I am watching: Owned: A Tale of Two Americas | Official Trailer | Independent Lens | PBS
Think about it
Of course, this documentary film revealed important outcomes of our quite dysfunctional property markets. For the people who are forced to live in depreciated housing in neighborhoods where public services are minimal and employment opportunities almost non-existence, the aggregate effect is despair.
Property prices might be quite low, but even so individual and household income is insufficient to pay the cost of rental housing or qualify for financing to obtain ownership. At the other end of our property markets prices are reaching heights where all but those with very high incomes are able to save enough to cover the down payment and closing costs required.
What do the problems in these very different markets have in common? A combination of huge land costs and land that is held for years or decades as a speculative investment or simply because the cost of holding the land off the market is minimal. These are problems created by how property is assessed and taxed.
What this documentary does not deal with is that discrimination is more of a surface cause than a systemic cause. Even if communities remained segregated by race, by ethnicity, by religion or other basis for people choosing to live only among those they see as of their "tribe," there is no natural reason why such communities cannot thrive -- if only each community abandoned the conventional means of raising revenue to pay for public goods and services in favor of a single tax on the value of each location in the community.
There is a wealth of economic literature on this idea and some partial real world experience. While these communities still tax people's wages, the profits of businesses, and many goods and services people need, they have begun to stop taxing homes and other buildings, in favor of taxing the value of land alone. Think of this. Buildings are depreciating assets, just like an automobile, a computer, a lawn mower, a refrigerator.
You get the picture.
The annual tax on the value of a building equates to the imposition of a sales tax, year after year after year. If this makes any sense, then a similar tax ought to be imposed on all of the other (arguably less essential) depreciating assets. In those communities that have greatly reduced or eliminated the annual tax on buildings, the response by owners has been consistent: more buildings are constructed, more buildings are renovated and more businesses are started employing more people.
At the same time, when the rate of taxation imposed on the assessed value of land parcels, the increased cost of holding land lowers the potential to profit by holding the land out of use as a speculative investment. Economic theory tells us that the closer the amount of annual tax comes to the potential annual rental value of the location, the lower will be the asking price for the location if put up for sale; or, the owner will invest in new development in order to offset the increase in land value taxation. Thus, the higher land value tax is good for the community and also good for the owner. The moral of this story is: ignore how the world works at one's peril.
Continue to allow speculators to control the destiny of a community and the community will eventually crash and burn.
Edward J. Dodson, Director
School of Cooperative Individualism