Today, Assemblymember Alex Lee introduced AB 362 in order to study statewide alternatives that could incentivize more building permits in the State of California. The bill would require the California Department of Tax and Fee Administration to study the efficacy of a statewide land value taxation system as a potential alternative to current appraisal methods for real property taxation.
Under our current property tax system, taxes are calculated by the value of the property which can disincentivize landowners from building or improving property, such as a large housing complex, in order to avoid potentially raising taxes on the property. This has resulted in financial incentives to hold unused land or leave the property vacant in order to avoid price appreciation.
Alternatively, a land value tax, which would be a tax on the underlying land without regard to buildings, personal property, or other improvements, could discourage speculative land holding for the purpose of avoiding tax increases.
“Our current taxation system discourages property development,” said Assemblymember Alex Lee. “The study will look into whether a statewide land value tax removes that incentive to hold onto property which would open the door for fairer assessments and more freedom for landowners to utilize their properties however they want.”
There are a number of jurisdictions that currently employ land value tax systems or a variation of it around the world including: Denmark, Estonia, Lithuania, Russia, Singapore, Taiwan, parts of Australia and Mexico, and the State of Pennsylvania.
In Allentown, Pennsylvania, the city adopted a land value tax through a split-rate system in 1996, and after adopting a land value tax, Allentown experienced a 32% increase in building permits.