\-\-\-\--Original Message\-\-\-\--

From: Steven Cord
\[[[mailto:stevecord@hotmail.com]{.underline}](mailto:stevecord@hotmail.com)\]

Sent: Tuesday, March 08, 2005 11:42 PM

To: comments

Subject: A New Tax Idea

Attention: John Breaux

Yesterday I expressed a desire to appear before the President\'s
Advisory Panel on Federal Tax Reform. Since then I have had a new idea:
how about allowing states to opt out of the federal income tax provided
they remit to the federal government an equivalent amount of revenue
raised by either a sales tax or a land value tax? Any voter opposition
to the income tax would then be directed to particular states rather
than to the federal government.

But of course, the devil is in the details, and I could present those
details to the Panel, if invited to do so.

===============Sincerely, Steven Cord (professor-emeritus, currently
president, Center for a Better Economy, 10528 Cross Fox Lane, Columbia
MD 21044, 1-800-252-3126)

\-\-\--Original Message\-\-\-\--

From: steven cord
\[[mailto:stevencord2000@yahoo.com](mailto:stevencord2000@yahoo.com)\]

Sent: Thursday, March 10, 2005 10:59 AM

To: comments

Subject: Request Permission to Present Tax Research to the Panel

There actually is a tax that creates jobs, quite irrespective of the
revenue it collects; even if the revenue were thrown away, the economy
would still benefit!

This may sound too good to be true, but this tax has actually been
applied in the world, and all empirical studies show that it always has
had good economic results. We should not argue with the facts. The
secret is to tax something that no one can produce rather than tax jobs
or what they produce. Here\'s what these studies show:

\>\>Most people get tax cuts (without diminishing government revenues at

\>\>all) The economy grows (because taxes on production have been

\>\>considerably

reduced).

I append below brief summaries of 22 representative studies of existing
applications and request permission to appear before the Panel to make a
formal presentation of them and to answer questions. The 22 studies are
taken from 237 in my possession (and I have more); I have spent a
lifetime compiling these tax studies. As it happens, I induced 20
American localities to adopt this type of tax, and all studies show good
results.

Won\'t the Panel want to hear about this tax approach from someone who
has

compiled them, and done some of them? They deal with the issue the Panel

is charged with.

=============Sincerely, Steven B. Cord (President, Center for a Better
Economy, 10528 Cross Fox Lane, Columbia MD 21044, 1-800-252-3126 or
1-410-997-1182; Professor-Emeritus, Indiana University of Pa., \[14,000
students, near Pittsburgh\])

22 Studies

Empirical Support

for Land Rent Taxation

by Steven B. Cord

I have recently discovered 237 empirical studies (and could easily
provide more), all substantiating that when private building assessments
are taxed at a lower percentage rate and land assessments are taxed at a
higher percentage rate, new construction and renovation increase and
most people pay less in taxes. There are also other benefits. The
studies come from all over the world and many are included in a new
book, The Golden Key to Continuous Prosperity.

I could find no empirical studies contradicting these results (and I
have read extensively on this subject). Here is a summary of these 237
studies.

Ø 45 studies prove that when a town adopts land rent taxation

(hereafter referred to as LRT) a spurt in new construction and
renovation results.

Ø 63 studies conclude that towns switching from taxing buildings to

taxing land always out-constructed and out-renovated their comparable
neighbors who were subject to the same economic-growth influences.

Ø 83 studies concluded that most voters paid less with a

revenue-neutral building-to-land tax switch. In 2 studies, most voters
paid slightly more.

Important: the government lost absolutely no revenue at all.

Ø 30 studies concluded that LRT had various miscellaneous advantages -

for example, tax defaults decreased, which is what you would expect if
buildings are taxed less.

Ø 6 studies concerned farmers: in three studies, farmers essentially

broke even with a shift to LRT, in one study farmers would pay slightly
more, and in two studies farmers would pay slightly less. Australian

farmers have generally voted to adopt LRT.

Ø 8 studies listed endorsements (also, there are literally hundreds of

endorsements by prominent authorities listed elsewhere).

Readers can obtain a copy of this 237 report by writing to me at 10528
Cross Fox Lane (E2), Columbia MD 21044 (cost \$12, 2005). But reading
237 summaries of these empirical studies can be a challenge to many
readers, so here follows a representative 22 of them:

\(1\) The contiguous cities of Allentown and Bethlehem in eastern
Pennsylvania are comparable as to size and economy. In 1997 Allentown
became two-rate LRT; its difference between land and building rates was
expanded in that year and in each of the following four years while
Bethlehem remained one-rate.

Allentown\'s new private construction and renovation grew by 32% in
dollar value in the three years after it first adopted two-rate LRT as
compared to the prior three years. That was 1.8 times more than
Bethlehem\'s increase in private construction and renovation even though
Bethlehem was the recipient of much federal-grant money during 1997-99
(not so for Allentown).

These figures are based on a study of city-hall building-permit data on
file in the Allentown and Bethlehem city halls, done by Benjamin Howells
(science researcher and former Allentown councilman), William Kells
(science-oriented businessman), and Steven Cord (professor-emeritus) in
1999. The study was summarized in Incentive Taxation (IT 7/00).

\(2\) Washington and nearby Monessen (both in southwestern Pennsylvania)
are roughly comparable as to size and economy. After Washington shifted
some of its tax off buildings onto land in 1985, its new private
construction and renovation increased by 33% in dollar value in the
three years after the two-rate adoption as compared to the prior three
years. During the same time period, nearby one-rate Monessen\'s new
private construction and

renovation decreased by 26%.

A report of this study, based on building-permit data on file in the
Washington and Monessen city halls, can be found in IT, 10/88 (also see
IT, 10/97 and 9/00).

\(3\) Connellsville, Pa. saw its new private construction and renovation
jump 3.46 times in the three years after it adopted a two-rate LRT
property tax as compared to the prior three years. This jump can be
compared to the rather modest 1.07 increase in nearby Uniontown\'s new
private construction and renovation during the same time period. The two
cities are quite comparable, although Uniontown is somewhat larger and
is the county seat (both are economic-development plusses).

A report of this study can be found in IT, 10/97. It is based on
building-permits issued on file in the Connellsville and Uniontown city
halls.

\(4\) Aliquippa, Pa., after the closure of its large steel mill, went
two-rate LRT in January 1988, whereupon its new private construction and
renovation jumped 97% in the three years after the two-rate switch as
compared to the three-years-before period. See IT, 10/91.

Nearby Ambridge, comparable except that it was closer to the Pittsburgh
international airport and enjoyed brisk tourist traffic at its Old
Economy Shaker Village (both economic plusses), experienced a 30%
decline in private building-permits issued during the same periods of
time. Nearby Beaver Falls, also comparable except that it was less hilly
than Aliquippa and is the county seat (again, economic plusses),
experienced a comparable 7.2% decline during the same period of time.

In July 1993, the Aliquippa School District adopted a two-rate
building-to-land switch in its property tax. Its new private
construction and renovation thereupon spurted: for 1994-95, it was 2.3
times greater than for 1991-92 (based on building-permit records on file
at city hall; see IT, 12/99).

\(5\) In 1989, Clairton, Pa., an industrial suburb of Pittsburgh, was
under direct state fiscal control, officially labeled \"financially
distressed.\" It took the advice of the prestigious Pennsylvania Economy
League and went two-rate LRT, taxing building assessments at 2.105% and
land assessments at

10% (instead of both at 3.7%). During the three-year period after the

switch, its taxable building permits were 8.5% more than in the three
years before (based on building-permit records in Clairton City Hall).
This is to be compared to the 5.8% decline in all U.S. building permits
during the same periods of time (see IT 10/93).

\(6\) Oil City, Pa. adopted two-rate LRT starting in January 1989 and
increased its new private construction and renovation 58.2% in the three
following years as compared to the three-years-before, while its nearby
one-rate but otherwise comparable neighbor, Franklin, Pa., experienced a
decline 12.2% in the same time periods (based on a study of
building-permits issued in the two city halls; see IT 11/94).

\(7\) Pittsburgh\'s long two-rate LVT experience has provided many
studies:

In the years 1980-84, when Pittsburgh was expanding the difference
between its land and building property-tax rates, its new construction
as measured by building-permits issued was fully 3.57 times higher,
adjusted for inflation, than in the pre-change years of 1974-78, despite
the steady post-1980 contraction of Pittsburgh\'s steel industry
(source: Pennsylvania

Economy League study of Pittsburgh\'s two-rate tax 1985, p. 16).

For the entire United States, 1980-84 office-building permits were only
1.6 times higher than for 1974-78 (not adjusted for inflation, per
Daniel Sansbury, U.S. Bureau of Census, Suitland, Md., 1/21/93, and
reported in IT, 10/93).

The boom in Pittsburgh continued: in 1985, its building permits
increased 2.29 times over 1984; in 1986, it was 2.38 times greater than
in 1984

(source: Pbg. Bldg. Inspection Dept.; see IT 10/86).

When Pittsburgh increased its land-tax rate in 1979 and again in 1980
(but not its building tax rate), its construction increased fully 6.2
times faster than U.S. construction during the same period of time
(sources: table 1194, U.S. Census report C30, and the building-permit
annual reports, city of Pittsburgh).

\(8\) Godfrey Dunkley, an economist and mechanical engineer specializing
in the design and sale of fluid filtration equipment, extracted
interesting statistics from the official Municipal Yearbooks of the
government of South Africa.

He compared 1959 assessments to 1979 assessments and found that the
one-rate towns (taxing land and buildings the same) increased their
total assessments by 486%, but the two-rate towns (taxing land more than
buildings) experienced a 561% increase and the 46 towns that taxed only
land assessments experienced an 850% increase. Inflation affected all
these figures, but note that the more a town taxed land values, the
faster it grew.

Further substantiation from the same study: the eight towns that
switched from one-rate to two-rate increased their assessments by 748%,
and the 15 towns that switched to land-taxing-only increased by 996%
(see IT 9/83). A later Dunkley study of a different time comparison
yielded similar figures.

In January 2005, Dunkley wrote me that \"to the best of my recollection,

government property did not appear in the valuation rolls at that
time.\"

\(9\) Then there\'s the study by professors Wallace Oates and Robert
Schwab, both

of the University of Maryland. They reported that 15 large northeastern
cities in the U.S. averaged a decline of 15.5% in their annual value of
building permits issued between 1960-1969 and 1980-1989, but two-rate
LRT

Pittsburgh recorded a 70.4% increase.

Columbus, Ohio was the only other city in the study recording an
increase - a rather modest 3.6% - but it had annexed some fast-growing
suburbs in the interim (see IT, 10/92).

\(10\) In 1995, Professor Nicolaus Tideman of Virginia Tech University
and his

then-graduate student, Florenz Plassmann (now a professor at the
University of Binghamton), completed a highly technical study of land
value taxation in Pennsylvania entitled \"A Markov Chain Monte Carlo
Analysis of the Effect of Two-Rate Property Taxes on Construction.\" See
IT 12/00 for the verbatim conclusion of the original study and the
peer-reviewed Journal of Urban

Economics, 3/00, pp. 216-47, for the full study.

To quote from their conclusion:

\"The results say that for all four categories of construction, an
increase in the effective tax differential is associated with an
increase in the average value per permit. In the case of residential
housing, a 1% increase in the effective tax differential is associated
with a 12% increase in the average value per unit\... From the
perspective of economic theory, it is not at all surprising that when
taxes are taken off of buildings, people build more valuable buildings.
But it is nice to see the numbers.\"

Although this study appeared in a peer-reviewed journal, it occasioned
no citations in other scholarly journals or comments from other
professional economists. It was like a stone dropped in a pond with no
ripples.

\(11\) Harry Gunnison Brown, a prominent economist, reported that
suburbs of Melbourne, Victoria, Australia, which were about five rail
miles from Flinders Street in the center of Melbourne and which taxed
land values only, had 50% more dwellings constructed per available acre
in the 1928-1942 period than similarly situated suburbs which taxed land
and buildings at the same rate (Source: Aus. Govt. statistics in
\"Public Charges Upon Land Values,\" a 1961 study prepared by the Gen.
Cncl. Of Rating \[local taxing\] Reform).

Making a similar comparison for suburbs seven miles out, the
land-value-tax suburbs did 2.33 times better; LRT suburbs 9.5 miles out
did twice as well.

\(12\) A Pittsburgh City Council study (1976) concluded that a 1% earned
income tax would hit the city\'s homeowners 3.59 times harder than an
equivalent-in-revenue LRT increase. The same study also found that a
two-rate LRT would down-tax 73.6% of homeowners.

\(13\) A Washington, D.C. council-authorized study done in the 1970s
concluded that if the current property tax were shifted from land and
building assessments to land assessments only, there would be these tax
reductions: single-family homes 18.1%, two-family homes 20.9%, row
houses 14%, walkup apartments 8.9%, elevator apartments 22.5%.

\(14\) In 64 suburbs outside central Melbourne (Aus.) during the
two-year period 1955/56 to 1957/58, there were 42 new factories, of
which half were in the 17 localities using LRT-only. In addition,
factory employment in these l7 LRT-only localities increased by 445
whereas in the remaining 47 localities, factory employment decreased by
361 (source: Aus. govt. statistics in \"Public Charges Upon Land
Values,\" a 1961 study prepared by the General Council of Rating \[local
taxing\] Reform - GCRR).

\(15\) Twelve studies in rural Victoria found that the LRT-only towns
averaged a construction-and-renovation growth of 29% as compared to the
growth of their real-estate-income-taxing neighbors of a modest 2.6% in
the same period of time (source: GCRR study of building-permits issued
as reported in Progress Magazine, Melbourne 3/75). LRT-only was always
adopted as a result of a poll of landowners only.

\(16\) If eastern Americans fall through the earth, they will emerge
near Perth, Western Australia (pop. 400,000). 17 localities in that
vicinity taxed land values only; they experienced a 34.36% increase in
the total number of dwellings between 6/30/71 and 6/30/76. The nine
nearby localities taxing both land and buildings and presumably subject
to the same economic-growth influences experienced a 0.02% decrease in
the same time period (source: Aus. govt. statistics, as cited in
Progress, 11/77, p. 10).

\(17\) In North Dakota, according to USN&WR, 4/3/78, p. 54, farmers paid
no tax on farm buildings. A survey by a high official of the N.D. League
of Cities revealed that this has encouraged new farm construction.

\(18\) California Irrigation Districts - A 1909 California law required
that when new irrigation networks were to be built, they were to be
financed by a tax on the affected land values only; all privately owned
improvements were to be property-tax exempt. The theory was that
publicly owned irrigation networks increased land values so the expense
of those networks should be borne by the affected landowners.

The result has been beneficial to the local farmers, particularly the
smaller ones. The irrigated valleys are among the most productive in the
world. This is what the Modesto Chamber of Commerce stated in 1914
(according to the Congressional Research Service in its study,
\"Property Taxation,\" p. 48):

\"As a result of the change many of the large ranches have been cut up
and sold in small tracts. The new owners are cultivating these farms
intensively. The population of both country and city has greatly
increased. The new system of taxation has brought great prosperity to
our district. Farmers are now encouraged to improve their property.
Industry and thrift are not punished by an increase in taxes.\"

\(19\) Malvern, Australia experienced a marked construction spurt after
it adopted LRT-only in August 1955. The most extensive construction took
place in its blighted problem neighborhoods. Before August 1955, those
neighborhoods accounted for only 22% of the city\'s building permits,
but in each of the five ensuing years that percentage jumped first to
35% and then steadily moved up to 47% in 1960 (these percentages are of
continually larger construction figures; source - Victoria Building &
Construction Journal, 1979).

\(20\) Tax defaults: in New Zealand in the late 1950s, ten large
LRT-only cities had slightly less tax defaults than three large non-LRT
cities, indicating that exempting buildings from local taxation does not
increase tax defaults (see the 1961 report of the Canadian Federation of
Mayors and Municipalities, p. 31, by H. Bronson Cowan). See IT, 12/81.

\(21\) A city-funded 1980 study in New Castle, Pa. revealed that seven
vacant and two poorly developed downtown sites would be an estimated
\$150,851 more profitable to build upon with an LRT-only property tax.
If county and school taxes were also to adopt LRT-only, then the extra
profit would approximate an estimated \$243,750 a year.

\(22\) Random-sample studies in sixteen U.S. cities substantiated that
most homeowners pay less with a two-rate building-to-land property-tax
shift (IT 56-7-76).

One can easily ascertain by exactly how much each voter in a city would
fare with this two-rate approach before going public with the idea.

But wait a moment - I just finished a study of Pittsburgh that I must
tell you about. I can\'t restrain myself. This should be the Absolute
Clincher. Wait till you read about this one.

The city of Pittsburgh has taxed land assessments more than building
assessments ever since 1915, but for the year 2001 and thereafter, it
reverted to taxing both types of assessments at the same one rate.

How come? An interesting question, but we can only consider it briefly
here because it is essentially irrelevant to what we are investigating,
which is \"what was the effect of the land-to-building switch?\" Well,
in 2001 the voters in Pittsburgh were suddenly aroused to fever pitch as
never before about their property tax because their new land assessments
were suddenly increased by five-to-eight times overnight - a political
no-no.

The voters mistakenly thought that if they could reduce the land tax
rate to the lower building tax rate, their property taxes would be
reduced (not realizing that would increase their building tax rate).
They were completely unaware of the many LRT studies that had been made.
So they pressured their city council to equalize the property-tax rates
on land and buildings. This is what happened:

Pittsburgh experienced a 19.57% decline in private new construction

and renovation in the three years after rescission as compared to the
three years before, even though during the same time period, the value
of construction put in place nationwide (including public construction)
increased 7.7% and sales tax receipts in Pittsburgh increased 7.6%. Both
of these increases should have boosted Pittsburgh\'s new construction,
but they

didn\'t.

It took me 200 hours of grueling labor to examine all 13,547 of the
building

permits for the six-year period. For the full details of the study, see

Incentive Taxation (5/04).

In addition, a computer examination of the entire assessment roll of
Pittsburgh found that 54% of the homeowners paid more property tax with
a land-to-building tax switch. What\'s more, all tenants will get an
almost immediate space-rent increase from the newly increased building
tax because it will be passed on to them in the form of higher space
rents (not so in the long run from an LRT increase - check any basic
economics textbook). Other large cities also have many tenants, both
residential and business.

The Pittsburghers acted somewhat like Samson. They harmed themselves.

This LRT rescission has actually been a blessing in disguise because it
allows us to examine the effect of a land-to-building tax switch on
construction and renovation.

Much more evidence for LRT could be cited, but I stop here because I
don\'t want to tax your patience. But isn\'t it common sense to expect
that if you down-tax buildings, you\'ll have more and better buildings,
and if you up-tax land, land-sites will have to be more fully utilized?
Don\'t let preconceived notions trump logic and hard empirical evidence.

For more information about LRT, consult
[www.EconomicBoom.info](../../../../../../../../J:%5CFederal%20Tax%20Reform%5Cweek%20four%5CGeneralIndividuals%5Cwww.EconomicBoom.info)
\<<http://www.economicboom.info/>\> or send your comments to: Steven
Cord, 10528 Cross Fox Lane, Columbia MD 21044, 1-800-252-3126,
\<[mailto:stevencord2000@yahoo.com](mailto:stevencord2000@yahoo.com)\>
stevencord2000@yahoo.com

\_\_\_\_\_

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