barriers here. The county, your county assessor called this proposal crazy because he says, then you're running two different tax rolls. You're making two separate assessments for every property. The state assessors association were unanimous in opposing this. It seems like that's a real barrier here. So how do you solve that? I mean, it's my inclination, obviously, being the way I am is you just need to fund and staff your assessing departments adequately. But how are you addressing that objection and that bit of resistance?

50:57Do you have sort of answers or proposals to help them? Well, I think, first of all, we're not asking them to change the way they assess land or home. The value of the home and the land stays the same. It's just how much of the tax burden we apply to the land part and how much tax burden we apply to the building part. That's really all that's changing. We're not asking people to assess the land differently at all. So that's kind of a misunderstanding. I don't know if they saw like an early draft that could have implied that, that made them think that that's where we were going. But our county assessor has been on board at different times and has kind of changed his mind as he hears other voices interpreting in different ways.

51:41But I think this is there's no insuperable barrier there to getting them on board. I think what they will have to do is work with their local governments and create the algorithm that works for their land base and their goals and then apply that algorithm to each property. So this could be a matter of just programming and not necessarily having to hire new staff. And I'll chime in here as well, because I've talked to a lot of these assessors in Washington state on this. And ultimately, they already value the land and buildings separately. And across the country, this is true, too. And different counties do it differently.

52:20Spokane actually does a quite good job of their split between land and buildings. and these counties in Washington already administer the multifamily tax exemption, which is an exemption on improvements. And this is very similar. We're not asking them to run two split roles. We're asking them just to add another exemption to properties. So we don't think that there's as large of an administrative barrier as assessors make it out to be. We're working with them to figure out how we can ensure. I used to work for housing and development. I care a lot about administration. But I also think that there's this sentiment among assessors we see nationwide why don't we talk about this policy?

52:55Some are actually very much in favor. Some think really like their land values, but some push back a lot. And I think that this sentiment, imagine if today we didn't have a property tax system. The idea that you would go around each city and value each property would sound so absurd. Yes. Like, how do I know that the granite countertops were worth$80 ,000 and the buildings depreciated$20 ,000? I mean - Yes, indeed. It's something of a mystery to me how they do it now. And it works, right? Granted, people push back nowadays and make this argument that, oh, it's an illiquid. You don't know the value until it sells.

53:33But it turns out that our property tax system works pretty well. And so if we were in this alternative universe where we didn't have one, we would hear the exact same pushback. Now, this is an even less of a step from going from no property tax to a property tax because we already have all of the infrastructure to value land. We have all the data we need. Now, some assessors might not be paying as much attention to the land values. They should be. But they already have all the infrastructure and data they need. And so this, to me, sometimes feels like a larger argument than it should be because people just aren't imagining what the future could look like in terms of land value taxes.

54:07And it's not as crazy. It's just as crazy as a property taxes. We already do property taxes. So I think it's possible. It's entirely possible. Another question is just about the size of this and the effects it will have. So, and tell me if I'm wrong about this, Kitty. Under this proposed tax split in Spokane, as I read the report, the median tax bill of a vacant parcel will rise by something like$560 a year. but these improvements you're making these investments like the like the investment in bus rapid transit etc etc this these some of these land values could be appreciating by tens of thousands of dollars a year so so i'm sort of wondering like even if you get this passed is the scale of it sufficient really to actually induce building like what is the what is the modeling show you about whether this is actually going to induce behavioral change?

55:18Well, I think that's the question right there. I think it depends on how we're able to apply it, if we're able to make it applicable to state and local taxes. There's a lot of what-ifs there that are going to be worked out through the legislature. I'm obviously hoping for the maximum impact possible, but it is just one tool in our toolbox to try to incentivize infill. We still need good growth containment strategies. We still need economic development plans. We still need to improve our zoning and our building codes, all of which we are working on in Spokane has been a leader on. But this is just one more thing that slightly equitizes our tax base, gives some relief to residential folks while still allowing us to pay for the infrastructure that some of these larger landowners benefit the most from.

56:23Greg, maybe you could tell us briefly, your outfit has done analyses and reports for various cities, just how this would work and what the effects would be. Tell us what the modeling shows in Spokane, like who benefits and who gets penalized. And I was sort of thinking about the people in the single family homes. I mean, it just strikes me and tell me if this is correct or not, that there's not one answer for how it's going to affect people in single family home neighborhood. It obviously depends on the value of the land, which again, depends on the proximity to the core, basically. So like if you are in a single family neighborhood that's very close to the urban core, it probably will induce a lot more development than it would if you're.

57:12in a neighborhood farther from the core. And it seems to me like that's exactly what you would want to happen. But tell me what the modeling kind of shows, like whose bill goes up and down and like who benefits and who gets hurt. Yeah. First, this is a lever that the city has and they can press on this lever as much as they want. And so the modeling we do for the city is a version of the policy. We, you know, the modeling we published was just one version of the policy that we would propose for Spokane. It doesn't dial it up immediately. It doesn't, but it's also not completely white. And so in the modeling we did, there was a base exemption and then an exemption on buildings, a percentage exemption on buildings.

57:58And that modeling showed that the median single-family homeowner is going to decrease 4%. But importantly, to your point, David, their tax, the median single-family homeowner's tax burden will... Property tax burden, yeah. Decline very slightly. Very slightly. And that was what I was about to say is most, this large majority of single-family homes will stay within 10 % of their current bill. And so what this is actually doing is it's really shifting that burden from the multifamily developments, the townhouses, to the vacant and surface parking loss in the downtown corridor. But also for those single-family homeowners, this is not dialing up a full land value tax to 100%.

58:38We're far, even if we did 100 % building exemption, far from 100 % land value tax. And so as the downtown develops more, which this policy would do, the single family home, sure, their land values would increase, but you profit off of that increase. And so there's still profit incentive for these single family homeowners to see their city get better, at least in my vision. But this is, again, comes down to whether this is about profit maximizing or whether this is about just keeping the character of the neighborhood. right which is still undefined science i think a lot of people are starting to think the latter the latter might be guiding this a little bit more than we once previously thought right but the other thing i wanted to touch on in terms of projections outwards in terms of what this does development i don't think it's been talked about we're talking about a one percent tax we're used to like eight percent sales taxes twenty percent right income taxes but that one percent tax applies annually.

59:33And so this building tax, this building portion, if I own a plot of land and I build a million dollar apartment on it, I'm taxed 1%, not just this year on that$1 million investment, but every single year thereafter, five years later, I'm still paying 1 % of that million dollars. We take the net present value of that. We sort of amortize that out. We say, how much tax is this really in terms of today's money? And it can go up to 20, 30 % tax burden. And so the building tax, although it seems small, is actually a large tax. And I just want to touch on that because it's important to say that we're not talking about a small tax here.

1:00:06This is number one source of revenue for local governments. It's a huge tax. And it's not just a one-time tax. So this is a large tax and a large disincentive to develop. And just to, you very briefly touched on this, but just to sort of pull this out, taxes would go up the most for vacant lots and parking lots and would decrease the most for multifamily residences, basically. Yeah, that's the modeling in Spokane. And that modeling typically holds true in a lot of the other cities that we model. Now, it's always true that vacant land doubles, you know, and service parking lot double in price. And it's a little bit variable how much single-family homes are impacted, how much multifamily is impacted.

1:00:52But typically those are single families typically not really changing much, in your multifamily is typically a median 10 % decrease. And that's true of the Spokane modeling. It's true of a lot of modeling we do. All right. And so Kitty, just one more for you. Just what is the plan? What is the, what's the plan of ATT &CK here? Are you going to have another go at trying to push this in the state legislature next session? Yes. We'll be having workshops for legislators before the session starts. Do they get this? Do they, like in your experience, do they intuitively understand this or is there a lot of education required at the state legislature level?

1:01:35I think what happens is they get the need for it. They get the idea and the concept and then they get spooked when the details come out. And so that's the point where we have to compete for their attention enough to get them to understand and feel confident. That what we're trying to do is possible and what we're trying to do is not burdensome to the state or local governments. And then it will be much easier because there's a ton of interest. There's a ton of buzz. It's something that I've been talking about for years with certain people and is starting to gain ground in more mainstream circles.

1:02:19Some folks even from counties have been interested in exploring this idea, which I've never quite understood. But I'm glad they're interested. And specifically, are you pushing for a pilot thing for Spokane? Are you trying to get a bill akin to what Pennsylvania has, which just says that cities can do this at their discretion? I think ideally it would be permissive for any city that wants to do it. But Spokane is always happy to be the test kitchen for the rest of the state. So for me, it would be enough to get it here. I think the problem is pronounced enough. It's very, very visible and it's clear on everything we can with the other tools that we have, that it would make a lot of sense to be a laboratory here.

1:03:09But I also don't want to stop other cities from being able to do it if they're interested. Interesting. Okay, well, we're short on time, but just quickly, Greg, tell us a little bit about momentum here. Like, this seems like a concept that was relatively obscure and confined to some committed Georgists not that long ago. And now, you know, I hear it popping up more often. My own mayor of my own city, Katie Wilson, here in Seattle, mentioned briefly recently that she would is interested in this idea, is interested in possibly pursuing this idea. So it seems like it's gaining momentum. What is actually happening and where?

1:04:01It's gaining a ton of momentum. And I think it's all part of this urbanist movement. I think is part of people trying to broaden their perspectives. I think three to four years ago, there was maybe a couple of states considering legislation to enable cities to implement this policy. And this is just to clarify, enabling cities to do this split rate, that is the main mechanism we're talking about. That is the main thing we're trying to push through state legislatures. Nobody is really contemplating like a full-on, full-on straightforward land value tax, are they? It's just it's this is the tool that we have available.

1:04:38Is that is that more or less correct? Well, David, if you talk to the right people, you'll find somebody pushing some people pushing for federal land value tax and constitutional. But yeah, this is the policy that I believe incrementalism. I think this is, you know, the step in the right direction. And so this is what I'm talking about is just enabling the split rate again, not even within even once it's enabled for the city. You don't have to dial it up 100 percent. The Pennsylvania cities haven't done that. You can be as incremental as incremental as you want, basically, once this is enabled.

1:05:11Precisely. And so, yeah, so, you know, three years ago, we were looking at a couple of states. Now we're looking at 1210 with introduced legislation to enable cities. We're looking at two states that have passed legislation this year for the first time in probably a couple of decades. I think Virginia had one bill in the 2010s. And outside of that, we really haven't seen movement on this. Who passed? So Virginia and Kentucky passed bills. Virginia enabled four additional cities. Newport News and Charlottesville are like the sort of main ones. And then Kentucky enabled Louisville to implement split rate taxes.

1:05:46And so we think that we're just at the beginning of this. I think the momentum is only going to continue. Am I making it up? There's one place where a Republican legislature pushed this through over a Democratic governor's veto. Is that Kentucky? This is Kentucky. Yeah. So Kentucky was doing a really intriguingly cross-partisan. It's not a straight is not a straightforwardly partisan kind of thing. Yeah, that's actually a great point. Virginia, the same month, Virginia and Kentucky passed a bill. Virginia's blue. They passed a bill actually pretty bipartisan anyways. Kentucky, the split rate tax was part of a larger governance overhaul.

1:06:25And so it was just one component. And so the Republicans were pushing this through. They wanted to remake the ethics committee to make it more Republican in nature for the metro councils. And they added this in because they were really interested in this as a pro-development strategy, particularly for urban areas and the urban area. So we think of Republicans, I mean, I think of Republicans generally as kind of hostile to cities on a general basis. So what is kind of the conservative rationale here? What do Republicans say on behalf of this policy? It's pro-development. So former Senator Pat Toomey was once Allentown, Pennsylvania's city administrator, and he wrote a letter to all the nearby cities saying, you guys should do split rate land value taxes.

1:07:16This is the best tax, right? This is pro-development. And he becomes a Republican senator, now running a very conservative, fiscal conservative org, or I think he was at one point. I forget what he's up to now. But in Kentucky, it was the same story, right? Milton Friedman loves this tax. This is pro-development. And to complete the story, the Republicans are then steamrolling the Democrats on this urban reform to remake the ethics. But there's this land value tax provision. A Democrat stands up and is like, I hate this bill, but I love the land value tax provision, you know. And so really, we are seeing bipartisan support.

1:07:54I think that there's something for everyone to love here. Some policies sound too good to be true. Land value tax might be too good to be true. But we will find out. I like to believe that it's too good to be true. But then every time I think about it further, I'm like, this is a great policy. And that's why I focused on it so much and started the Center for Land Economics to work on it full time. Yeah, I mean, you have to tax somebody, right? Right. Somebody somebody's got to pay taxes if you want to have public amenities and like. Almost any group you can gin up some sympathy for, but almost nobody really loves land speculators.

1:08:34This is this is not a group of people that have a lot of like explicit defenders in in legislative world. Except themselves. Yes. Yes. To the extent that they are organized, they defend themselves. But like if you're looking for people who, you know, and if you're looking to sort of minimize, again, like the second order, you know, negative effects of taxing, you're not going to get any less land, right? Like you can't get rid of land by taxing it. So like it seems like it ought to be an area of agreement. Okay, well, I've kept you all long enough. As usual, when I dig into something like this, I realized you could do a million pods on this and barely scratch the surface.

1:09:19But I think we sort of captured the basic idea. So thank you, Greg. And thank you, Kitty. Thank you. Thanks, everybody. You've been listening to Volts, founded and hosted by me, David Roberts, produced by Nate Peavy, and supported entirely through the generosity of listeners like you. If you enjoyed this conversation, please consider telling a friend about Volts. That's how this show grows and survives, through word of mouth. See you next time.