While it is known as a region of great diversity, Latin America is also characterized by common legacies that directly or indirectly affect land issues. These include a heritage of patrimonialism based on a land ownership structure in which political influences determine the spatial allocation of public investments and services; strong central administrations with weak fiscal accountability at the local level; and a legal tradition with elitist codes and rigid, even anachronistic, land-related legislation. Urban planning, with its physical design bias, has tended to focus on the “legal” city while overlooking the “real” city. At a broader level, investments in the fast-growing built environment (i.e., urbanization) are relatively autonomous from the industrialization process. In a context of weak capital markets and high, often chronic, inflation land frequently takes on the role of a capitalization mechanism or a surrogate for the lack of social security.

Regional Trends

One of the main features of the functioning of urban land markets in Latin America is the magnitude and persistence of illegal, irregular, informal or clandestine activities in accessing and occupying land, largely resulting from the insufficient supply of serviced land at affordable prices. This scarcity of serviced land plays an important role in the region’s social culture, since access to land is often a tacit condition for citizenship and social mobility.

Perhaps most important are the multifaceted trends that are sweeping the continent and are opening new opportunities for urban land policy. First is the widespread re-democratization of many countries after long periods of authoritarian or military regimes, which has had numerous implications on land policy. There is a generalized increase in awareness of public officials’ liability and accountability in urban land management as in other aspects of public administration, as well as the emergence and public recognition of new social agents such as non-governmental organizations (NGOs). New forms of community participation and civil action are the expressions of a heightened consciousness of the need to legitimize alternatives to land access by the urban poor, including innovative modes of collective ownership and attention to gender issues in the regularization of illegally occupied land.

A second and related trend reflects the need for institutional and constitutional reforms accompanied by the redefinition of state roles. This process has had a number of manifestations, including:

• fiscal decentralization, resulting in pressure for new revenue sources at the local level and opportunities to improve on property tax collection;
• political and administrative decentralization, which has increased the power and autonomy of local and intermediate level authorities. This process has created many new responsibilities associated with land market regulation for the provision of services and social housing;
• new instruments for regulatory and fiscal intervention, including the implementation of tools associated with the mobilization of land value increments for the community’s benefit;
• privatization or removal of statutory restrictions on the availability and release to the market of previously state-owned land, thus increasing opportunities to use or reuse existing vacant land;
• new modes of service provision caused in part by the widespread privatization of utilities, with direct implications on the process of land use and redefinition of patterns of spatial segregation;
• the emergence of public/private partnerships in urban development and redevelopment, resulting in a variety of new kinds of urban sub-centers.

A third major development of recent decades has been macro-economic restructuring, which has resulted in the stabilization of the region’s historic and often chronic problems with inflation and has influenced the evolution of land prices. Latin America also has experienced broader trends toward globalization, the opening of national economies, and technological changes. Among other consequences, these trends have led to greater competition among cities for private investments, ranging from the use of strategic planning as a city marketing device to giving up local incentives through fiscal wars. This has greatly affected the economic base of the cities and the nature and scale of urban poverty. Also affected are the types of urban interventions (ranging from large-scale rehabilitation projects of abandoned or depressed areas, to new mixed-use developments in urban fringe areas) that are redefining urban form, city dynamics, and patterns of spatial and social segregation.

Building a Presence

Since 1993, the Lincoln Institute has made a concerted effort to participate in the lively debate over land and taxation policy in Latin America. We adopted a multi-country approach to work wherever we can find issues closely related to our own agenda, pursue opportunities to make a difference for local capacity building, or develop initiatives that could be disseminated and potentially replicated in other countries. This strategy allows us to be present in places where significant policy changes are imminent or where important land-related issues are under discussion.

Experience has shown that the Institute is well positioned to play three important roles that serve our educational mandate: to promote cross-fertilization of ideas, to act as a convenor and facilitator of debates among different stakeholders, and to offer intellectual leadership. As in all Lincoln programs, we place great value on the dissemination of valuable information based largely on case studies that can be used to foster intraregional sharing of knowledge and problem solving. This role of encouraging the cross-fertilization of ideas through horizontal dialogue is particularly important given the centralist nature of public administration in Latin America and the predominance of vertical channels of communication.

The Lincoln Institute’s international credibility and recognition as a respected non-partisan institution concerned with land policy and property taxation issues places us in a unique position to facilitate complex, politically sensitive discussions among different stakeholder groups, particularly public officials at different administrative levels and representatives of the business sector, NGOs, and the political community.

Equally important is the Institute’s role in offering intellectual leadership by helping to bridge the gap between state-of-the-art knowledge and the more practical, immediate needs of public officials dealing directly with the implementation and administration of land use and taxation policies. This role often involves “translating” academic ideas and arguments into the language of practitioners through both printed materials and face-to-face courses and seminars. By supporting research and curriculum development projects, we also draw attention to critical and sometimes unperceived dimensions of complex topics, such as the economic consequences of informality in the access to land. As a resource provider to our international partners, we help identify experts and provide useful case studies and other materials from different countries and contexts.

Networks and Program Focus Areas

Beginning in 1995, the Institute’s Latin American Program developed a core network of representatives from twelve countries with whom we worked closely on both curriculum development and educational programs. Our strategy has evolved as we have gained a more profound understanding of the issues that are pertinent to the Institute’s international agenda. Today we work with several networks of public officials, practitioners and scholars that are organized thematically rather than geographically. These five transnational networks, whose topics are often overlapping and thus mutually reinforcing, are linked to the Institute’s three main program areas.

In the Program on Taxation of Land and Buildings, value capture is the primary topic for which the Institute has definite comparative advantages in the region. We focus on technical and management conditions for the implementation of instruments through which land value increments have been or may be mobilized directly or indirectly (through taxes, fees, exactions and other regulatory means) to promote urban development and to benefit the community at large.

In addition to the use of value capture mechanisms to control urban growth and territorial expansion and to reduce the perverse effects of land speculation, we are interested in their applicability to circumstances characterized by the large-scale and persistent informality in land markets so typical in Latin America. These include situations where land tenure relationships are poorly defined, where land occupations are mostly irregular or illegal, and where significant land value increments are self-generated by the community, rather than by state action. This network explores whether land value increments (resulting directly or indirectly from public interventions) can be mobilized to mitigate urban poverty in general and improve the access to serviced land by low-income families in particular.

Our second network looks at property taxation, assessment and collection. International comparisons have shown that the collection of property taxes in Latin America is generally considered inadequate to meet the needs of rapid urbanization. Strong vertical and horizontal inequities, inefficient collection systems, poor assessment practices, strong influence of historical values, and fragile legal frameworks are among the drawbacks to property tax systems in many areas. Nevertheless, many national efforts, sometimes supported by multilateral agencies, are promoting reforms and improvements in property tax systems. These improvements include the innovative use of self-declaratory systems and sophisticated information systems, creative shifts to land value taxes, and opportunities to reinstate the property tax in countries where it does not currently operate. This network contemplates more interconnected research and educational initiatives, ranging from studies of the pros and cons of shifting to land value taxes, to the role of the property tax in facilitating access to land by the urban poor, and to the use of new operational tools to improve local property taxation goals in general.

Spatial and social segregation are concerns we share with the Institute’s Land Markets Program. The landscape of Latin American cities is often stigmatized by the social distance between neighborhoods that emulate the most elegant sectors of cities in any developed country and those settlements with precarious physical conditions to which the majority of the poor urban population is confined. The formation of this divisive social pattern of land use may be attributed to a number of factors: “white expulsions” through market mechanisms; more subtle exclusionary policies embedded in legal and administrative standards (i.e., urbanistic norms, regulations and credit requirements); or the direct land evictions and removals by force that have occurred in almost all Latin American cities. Much has been written about these processes, yet little has been documented about the policies to prevent them or reverse their outcomes. This network addresses questions such as: What are the policies that have been or could be used, and how effective have they been? What should urban planners know about spatial segregation, and why?

The fourth network, also in the Land Markets area, recognizes the need to review existing regulatory environments in the Latin American land policy agenda and to design new urbanistic norms and regulations that can be complied with more realistically by low-income sectors. This means adequately assessing the effects of alternative regulations on the pattern of land uses, specifically on the access to land and urban services by the urban poor. In most large cities in the region, new high-income developments are increasingly out-competing the less attractive and accessible land traditionally affordable to the urban poor. City managers struggle with the promotion of sustainable inner-city densification and the reutilization of abandoned industrial areas, while also trying to control sprawling land use in urban peripheries.

As part of the Institute’s Land as Common Property Program, security of tenure, regularization and urban upgrading programs are important themes. Many countries throughout the region are making major efforts to set legal and urban regularization programs. However, the implementation of these initiatives is often met by political and practical obstacles. The signals being given by these essentially “curative” programs have significant impacts on the illegal, irregular, informal or clandestine activities of groups seeking to access and occupy urban land. The resolution of disputes around regularization programs and arbitration of adequately assessed values for public acquisitions of land for social interest projects often runs into legal and institutional bottlenecks at the national and local levels. This network seeks to better understand the economic impacts of these programs on the functioning of land markets in general and on the benefited settlements in particular.

Dissemination of Information

While continuing to sponsor research and educational programs in Latin American countries, the Institute is also developing parallel efforts to disseminate information to broader audiences. We have created a Latin American section within the Lincoln Institute website, where we present the full text of many research projects and papers presented in our seminars and conferences, in their original language. Also available on the site are a number of Land Lines articles translated into Spanish.

The Institute is making a concerted effort to systematize all curriculum materials (research papers, seminar presentations, outlines, supporting audiovisual materials and other teaching aids) and products (books, articles, videos) to facilitate the organization and integration of our present and future academic activities. A number of Latin America-related publications are now available or are in the planning stages. For example, an annotated bibliography of materials related to urban land markets in Mexico was recently published and will soon be available on our website. This bibliography should serve as a model for other members of our Latin American networks to publish materials on their countries. In addition, several collections of papers presented as part of on-site education programs are being edited for publication.

This issue of Land Lines lists funded curriculum development and research projects and dissertation fellowships for the current academic year, highlighting those affiliated with the Latin American Program.

Martim Smolka is senior fellow and director of the Institute’s Program in Latin America and the Caribbean, and Laura Mullahy is a research and program assistant.

Latin America: A Region of Great Diversity

A brief look at the region reveals a wide variety of situations regarding the status of land and land markets, as indicated below. The Lincoln Institute has worked with scholars and public officials in each of these countries to understand and address their land policy concerns.

Chile’s liberalization of land markets and virtual elimination of urban land boundaries in 1979 (only partially reinstated in 1985) stands in contrast with Colombia’s current efforts to implement a strong value capture planning tool, “Participación en Plusvalias.” This legislation requires local governments to designate 30 to 50 percent of the land value increment resulting from changes in land designation from rural to urban use for social housing and infrastructure provision in underserved neighborhoods.

Informal settlements and land occupations are dealt with quite differently among Latin American countries. In Argentina there have been virtually no restrictions on land use, and consequently there are no officially recognized illegal settlements. Peru’s governments have recognized freely accessed unserviced land on the urban fringe (arenales) since 1961, while in Ecuador there is a complete absence of norms and regulations to deal with informal occupations.

Significant variations in national land policies are also important. For example, Cuba is unlikely to give up state ownership of the approximately 70 percent of land under its control, whereas Mexico passed national legislation in 1992 that allowed for the privatization of the land held under its ejido system.

It is not surprising that proposals for land value taxation (LVT) should elicit strong reactions in public debate. Land, taxes and information are a combustible combination, but they are critical to our political system. Without land we cannot live; without taxes we cannot be governed; without information about land and taxes we are powerless to change the way we are governed. Although Britain has not confronted basic land or tax reform in recent years, there are several signs, outlined below, that this is changing, and such changes can open the way for renewed attention to LVT initiatives.

Increasing Awareness of the Tax Burden

There is now widespread acceptance that Britain taxes jobs and enterprise far too much. In 1997 the European Commission (now known as the European Union) asked its 15 member states to produce employment action plans, including proposals to relieve the burden of taxes on employment. In 1999 British Prime Minister Tony Blair and German Chancellor Gerhardt Schroeder issued a joint statement that said, “. . . overall, the taxation of hard work and enterprise should be reduced.” Britain’s Liberal Democrat Party manifesto in 1998 called for a “major tax shift off people and on to pollution and resources.” Across the political spectrum consensus is building for a shift in the tax burden.

Devolution and Constitutional Reform

The United Kingdom is in the midst of far-reaching constitutional changes involving elections by proportional representation, which almost guarantee coalitions and make continuity of policy more likely. The number of voting hereditary peers in the House of (Land) Lords has been reduced from 400 to fewer than 100. Unlike a century ago, the Lords can no longer block an elected government with a mandate to introduce LVT or other land reforms. Although Britain still has one of the most centralized governments in Europe, Scotland and Wales now have considerable autonomy through their elected Parliament and Assembly.

Northern Ireland also has an elected Assembly, and land policy there is arguably more forward-thinking than on mainland Britain, with integrated ministerial responsibility for maps, land registers and property valuation. By 2007 there will be a fully electronic, map-based comprehensive land register and up-to-date property assessment. Uniquely in the UK, residential areas will be assessed through computer-aided mass assessment (CAMA) techniques imported from the U.S.

Scotland can vary income tax by up to 3 percent and can choose the tax base for its 28 local authorities. There is a much better understanding of LVT in Scotland than elsewhere in the UK, and the Scottish Executive has promised to initiate a thorough study of the economic implications of LVT before the next elections in 2004.

London now has its own devolved regional government, the Greater London Assembly, with an elected mayor, Ken Livingstone, who has become keenly interested in the potential of land values to fund transport infrastructure. The mayor’s transport commissioner, American Bob Kiley, is even more interested and has gone on record saying LVT might have a role, and not just in transport funding. There is currently a lively political battle concerning the London Underground, addressing who pays for investment and who benefits from it, which may provide a context for considering the role of LVT.

In most of the UK, however, local government is still a creature of the central state. Seventy percent of local government revenue comes directly from central grants, and over 90 percent of local expenditure is constrained by directives from the central government.

Advances in Geographic Information Technology

There have been amazing changes in information technology since the last thorough review of local government finance in Britain, in 1975. Then, base map information was held on a quarter of a million glass plates that were only revised on a 10- to 25-year cycle, using manual cartography, steel tapes and parchment paper. Now the entire national mapping system is computerized, using satellites, hand-held field data recorders and Internet map access. The Ordnance Survey MasterMap data structure recognizes land and building parcels and can hold attributes as diverse as height, material of construction, value and ownership. It is updated on a continuous basis and can incorporate pre-build and historic information. In 1975 the map archive occupied a large four-story building; now it fits on just eight CD-ROMs, covering every building and land parcel occupied by 60 million people.

All of these advances could assist the introduction of a tax based on land value, although there are serious institutional problems in getting all agencies that would be involved in LVT to apply the technology fast enough. However, the government has a target of enabling all information-based functions to be delivered electronically by 2005.

Unpopularity of the Uniform Business Rate

The uniformity of taxation in Britain is reflected in the name of the nonresidential property tax: Uniform Business Rate (UBR). At the end of the 1980s, local councils lost the power to fix the rate of the tax, and with it any direct financial connection with their local business communities. The central government at Whitehall decides what each council will collect from its business ratepayers, and how much each council retains, which can be substantially more or less than is collected locally. All that remains is some discretion over businesses exemptions, at the expense of local residents. No wonder that a recent government study showed a deep disdain for local councils among business owners and huge ignorance by both business and councils about their respective roles and problems.

Because this tax is based on occupancy and not on ownership, vacant and underused land largely or wholly escapes taxation. The UBR is regarded as a most regressive tax, accounting for up to one-third of the turnover of the smallest independent traders but only 3 percent of turnover of large multiple stores. My research has found UBR to be extremely unpopular: it penalizes success and fails to compensate for harm done by irresponsible neighbors. So this is another factor in the return of interest in LVT. As others have noted in recent years, the replacement of UBR, in part or totally, with a site-value-based tax would most likely be an extremely effective policy for urban renewal.

Business Improvement Districts

BIDs are coming to Britain after years of use in the U.S. These special districts allow commercial and office sectors to raise funds through property assessments for maintenance and improvement of their neighborhoods. But the only tax currently proposed for BIDs is a supplement to the occupier-based UBR. The business community does not like this idea, and LVT campaigners are now working with others to persuade prospective BID partnerships to consider assessments on owners and also to press for the creation of new tax powers.

LVT supporters propose that if a large majority within the BID support such measures, the BID should be able to compel all owners in the district to pay them; free-riders should not be allowed. The idea, known as “Smart BIDs,” is to support the BIDs with taxes on owners rather than business rates, and perhaps even to reduce the UBR rate within Smart BIDs.

Environmental Concerns

Current interest in LVT in Britain was boosted by an Urban Task Force report and formal support for LVT pilot projects by Friends of the Earth (which has more members in the UK than the Liberal Democrat Party) and the Town & Country Planning Association. These environmental organizations are interested in taxation as a tool for sustainable development, and such concern will only grow in the future. People in Britain will recycle even if it costs them time and money to do so. The same concern for the environment will increase acceptance of LVT when it is understood as a means of keeping towns and cities viable and protecting the countryside.

Practical Administrative Considerations

Two surveys of the town of Whitstable by Hector Wilks in 1963 and 1973 support the view that LVT presents fewer assessment difficulties than do traditional rating systems. Recent advances in computerized assessment systems make LVT more feasible than ever before. My own preliminary studies of other countries that use computerized assessments, especially Denmark and Australia, show that the overall cost of property tax administration is far lower there.

Denmark’s property tax, with annual revaluations, costs 20 percent less per property than Britain’s. When I visited Denmark last year, I found an extremely efficient property tax system tapping into land values in a modest way. Tax administrators told me that, aside from the environmental benefits of the tax, the greatest interest came from Treasury officials concerned about the growth of offshore tax havens. They are attracted to LVT because it costs very little to administer and there is virtually no possibility of avoidance or evasion.

If a British government were inclined to switch to LVT, it would not find any insuperable problems within our highly intelligent and incorruptible valuation profession. We have a professional, politically independent agency for conducting property tax assessments and the best national mapping agency in the world. It is simply a matter of exercising political leadership.

The Way Forward

In addition to supporting Smart BID pilot projects, my personal list for projects to help realize the potential of LVT includes:

• updating basic economics courses and making them available on the Web;
• implementing exchange programs between relevant tax professionals in Britain and countries with LVT;
• developing easy-to-use value mapping tools;
• studying the links between planning and LVT;
• comparing compliance costs of LVT and other taxes;
• developing indicators of the economic impact of LVT;
• monitoring public perceptions of land and tax issues over time and across countries; and
• providing more accessible nontechnical publications about LVT. These are.

The subject of tax reform is one of the most important issues of our age and political environment, and after years of neglect LVT is being considered in Britain again. The Lincoln Institute’s sponsorship of work by many LVT thinkers, writers and researchers in Britain and elsewhere has been instrumental in advancing public awareness of and professional appreciation for the potential benefits of LVT.

Tony Vickers recently completed a David C. Lincoln Fellowship in Land Value Taxation at the Lincoln Institute, and this article summarizes his Founder’s Day lecture on the topic in Cambridge, Massachusetts, in June 2002. Vickers is the former CEO of the Henry George Foundation in London, and he is currently pursuing a Ph.D. at the School of Surveying, Kingston University, London.

C. Lowell Harriss is Professor Emeritus at Columbia University, where he taught economics from 1938 until his retirement in 1981. He then served as executive director of the Academy of Political Science until 1987. He has been a consultant to and a member of numerous government commissions and boards of professional organizations. He has written and edited many books and hundreds of articles, and is the recipient of countless honors and awards. Dr. Harriss has been a valued associate of the Lincoln Institute since its founding in 1974, as a faculty member, research scholar, and board member. Joan Youngman, senior fellow and chairman of the Institute’s Department of Valuation and Taxation, spoke with him about his lifelong commitment to education, public service, and property taxation.

Joan Youngman: How does land value differ from improvement value as a property tax base?

Lowell Harriss: The significant factor with land is location, the unimproved condition of nature in the most fundamental economic sense. Whatever results from private or public investment and labor, such as streets, buildings, and so forth, is not part of land in this definition. Land differs from other productive resources because it is immobile and its quantity is fixed.

Land exists not because people produce it, but because it’s there by nature. The price one pays for land, as contrasted with other resources, has no role in creating supply. Land is also unique in that no two pieces are the same, so the kind of analysis appropriate for labor and capital with fungible aspects is not applicable to land.

Another important element is the ability to control land use–for example, to receive rent as payment for access, rather than because the owner created anything. The person who controls land use can serve a constructive function by directing it into better instead of poorer uses, and I think there should be the prospect of rewards for doing so. Market forces will indicate demand, and one interested in public policy hopes that the land will be used in the best possible ways. The owner of desirable land will get higher returns, but not because of anything he or she did to create it.

Almost any urban use illustrates this. Some thirty or forty years ago, I was walking down Park Avenue and I saw a very fine building in a key location, 64th Street, I think, housing some offices of the New York City Board of Education—much too valuable a location to be used for administrative purposes. I raised this point with someone in the school system, and he said that they were moving out. They had come to the same economic realization.

Any use of land prevents another use. Holding land idle or partially idle affects not only the owner but neighbors and society at large. Others will have to travel further to get to work or to the grocery store or to school. Land is so crucial, so important to life, that society will be better off if there are forces, market forces or governmental forces, inducing better rather than poorer uses.

JY: How can the tax system encourage better land use?

LH: A tax system that imposes higher taxes on land creates pressure on owners to make more productive use of their land. I don’t like the term “land value tax,” because it emphasizes the tax aspect. My focus over the years has been on reducing the tax rates on structures to induce more investment in improvements. I have not emphasized increasing the tax rates on land to increase pressure for better land use, but these can go together. If the tax system can create a built-in inducement, year in and year out, for better use of land, that will be a plus. I don’t want to be unduly skeptical about more direct land use regulation, but government is politics and the political pressures that affect government regulation do not always represent mankind at its best.

JY: How would you deal with past improvements to land, before the implementation of a land-based tax?

LH: I would just establish the tax on the current condition of the land. The past is past. We’re not talking about a tax on capital gains but a recurring tax on an immobile resource. Some of its current value does reflect prior capital investment, the same as for structures, but I don’t see how to make any differentiation for an annual tax on land value. As a practical matter we have no market for land the way it was hundreds of years ago.

Going forward, it would be desirable to distinguish the value of unimproved land from the value of capital improvements to the land, such as infrastructure and grading, that aren’t viewed commonly as “buildings” but that represent investment and effort. The tax system should not create obstacles to investment. I would certainly be open to learning more about what might be administratively feasible in that regard.

JY: What about the taxation of farms, forests, and open space?

LH: Well, this raises complicated concerns. On one hand, I think it would be good to have additional pressure on some owners of agricultural land to speed up nonagricultural development, especially in the urban fringe. On the other hand, decisions about land use are often irreversible. Covering more acres in Westchester County, where I live, with asphalt and buildings will affect drainage for years to come. I think if anything there should be bias against decisions that are costly in the long run and difficult to reverse if conditions change. But it’s also pretty clear that interests vary, and what is in the interest of farmers is not always in the interest of the public as a whole.

Land is a large part of farm investment, and anticipated future income is reflected in land prices. The market value of land does not necessarily reflect current cash flow, so if taxes are high they may constitute a substantial portion of farm income. I’m sometimes considered not very sympathetic to farmers, because I think they have undue political influence.

The effect of many state and federal programs to benefit farms will be capitalized into higher land values. The consumer will pay forever, and the benefits will go to the person who owned the land when the policy was established. This is not a new conclusion. It’s been in the literature since farm programs began in the 1930s, but it has not affected the political decision-making process. Congressman Barney Frank of Massachusetts asked why the family farm deserves more consideration than the family shoe store, and I agree with the implication of his question.

JY: What about two people who own identical parcels of land, side by side, but one has a small, older house and the other has a new commercial building or shopping center? Many people think it’s unfair to impose the same tax on both.

LH: There are real problems here, too, partly because of imperfections in the capital markets. The person with unimproved land, let’s say it’s a widow, might ideally get a reverse mortgage to realize cash income from her property. The logical thing at that stage of life is to consume capital, for example, by drawing down retirement accounts. We have a systematic market that enables us to live off of our capital when it’s in the form of financial investments, but it’s not that well developed for the real estate market.

I always want to be sympathetic with the person who is having trouble, but wise public policy cannot be made well by concentrating on the extreme cases. Society needs to deal both with the cases of human need and with other problems such as the pressures on land use. Those whose land has become valuable, not because of what they did, but because of their neighborhood, are lucky, even though they may not recognize it. We need separate instruments to deal with separate problems, such as the person whose tax bill goes up even when his cash income does not.

Another aspect of the question is that the property tax is not a personal tax and cannot be evaluated on the same grounds as, say, an income tax. To attempt to do so can mislead. A rich person may own no land and a person with very little cash may own a good deal of land. There are ways to deal with the cash-flow problem, such as circuit breakers that limit property taxes to a certain percentage of income or deferral of tax payments until the property is sold.

JY: Is speculation a special concern? Is everyone who holds property with the hope that it will rise in value a speculator?

LH: I’ve always been reluctant to use the term “speculation,” and I certainly would not say that public policy should penalize the speculator. But, to the extent that government plays a role, I would say its bias should be toward use rather than idleness, and tax policy also supports this view. There is a whole range of speculation, from an owner deciding not to sell a house this week because of hopes for a better price next week, to holding a plot of ground idle in downtown Manhattan, knowing that someone is going to offer a very high price for it eventually.

The developer is presumably a constructive element in the total process. I don’t think anyone really wants equilibrium, but something better than what would be equilibrium. More people live better by reasonable standards now than was the case 20 or 100 years ago, and the real estate developer has played a part in that process. Sometimes it’s fashionable to be disparaging of developers, but we owe a lot to them. Maybe we’ve overpaid some of them, but plenty of them have lost their shirts. It can be a very risky business.

JY: How should the tax system treat government-financed improvements to land?

LH: In New York City, for example, I don’t know how much of the cost of building and extending subways could be borne by taxing the increments of the land value in the neighborhood, but probably a good deal. It’s not going to slow down progress to use those land value increases to help finance the expansion of the subway system.

We need to distinguish, however, between year-in, year-out financing of government by taxes on land and more or less one-time charges. That is, if the subway system is extended, there will be immediate capital gains as well as a long-term increase in the property tax base. Each of these effects deserves consideration in public policy.

JY: What is the difference between someone who invests in a piece of land and then watches as the price of land rises and someone who invests in a stock and then watches the stock market rise?

LH: Well, as far as income taxation is concerned I would think they are the same, but for financing local government they’re very different. The land stays in place, yet the stockholder can move. The ability of the landowner and stockholder to pay may be the same, but that isn’t the only relevant consideration. In thinking about how to tax gains you need to take into account whether the taxpayer can move from the jurisdiction.

I think that taxing people annually to finance local government, based on their ownership of land, is good public policy. The effort to apply that same principle to intangibles was a complete failure in the late nineteenth and early twentieth centuries, because you can’t tax people locally on the basis of resources that are so mobile.

The distinction here is not between earned and unearned income. For income tax purposes the tax is applied after a sale when the owners have realized their gain. But, to finance schools and other services you don’t want to rely on residents’ decisions about whether or not to sell their land. You want a permanent and steady source of tax revenue.

This is quite different from the question of unearned income, that is, whether or not the owner grew rich in his sleep. If the Astors became rich from owning land in Manhattan, but paid their property taxes year in and year out, well, so be it. I think that the property tax can take only a very limited account of differences in wealth. The administrative difficulties of a net wealth tax could be enormous. And the identification of a property tax with a tax on wealth or net worth is, I think, diverting and dangerous. It shifts attention from the goal of financing government to issues of personal status and relative position.

JY: Could you say more about the problem of jurisdictions competing for business by offering tax reductions?

LH: It seems to me there is no need for property tax exemptions on land. Special concessions may be appropriate for buildings, as an acceptable means of competition, but I’m dubious and favor broad reduction of taxes on structures. In any case, the land is not going to move. If you give concessions for land, they will tend to be capitalized into capital gains for the present owners. Under a two-rate land and buildings tax system, any concessions should be made on the basis of the variable resource, which is the building value. Inducements are not going to create more land, but they might create more structures. In this way, economic development incentives might be more effective under a land tax.

As the U.S. housing market experiences its largest contraction since the Great Depression, the Lincoln Institute of Land Policy and the Urban–Brookings Tax Policy Center took a closer look at the consequences of this crisis for state and local governments in a May 2010 conference. A major theme of the discussion was the fallibility of conventional wisdom. For example, some participants questioned whether easy credit was in fact the cause of the housing bubble and thus to blame for the subsequent loss of state and local tax revenues. Papers presented at the conference document the complexities researchers face in determining the causes and lessons of this crisis.

• While easy credit did motivate homebuyers, its effect was not sufficiently strong to fully account for the housing boom.
• The housing market downturn was largely predictable, but only by looking at state-level rather than national data.
• Although state budgets have been battered by fallout from the recession in the form of lower income and sales tax revenue, these declines have been triggered more by the broader economic downturn than by the collapse in housing markets.
• Local governments seem to have been largely spared the severe budget shortfalls plaguing many states. While housing prices have fallen, property taxes have held up fairly well—supporting city budgets while other revenue sources have shrunk. However, there is great geographic variation in these results.

The Housing Market Boom and Bust

According to Byron Lutz, Raven Molloy, and Hui Shan, house prices at the national level increased by 64 percent from 2002 to 2006, before falling nearly 30 percent over the following four years. From 2006 to 2009, existing home sales dropped 36 percent and the number of newly constructed homes fell 75 percent. Could we have seen it coming? Was the housing market bust predictable? Yes, according to Yolanda K. Kodrzycki and Robert K. Triest, but only by looking at state-level data.

Conventional wisdom held that while house prices could fall in specific markets, national housing prices would not decline. This had been the historical pattern, although some markets, for example the Boston and Los Angeles metropolitan areas, experienced declines in the 1990s after strong increases in housing prices. Other areas, such as Detroit, had been declining or stagnant even when the country as a whole experienced consistent upward movement in house prices.

Much of the modeling and analysis of the housing crisis has used national-level data, which provided insufficient evidence to measure the peak of the housing bubble. Since economic cycles are more apparent at the state level and can act as early warning signs of housing trouble on a national scale, analyzing state data collectively can improve national forecasts.

Nevertheless, even the ability to recognize a housing bubble does not provide an easy prescription for preventing a crisis. Previous episodes of state-level housing price declines show that booms do not necessarily end in busts, Kodrzycki said. Rather, downturns are closely related to economic cycles. In most cases housing prices did not fall until after a recession had begun within a region—a pattern that is different from the current crisis.

The cause of the housing bubble is a crucial and unsettled question. Many economists have argued that easy credit was responsible, but Edward L. Glaeser disputed that view in a paper written with Joshua Gottlieb and Joseph Gyourko. Widely available credit and low interest rates do encourage more people to buy homes, increasing demand and raising housing prices. “This goes along with an older view,” Glaeser said, “that interest rates are very powerful in determining housing prices. There is some truth to that, but I think…those claims are overblown. Certainly the changes in the credit market can’t explain what we went through.”

Between 1996 and 2006, real housing prices rose by 42 percent, according to the Federal Housing Finance Agency price index. Glaeser and his colleagues found that low interest rates can likely explain only one-fifth of that increase. Other factors, including an elastic housing supply and credit-constrained homebuyers, can mute the effect of interest rates on prices. Buyers contemplating future moves or refinancing can take those factors into account when deciding how much to pay for a home. If the link between interest rates and house prices is smaller than expected, that knowledge can inform future federal housing policies and estimates of their effects on the housing market.

Impacts on State Revenues

State revenues plummeted in the recession, leading to record-high budget shortfalls just as demand for public services was growing. Inflation-adjusted state tax revenue fell nearly 15 percent during the downturn—the biggest drop in more than 50 years.

Donald Boyd noted that many of the first states to see their tax revenues decline also had been hit hard and early by the housing downturn. Arizona experienced its revenue peak in 2005, and by 2009 its real per capita tax revenue fell by 23.5 percent. Meanwhile, housing prices in Arizona tumbled 19.7 percent from 2006 to 2008.

States that were spared the worst of the housing crisis did not see revenue losses until the recession was in full swing. Texas had a 7.4 percent increase in housing prices from 2006 to 2008. Its tax revenues did not peak until late in 2008; roughly a year later, however, Texas saw its revenue drop by 17.5 percent.

Steven Craig and Edward Hoang examined how state government expenditures and taxes fluctuate with changes in underlying economic activity. They found that in general state responses initially tend to lag behind changes in gross state product, but in the long run states tended to overadjust to economic shocks.

Boyd found that in response to their budget gaps states cut spending in 2009 and 2010 primarily through furloughs and layoffs, and by stretching out payments of obligations into the future. States also cut grants to local governments, according to Howard Chernick and Andrew Reschovsky, who examined whether state budget crises lead to greater tax competition between states and their large cities. They find that in the long run cities with diversified revenue will be in a stronger fiscal position, but in the short run own-source revenue has declined more in cities with a diversified tax base (due in part to the strength of property tax). They also find that state aid is highly stimulative, but that increases in states sales tax rates will make it more difficult for cities to increase their sales taxes. The authors conclude that the current economic downturn will force significant public service reductions for large central cities.

Rachana Bhatt, Jonathan Rork, and Mary Beth Walker examined how higher education fared during the recession. While there have been highly publicized cuts in funding for higher education from general revenues, the overall level of expenditures for higher education has increased from 1996 to 2008. The authors find that across the business cycle states tend to substitute earmarked support for higher education (whether in the form of federal grants, lottery revenues, or other special accounts) for general fund support.

Federal stimulus spending in the American Recovery and Reinvestment Act (ARRA) helped boost state budgets and mitigate cuts in state aid to local governments, but those funds are set to expire in 2011. Boyd examined earlier recessions and found that the declines in state revenues have been more extreme this time. The good news, Boyd said, is that state tax revenue declines are showing signs of slowing and local revenues have not yet declined in aggregate.

“We might be stabilizing,” Boyd said. But, “it’s going to be a long ways before states are likely to have the capacity to finance the kinds of spending programs they have had…which means a lot of budgetary pain ahead still.” Indeed, the stabilization of state revenues on average was due in large part to tax increases in only two states, New York and California. Boyd predicts that it will be some time before other state revenues return to prerecession levels.

But, was this damage caused by the housing crisis? The recession may have been sparked by failing subprime mortgages, but it was fueled by overleveraged financial institutions—turning a housing slump into a global economic downturn. Lutz, Molloy, and Shan sought to separate the effects of the housing downturn on state and local tax revenues from the broader impact of the recession. They identified five main revenue streams that are influenced by the housing market: property tax revenues; transfer tax revenues; personal income tax revenues (related to construction and real estate jobs); direct sales tax revenues (through construction materials); and indirect sales tax revenues (when homeowners adjust their overall spending in response to changes in property value).

Property tax revenues remained high, and even grew in some states. The other four revenue streams declined, but had only a modest effect on overall state and local tax revenues. Lutz, Molloy, and Shan estimated that the combined decreases from these four revenue streams reduced total state and local tax revenues by $15 billion from 2005 to 2009, which is about 2 percent of state and local tax revenues in 2005. They found that in aggregate housing-related declines are responsible for only a fraction of the overall decline. Widespread unemployment and shrinking family incomes are more significant in cutting personal income and sales tax revenue. Thus, while the housing market and the economy are closely intertwined, the severe drop in state tax revenues can largely be attributed to the broader economic downturn, not the housing crisis specifically.

Local Governments and Property Taxes

As state revenues fell, local government revenues as a whole continued to grow because property tax revenue, which stayed strong in the recession, supported municipal budgets. States typically rely on income and sales taxes, which are more volatile than the property taxes that largely fund local governments. From 2007 to 2009, corporate and individual income tax revenue declined rapidly and sales tax revenue fell—but property taxes grew (figure 1).

In most states, housing price declines are not immediately reflected in assessed property values, and that lag makes property taxes a fairly resilient source of revenue. Also, policy makers tend to offset declines by raising tax rates (figure 2). James Alm and David L. Sjoquist backed these findings with their study of national trends in property tax collections. Although experiences varied among cities, they noted that local governments’ reliance on property taxes has been an advantage, allowing them to avoid some of the more severe effects of the recession.

Variable Effects in Selected States

While the conference focused on national trends, a recurrent theme was the dramatically variable experience of specific states and regions. Bruce Wallin and Jeff Zabel examined the effects of an earlier decline in Massachusetts house prices in the aftermath of a tax limit. Proposition 2½, passed in 1980, is a voter initiative that limits property tax levies (to 2½ percent of assessed values) and limits revenue growth to 2½ percent per year. There are exceptions for new growth, and Proposition 2½ does allow local voters to pass overrides to increase the growth percentage. Wallin and Zabel found property tax revenues overall did grow 4.58 percent between fiscal year 1981 and fiscal year 2009, largely due to these exceptions. A maximum of 547 overrides were proposed in 1991, but as few as 51 in 1999. However, poorer towns have been less likely to approve tax increases, relying instead on spending cuts, and leading to a growing gap between poor and wealthy towns over time.

Michigan, already struggling with the loss of manufacturing jobs, provides another striking case study. Poverty and unemployment rates there are higher than the U.S. average. In Detroit, housing prices plummeted—the average home cost $97,850 in 2003, but dropped to a remarkable low of $11,533 by 2009. Mark Skidmore and Eric Scorsone found that in the recession Michigan cut spending on recreation programs and delayed capital projects and infrastructure maintenance. That strategy may be effective in the short run, Skidmore said, but will likely result in higher costs down the road. He suggested that a similar fate might be in store for Las Vegas or cities in Arizona, which also experienced severe housing price declines.

Local governments in Florida and Georgia have remained fairly stable, so far. Florida experienced a tremendous increase in house prices from 1994 to 2006, before the housing market decline caused prices to fall across the state. William M. Doerner and Keith Ihlanfeldt found that city revenues in Florida rose during the housing boom, but not solely as a result of increased property values, and those revenues have stayed fairly strong following the drop in house prices. Alm and Sjoquist reported that property tax revenues in Georgia rose slightly between 2008 and 2009, while property values declined. Local governments, in many cases, maintained collections by increasing the tax rate.

What the Housing Crisis Means for Children

The housing crisis inflicted enormous costs on individuals, communities, and governments. Residents have been hurt by foreclosures and tremendous losses in property values (box 1). Vacant, deteriorating homes have weakened neighborhoods. The children caught up in the housing crisis face uncertain living situations and may have to transfer from school to school. Although researchers know these changes can harm children, they do not yet fully understand how this crisis is affecting students and schools.

David Figlio, Ashlyn Aiko Nelson, and Stephen Ross are studying how foreclosures hurt children’s educational outcomes. Their preliminary analysis indicates that schools serving neighborhoods with high foreclosure rates may experience declines in enrollment or community resources, with spillover effects on students whose families have not lost their homes.

Box 1. Foreclosure Statistics

• Nationwide, 1 in 33 homeowners are facing foreclosure.
• In 2004, before the crisis, the national foreclosure rate was 1.1 percent.
• In 2009, 2.21 percent of all homes in the United States were foreclosed.
• Foreclosure rates hit double digits in some markets: Las Vegas, NV (12.04 percent), Fort Myers, FL (11.87 percent), and Merced, CA (10.10 percent).

Source: Figlio, Nelson, and Ross (2010).

The effects of the housing crisis on children, schools, and neighborhoods are also being examined by Jennifer Comey and her colleagues. The first stage of their work in New York, Baltimore, and the District of Columbia identified areas with high rates of foreclosures. They have found that foreclosures of multifamily and rental units can lead to displacement of renters, causing many families to be harmed by the upheaval in the real estate market. The second phase will track student transfers after foreclosures, comparing their former neighborhoods and schools with their new ones.

Comey and her colleagues will also analyze these students’ school performance through attendance, test scores, and dropout rates. They stressed the importance of coordinating housing and education services. Housing counselors need to know how students are affected by foreclosure and to understand relevant local school policies. A better understanding of these issues can help schools ease the burden on displaced and homeless students.

Looking Abroad . . . and Ahead

Government responses to the global housing crisis also vary around the world, and some countries may offer lessons for the United States. For example, Christian Hilber examined whether central government grants can help maintain housing prices and found that most such grants seemed to translate into increased property values.

Joyce Yanyun Man reported that local governments in China were encouraged to invest in real estate and infrastructure to stimulate economic growth. Rather than using property taxes, they turned to land leasing fees and borrowing to finance urban development. China’s GDP growth rate is rising, but local governments are heavily in debt. Given what we are learning about the stability of property taxes in the United States, China may need to consider a similar policy instead of relying on one-time leasing fees to generate extra revenue.

Although local governments have not suffered the same fate as states, at some point assessed values will catch up to housing price declines. Indeed, recent survey results from the National League of Cities indicate that cities are beginning to see their revenues soften. John E. Anderson warned that local governments are in a precarious position—the property tax base has shrunk and ARRA funding will end, which could create a delayed blow to revenue. If these forces cause local governments to raise rates, this could cause homeowners to push for property tax limits and other initiatives to reduce property tax rates. Anderson investigated the potential adjustments local governments may have to make as they reduce reliance on the property tax in favor of alternative taxes.

Hui Shan stated, “Historical data and case studies suggest that it’s quite unlikely for property tax collections to fall steeply in the next few years.” The delay between the housing downturn and a drop in property taxes may give the national economy time to recover, making up for the loss of stimulus funds and property tax revenue through higher income and sales tax revenue. The forecast is not clear, but state and local governments should be prepared for what the conference participants agreed will be a slow economic recovery ahead.

About the Authors

Kim Rueben is a senior fellow at the Urban Institute and leads the state and local research program at the Urban–Brookings Tax Policy Center.

Serena Lei is a research writer and editor at the Urban Institute.

Acknowledgments

We thank Ritadhi Chakravarti of the Urban Institute, Tracy Gordon of the University of Maryland, and Semida Munteanu and Joan Youngman of the Lincoln Institute for assistance in writing this summary. We also thank the authors and other participants at the conference for engaging in a stimulating discussion. All mistakes and errors are our own.

Conference Authors and Papers

Alm, James, Tulane University; and David Sjoquist, Andrew Young School of Policy Studies, Georgia State University: Rethinking Local Government Reliance on the Property Tax

Anderson, John E., University of Nebraska–Lincoln: Shocks to the Tax Base and Implications for Local Public Finance

Bhatt, Rachana, Georgia State University; Jonathan Rork, Reed College; and Mary Beth Walker, Georgia State University: Earmarking and the Business Cycle: The Case of Higher Education Spending

Boyd, Donald J., The Nelson A. Rockefeller Institute of Government, State University of New York at Albany: Recession, Recovery and State and Local Finances

Chernick, Howard A., Hunter College and the City University of New York; and Andrew Reschovsky, University of Wisconsin–Madison: The Impact of State Government Fiscal Crises on Vertical Fiscal Competition Between States and Local Governments

Comey, Jennifer, The Urban Institute; Vicki Been, NYU/School of Law and Furman Center; Ingrid Gould Ellen, NYU/Wagner and Furman Center; Matthew Kachura, The Jacob France Institute, University of Baltimore; Amy Ellen Schwartz, NYU/Wagner-Steinhardt/IESP; and Leanna Stiefel, NYU/Wagner-Steinhardt/IESP: The Foreclosure Crisis in Three Cities: Children, Schools and Neighborhoods

Craig, Steven G., University of Houston; and Edward Hoang, University of Memphis: State Government Response to Income Fluctuations: Consumption, Insurance and Capital Expenses

Doerner, William M., and Keith R. Ihlanfeldt, Florida State University: House Prices and Local Government Revenues

Figlio, David, Northwestern University; Ashlyn Akio Nelson, Indiana University; and Stephen L. Ross, University of Connecticut: Do Children Lose More than a Home? The Effects of Foreclosure on Children’s Education Outcomes

Glaeser, Edward L., and Joshua Gottlieb, Harvard University; and Joseph Gyourko, The Wharton School, University of Pennsylvania: Can Easy Credit Explain the Housing Bubble?

Hilber, Christian A.L., and Teemu Lyytikainen, London School of Economics and Spatial Economics Research Center (SERC); and Wouter Vermeulen, CPB Netherlands Bureau for Economic Policy Analysis, VU University and SERC: Capitalization of Central Government Grants into Local House Prices: Panel Data Evidence from England

Kodrzycki, Yolanda, and Robert K. Triest, Federal Reserve Bank of Boston: Forecasting House Prices at the State and National Level: Was the Housing Bust Predictable?

Lutz, Bryon, Raven Molloy, and Hui Shan, Federal Reserve Board of Governors: The Housing Crisis and State and Local Government Tax Revenue: Five Channels

Man, Joyce Yanyun, Lincoln Institute of Land Policy: Extra-Budget Spending, Infrastructure Investment, and Effects on City Revenue Structure: Evidence from China

Skidmore, Mark, Michigan State University; and Eric Scorsone, Michigan Senate Fiscal Agency: Causes and Consequences of Fiscal Stress in Michigan Municipal Governments

Wallin, Bruce, Northeastern University; and Jeffrey Zabel, Tufts University: Property Tax Limitations and Local Fiscal Conditions: The Impact of Proposition 2½ in Massachusetts

The complete conference papers are available for free downloading on the Lincoln Institute Web site at www.lincolninst.edu/education/education-coursedetail.asp?id=720

La reciente recesión ha sido reconocida como la peor de que hayamos tenido memoria, y sus efectos todavía se están sintiendo. Lo que no se comprende tan bien es que esta recesión ha sido mucho peor para los gobiernos estatales de lo que se podría inferir por la caída en el producto interno bruto (PIB). Si bien las finanzas de los gobiernos estatales han dejado de desplomarse, siguen estando más cerca del fondo del precipicio que de su cima. Las recaudaciones de impuestos no han recobrado sus niveles previos a la recesión, y la demanda de nuevos ingresos puede llegar a abrumar cualquier mejora provisional en las cobranzas. Aun cuando los estados puedan superar estos desafíos, el camino hacia la recuperación fiscal será largo y lento, con varios y grandes riesgos en la andadura.

Los gobiernos estatales y locales juegan un papel importante en la economía y en nuestra vida cotidiana. Financian más del 90 por ciento de la educación primaria y secundaria, y proporcionan casi toda ella. Las universidades públicas educan a tres cuartos de los estudiantes inscritos en instituciones académicas. Los gobiernos estatales y locales supervisan, diseñan y construyen más del 90 por ciento de la infraestructura pública del país. Financian gran parte de la red de seguridad social de la nación y también implementan gran parte de ella. De hecho, los gobiernos estatales y locales gastan más en la implementación directa de políticas internas que el gobierno federal.

Los servicios financiados y proporcionados por los gobiernos estatales y locales tienden a tener una demanda estable y generalmente creciente. Cuando llega una recesión, no se reduce la cantidad de niños en la escuela o de ancianos en residencias para la tercera edad –dos de las áreas de gasto más importantes para los gobiernos estatales y locales– ni la cantidad de incendios o delitos. Para programas como Medicaid o educación universitaria, por ejemplo, la demanda de los tipos de servicios proporcionados por los gobiernos estatales y locales aumenta precisamente durante las recesiones. A menos que los estados puedan corregir las estructuras de ingresos o desarrollar las reservas adecuadas, la política pública seguirá sufriendo los vaivenes de cada giro de la economía.

La disminución en la recaudación de impuestos estatales

La Gran Recesión que comenzó en diciembre de 2007 fue la recesión más profunda y prolongada desde la Gran Depresión de la década de 1930. La tasa de desempleo subió al 10,1 por ciento y sigue siendo obstinadamente alta, cayendo sólo al 9,1 por ciento después de dos años de recuperación. Las recaudaciones de impuestos estatales se desplomaron, cayendo por cinco trimestres consecutivos desde el último trimestre de 2008 hasta finales de 2009. Las recaudaciones de impuestos cayeron vertiginosamente un 16,8 por ciento en el segundo trimestre de 2009, y en los años siguientes disminuyeron aún más, y más rápidamente, que en cualquier otra recesión habida desde la Segunda Guerra Mundial (figura 1).

La reciente caída en el PIB ha sido significativa en comparación con recesiones pasadas, pero las caídas en el consumo tributable y en los ingresos personales, dos componentes que constituyen la base tributaria de los gobiernos estatales y locales, han sido mucho peores. El consumo tributable cayó alrededor del 11 por ciento, mientras que el PIB cayó alrededor del 5 por ciento. Los componentes tributables de los ingresos personales también cayeron mucho más que la economía en general, y siguen languideciendo más del 5 por ciento por debajo del auge previo a la recesión, lo cual refleja que no ha habido recuperación en el empleo.

Si bien esta ha sido la peor recesión desde la posguerra según los patrones económicos tradicionales, estas formas de medir no cuentan toda la historia. Las ganancias de capital, un componente importante de las bases tributarias de los estados, no forman parte de los ingresos personales en las cuentas económicas de la nación. Estas ganancias han aumentado en importancia y son una de las causas principales de la mayor volatilidad de las finanzas estatales. Las ganancias de capital cayeron más del 55 por ciento, impulsando la caída de la recaudación de impuestos en el trimestre final del año fiscal 2009, cuando se presentaron las declaraciones de impuestos que correspondían al colapso de la bolsa en 2008.

El resultado neto de estas y otras fuerzas fue una enorme disminución en los impuestos estatales sobre los ingresos, las ventas y las corporaciones. La figura 2 ilustra cómo los impuestos anuales sobre los ingresos cayeron más del 15 por ciento cuando se los ajusta por la inflación; los impuestos sobre las ventas cayeron más del 10 por ciento; y los impuestos corporativos cayeron más del 25 por ciento. Los impuestos sobre la propiedad, que son cruciales para los gobiernos locales pero, en general, no son una fuente significativa de ingresos para los estados, permanecieron bastante estables durante todo el período, si bien están comenzando a debilitarse y en algunas partes del país han caído significativamente.

Una lenta recuperación

La recesión terminó en junio de 2009 y la economía se ha estado recuperando lentamente. La recaudación de impuestos estatales creció en cada trimestre del año natural 2010, y el carácter de este crecimiento ha mejorado con el tiempo. En los primeros dos trimestres de 2010, los incrementos en las tasas tributarias compensaron con creces las caídas causadas por la debilidad económica subyacente, pero en los últimos dos trimestres el crecimiento de los ingresos tributarios ha sido impulsado principalmente por una mejoría en la economía. En el cuarto trimestre, los ingresos tributarios crecieron un 7,8 por ciento, pero incluso sin los aumentos en las tasas tributarias hubieran crecido un 7,0 por ciento. Los ingresos tributarios del trimestre de enero a marzo de 2011 crecieron un 9,3 por ciento en comparación con el año anterior, y 21 estados tuvieron un crecimiento mayor del 10 por ciento. Los datos preliminares para el trimestre de abril a junio muestran que las recaudaciones tributarias aumentaron un 11,4 por ciento.

Los ingresos tributarios estatales con inflación ajustada para el país en general en los últimos cuatro trimestres (que finalizan en el primer trimestre del año natural 2011) fueron un 7,7 por ciento menores que el pico alcanzado en 2007. El considerable crecimiento observado en los primeros dos trimestres de 2011 probablemente no se podrá sostener mucho más porque parece haber sido impulsado por las ganancias en la bolsa del año fiscal 2010, inflando las declaraciones de impuestos en el segundo trimestre. Casi con seguridad estas ganancias no se repetirán en 2011.

Además, las turbulencias en los mercados de deuda europeos y la reciente rebaja de la deuda a largo plazo de los Estados Unidos por parte de Standard & Poor’s han contribuido al temor de que se produzca una segunda recesión. Existen señales de que el crecimiento económico será más lento de lo que la mayoría de estados había supuesto en sus presupuestos actuales. Los estados están más cerca del fondo del precipicio que de su cima, y corren el riesgo de volver a caerse. Mientras tanto, hay algunos signos de que los ingresos tributarios de los gobiernos locales también están comenzando a debilitarse.

Si bien los ingresos tributarios están creciendo ahora en la mayoría de los estados en comparación con las bajas tasas de recaudación del año anterior, no han alcanzado todavía los niveles previos a la recesión. Después de ajustarlos a la inflación, los ingresos tributarios para los últimos cuatro trimestres están por debajo del nivel del año natural 2007 en 43 estados, y los ingresos son por lo menos 10 por ciento menores que dicho nivel en 20 de estos estados. Entre los siete estados que muestran un giro positivo en la recaudación de impuestos, sólo Oregón (8,9 por ciento), Delaware (13 por ciento) y Dakota del Norte (62,9 por ciento) muestran niveles superiores al 2 por ciento.

Reacciones de los gobiernos estatales y locales

Los estados que han sufrido una reducción en sus ingresos también han visto subir el costo de sus programas sociales, debido en gran parte a la inscripción en Medicaid, que siempre aumenta después de que los trabajadores desempleados agotan sus prestaciones de seguro de salud. Según la Asociación Nacional de Funcionarios Presupuestarios Estatales (2011, ix), la inscripción en Medicaid aumentó un 8,1 por ciento en el año fiscal 2010, y se estima que aumentará un 5,4 por ciento en el año fiscal 2011; los estados proyectan un incremento adicional del 3,8 por ciento en el año fiscal 2012. Estos y otros tipos de gastos necesarios producen aún más tensiones en las actividades cotidianas de los gobiernos estatales y locales.

Es difícil medir el impacto de los recortes de gastos sobre los programas estatales y locales, pero sí se pueden medir los cambios en el nivel de empleo de los gobiernos estatales y locales. Si bien en el sector privado el empleo cayó significativamente desde el comienzo de la recesión, el empleo en los gobiernos estatales y locales siguió creciendo modestamente durante alrededor de un año y medio. Poco antes de que el empleo en el sector privado alcanzara su nadir, el empleo en los gobiernos estatales y locales comenzó a disminuir, y han tenido que recortar el empleo de manera agresiva. El nivel de empleo en los gobiernos locales es ahora un 3 por ciento menor que el pico, y el empleo en los gobiernos estatales es alrededor del 2 por ciento menor que el pico.

Los puestos de trabajo en educación en la mayoría de los estados están relacionados principalmente con la educación superior –universidades comunitarias, universidades de licenciatura y universidades con cursos de posgrado– si bien parte de ellos corresponden a la burocracia administrativa de la educación primaria y secundaria, y en algunos estados incluye parte de la fuerza de trabajo de ese sector educativo. El empleo en educación de los gobiernos estatales ha seguido creciendo significativamente durante la recesión y la recuperación, reflejando en parte el aumento en la demanda de educación terciaria que normalmente se produce en las recesiones (figura 3). Cuando es difícil encontrar trabajo, muchas personas deciden aumentar su nivel de destrezas y conocimientos inscribiéndose en un programa educativo o prolongando su estadía en la universidad (Betts y McFarland, 1995).

Mientras tanto, los gobiernos estatales han estado recortando el empleo no relacionado con la educación a pasos acelerados, de tal manera que ha bajado ahora casi un 5 por ciento desde su pico a mediados de 2008, casi comparable con lasituación actual de recuperación leve del empleo en el sector privado. En cada una de las nueve recesiones previas, el empleo no relacionado con la educación en los gobiernos estatales no disminuyó en absoluto o lo hizo en mucha menor medida, como fue el caso, por ejemplo, en la recesión de 2001.

La figura 4 muestra los mismos datos de empleo para los gobiernos locales, que están sufriendo cada vez más por la disminución de los impuestos sobre la propiedad y los recortes de ayuda estatal. El empleo en educación es ahora un 3,5 por ciento menor que el pico producido a finales de 2008, y el sector no relacionado con la educación ha caído un porcentaje similar con respecto al pico. No hay señales de que estos recortes se estén frenando, y hay pocas razones para pensar que vayan a remitir a corto plazo.

Las presiones fiscales continúan

La reciente mejoría de los ingresos tributarios estatales es bienvenida, pero siguen quedando varios desafíos. Los estados tienen problemas fiscales por cuatro razones principales. Primero, los ingresos totales siguen estando muy por debajo de su pico. Segundo, la recesión ha provocado efectos fiscales demorados, aumentando la demanda de muchos servicios gubernamentales, sobre todo Medicaid, otros programas de la red de seguridad, y la educación superior. La recesión también ha creado otras presiones y problemas para los estados al vaciar los fondos de fideicomiso del seguro de desempleo, lo cual puede llevar a imponer impuestos mayores para los seguros de desempleo con el fin de poder pagar los préstamos federales.

Tercero, los ajustes estatales cíclicos no se han completado aún, porque tienen que contabilizar las pérdidas del estímulo federal de más de US$50.000 millones en el año fiscal 2011–12 y el vencimiento de las medidas temporales de aumento de ingresos que se promulgaron en respuesta a la recesión. Cuarto, aun después de que este ciclo se estabilice por completo, los estados tendrán que enfrentarse con grandes aumentos en contribuciones de pensiones y pagos para la salud de los jubilados –una presión que probablemente se irá acumulando en los años venideros por varias razones como el aumento en la cantidad de jubilados debido al envejecimiento de la fuerza de trabajo; la probabilidad de que los costos de salud aumenten más rápidamente que la economía en general (Keehan et al. 2011); y, en el caso de algunos sistemas de pensiones y la mayoría de los planes de salud para jubilados, muchos años de subfinanciamiento crónico.

Los estados financian estos servicios con fuentes de ingresos inestables, y los ingresos tributarios se han hecho mucho menos confiables en las últimas dos décadas, reflejando en gran parte la participación cada vez mayor de los impuestos volátiles sobre la ganancia de capital. A menos que los estados puedan ampliar sus bases tributarias para que sus estructuras de ingresos sean menos volátiles, o desarrollar reservas adecuadas, la política pública seguirá sufriendo los vaivenes de cada giro en la economía.

Sobre El Autor

Donald Boyd es el director ejecutivo del Comité de Tareas Nacional sobre la Crisis en los Presupuestos Estatales, cuyos presidentes son el expresidente de la Junta de la Reserva Federal, Paul Volcker, y el exvicegobernador de Nueva York, Richard Ravitch. Boyd se encuentra actualmente bajo licencia de sus responsabilidades como senior fellow en el Instituto de Gobierno Rockefeller, donde realiza investigaciones sobre temas fiscales de los gobiernos estatales y locales.

Referencias

Betts, Julian R., and Laurel L. McFarland. 1995. Safe port in a storm: The impact of labor market conditions on community college enrollments. Journal of Human Resources 30(4):741–765.

Boyd, Donald. 2011. Recession, recovery, and state and local finances. Working Paper. Cambridge, MA: Lincoln Institute of Land Policy.

Keehan, Sean P., Andrea M. Sisko, Christopher J. Truffer, John A. Poisal, Gigi A. Cuckler, Andrew J. Madison, Joseph M. Lizonitz, and Sheila D. Smith. 2011. National health spending projections through 2020: Economic recovery and reform drive faster spending growth. Health Affairs 30(8): 1594–1605.

National Association of State Budget Officers. 2011. The fiscal survey of states. Washington, DC. http://nasbo.org/Publications/FiscalSurvey/ tabid/65/Default.aspx

Los Estados Unidos están emergiendo de una gran recesión, cuya característica principal ha sido el colapso de los precios inmobiliarios nacionales, los cuales aumentaron en un 59 por ciento de 2000 a 2006 y luego descendieron un 41 por ciento para el año 2011 (siempre en dólares constantes). A nivel nacional, los verdaderos precios inmobiliarios en 2011 se encontraban un 6 por ciento por debajo de los niveles del año 2000. El colapso de los precios inmobiliarios tuvo efectos contagiosos inesperados que contribuyeron a la crisis financiera resultante y al deterioro económico más grave desde la Gran Depresión. La proporción de hipotecas de los EE.UU. en mora por 90 días o más aumentó de cerca del 1 por ciento en 2006 a más del 8 por ciento en 2010. Los costos económicos y sociales derivados de esta burbuja de precios inmobiliarios y su consecuente colapso han sido enormes.

La prevención de futuras burbujas de precios inmobiliarios evidentemente conlleva grandes beneficios, aunque lograr dichos beneficios requerirá que los legisladores aprendan a detectar las burbujas de precios a medida que éstas se van formando y luego implementen las políticas necesarias que logren atenuar o mitigarlas. En un reciente informe sobre enfoque en políticas de suelo del Instituto Lincoln, titulado Cómo prevenir las burbujas de precios inmobiliarios: Lecciones de la explosión de 2006–2012, sus autores, James Follain y Seth Giertz, abordan los desafíos a la hora de diagnosticar y tratar las burbujas de precios en el mercado inmobiliario. Este informe representa un aporte al amplio análisis estadístico que se encuentra disponible en varios documentos de trabajo del Instituto Lincoln.

Aunque es muy común resumir la reciente explosión del mercado inmobiliario en términos de indicadores nacionales (tal como se indica en el párrafo anterior), dichos indicadores no toman en cuenta las grandes variaciones tanto en los niveles como en los cambios en precios inmobiliarios entre diferentes áreas metropolitanas. Por ejemplo, de 1978 a 2011, los precios inmobiliarios en dólares constantes en Dallas, Texas y en Omaha, Nebraska experimentaron una variación menor al 20 por ciento comparados con los niveles de 1978; los precios en Stockton (California) casi se triplicaron de 1978 a 2006, aunque para el año 2011 volvieron a los niveles de 1978. Los mercados inmobiliarios locales se encuentran influenciados por las políticas y condiciones económicas y financieras a nivel nacional, pero estas grandes diferencias entre los mercados metropolitanos indican que las condiciones locales también juegan un papel muy importante en este sentido.

Un elemento clave en el trabajo estadístico llevado a cabo por Follain y Giertz es utilizar mercados inmobiliarios metropolitanos como unidad de observación para sus análisis, que están basados en datos anuales (desde 1980 hasta 2010) y en datos trimestrales (desde 1990 hasta 2010) de hasta 380 áreas metropolitanas. Según el trabajo econométrico realizado por los autores, las burbujas de precios inmobiliarios pueden detectarse comparando las diferentes áreas metropolitanas, y los precios y el riesgo crediticio resultante varía en gran medida. Las pruebas de estrés, tales como aquellas utilizadas para evaluar el riesgo de crédito hipotecario, pueden llegar a ser indicadores útiles de posibles burbujas de precios a nivel metropolitano.

Debido a que los niveles y cambios en los precios inmobiliarios varían en gran medida entre las diferentes áreas metropolitanas —algunas de las cuales presentan aumentos de precios del tipo burbuja, y otras experimentan precios básicamente estables— Follain y Giertz concluyen que las políticas destinadas a mitigar las burbujas de precios inmobiliarios deberían ser formuladas a medida para las áreas o regiones metropolitanas, en lugar de ser aplicadas uniformemente en todas las áreas metropolitanas a nivel nacional. De esta manera, la política monetaria representaría una intervención poco atractiva para hacer frente a los aumentos de precios inmobiliarios en algunas áreas metropolitanas, ya que afectaría los términos financieros tanto en los mercados inmobiliarios efervescentes como en aquellos que son estables. En cambio, Follain y Giertz son partidarios de las intervenciones consistentes en políticas dirigidas a aquellas áreas metropolitanas que presentan grandes aumentos de precios. La política por la que abogan los autores aumentaría el coeficiente de reserva de capital que deben poseer los bancos en relación con las hipotecas que financian en dichas áreas. Estas políticas anticíclicas respecto del capital desalentarían los aumentos de precios inmobiliarios a la vez que fortalecerían las reservas de los bancos emisores, lo que mejoraría la capacidad de estos últimos de soportar cualquier conmoción financiera inesperada.

La aplicación de políticas prudentes en cuanto a los mercados inmobiliarios a nivel metropolitano parecería ser algo obvio… entonces, ¿por qué no se han implementado antes? Gran parte de la respuesta tiene que ver con que el análisis del mercado inmobiliario está siendo beneficiado por una revolución en la disponibilidad de datos desglosados espacialmente a nivel metropolitano, del condado e incluso por zona de código postal. Los datos necesarios para informar acerca de las intervenciones mediante políticas a nivel metropolitano que se encuentran ampliamente disponibles desde hace muy poco tiempo, y dichos datos sustentan el trabajo empírico llevado a cabo por Follain y Giertz. Para más información sobre el análisis realizado por los autores, ver http://www.lincolninst.edu/pubs/2245_Preventing-House-Price-Bubbles.

Una ciudadanía informada es una ciudadanía con poder, pero educar a los contribuyentes y al electorado puede ser una tarea difícil. Aunque a la mayoría de las personas les importan mucho los diferentes problemas de la comunidad, como construir o no una nueva sucursal de la biblioteca o implementar de retiro domiciliario de residuos reciclables, muy pocos de nosotros pasamos nuestro limitado tiempo libre mirando hojas de cálculo para comprender los detalles del presupuesto municipal y las probables implicaciones que puede tener una decisión sobre la obtención de fondos. Esta desconexión es desafortunada, ya que, sepultada bajo esas toneladas de datos, yace la historia de cada una de nuestras comunidades, un mapa que muestra las formas en que una decisión en particular puede tener un impacto sobre la calidad y la disponibilidad de los servicios públicos de los que dependemos en nuestra vida diaria, como el mantenimiento de las calles, la educación pública y los servicios de emergencia.

“Para lograr una posición fiscal sólida, los gobiernos municipales deben dialogar con los residentes”, expresa Lourdes Germán, experta en salud fiscal municipal y miembro del Instituto Lincoln de Políticas de Suelo. “Los residentes deben saber cuáles son las decisiones clave que los funcionarios municipales están tomando, qué significan dichas decisiones desde el punto de vista económico, y de qué manera se están utilizando los impuestos que pagan. Los residentes votan muchas cuestiones diferentes en las asambleas municipales y, con frecuencia, dichas asambleas son la primera oportunidad que tiene la gente de escuchar sobre estas cuestiones, lo cual, a esa altura, resulta demasiado tarde”.

Annie LaCourt, exconcejal del municipio de Arlington, Massachusetts, coincide. LaCourt tuvo la idea de convertir las pilas de hojas de cálculo del presupuesto municipal de Arlington en un sencillo gráfico visual que cualquier miembro de la comunidad pudiera entender, incluso aquellos que carecieran de todo conocimiento previo sobre el proceso presupuestario.

“En el caso de Arlington, realizamos una proyección de cinco años para nuestro presupuesto y debatimos muchísimo con el público acerca de lo que significan dichas proyecciones y de qué manera se relacionan con nuestros impuestos”, explica LaCourt. “Yo quería que ese diálogo fuera más público, más abierto y más transparente para la gente que quiere saber lo que está pasando”.

En particular, LaCourt concibió un sitio web interactivo en el cual los residentes podían introducir su factura de impuestos y recibir un desglose claro y gráfico de la forma en que el municipio gastó los fondos. LaCourt esperaba que, al proporcionarles información más accesible y resumida, los contribuyentes se animarían a participar más activamente en las decisiones importantes (aunque parecieran esotéricas) que forman parte de un presupuesto municipal. LaCourt reclutó a Alan Jones, vicepresidente del comité financiero del municipio de Arlington, y a Involution Studios, un estudio de diseño que donó sus servicios a este proyecto. Y en septiembre de 2013, el Presupuesto Visual de Arlington (arlingtonvisualbudget.org) vio la luz.

“El Presupuesto Visual de Arlington permite a los contribuyentes reflexionar sobre el presupuesto a una escala que les resulta más útil”, señala LaCourt. “En lugar de tratar de entender sumas de millones de dólares gastados en diferentes conceptos del presupuesto, el contribuyente puede ver cuánto le costaron personalmente ciertos servicios públicos en particular. Por ejemplo, en Arlington, gastamos 2 millones de dólares para retirar la nieve el año pasado, lo cual representa el mayor monto que hemos pagado por este concepto. Mediante el uso del sitio web, un residente que tenga una factura de cobro por US$6.000 podrá ver que, personalmente, pagó US$90 por estos servicios, lo cual es una ganga. Cuando uno ve su factura de cobro desglosada en los diferentes servicios, y ve que su participación en el costo total de todos los servicios es relativamente baja, comienza a parecerle bastante razonable”.

Y Jones agrega: “Esto también muestra a la gente que sus impuestos se utilizan para cosas en las cuales no necesariamente piensan, cosas que no ven cuando van en automóvil todos los días por la ciudad, pero que forman una parte importante del presupuesto, tales como el servicio de deuda de los edificios escolares construidos hace 10 años, los pagos de pensión y seguro de jubilados o el seguro de salud de los empleados en activo”.

Otro beneficio del sitio web es que se puede observar fácilmente cómo ha ido evolucionando la política pública con el tiempo. “El Presupuesto Visual de Arlington contiene datos desde el año 2008 y proyecciones hasta el año 2021, por lo que los ciudadanos realmente pueden entender cómo ha cambiado el presupuesto y el impacto que este tiene sobre la comunidad”, señala Adam Langley, analista de investigación senior del Instituto Lincoln de Políticas de Suelo. “Los contribuyentes pueden observar que la ayuda del estado para los gobiernos generales se redujo a la mitad entre 2009 y 2010, y que, desde entonces, nunca se recuperó totalmente. Debido a dicho recorte, la parte del presupuesto de Arlington que se cubría con fondos del estado se redujo, mientras que la parte que se cubre con los impuestos a la propiedad creció del 70 por ciento al 76 por ciento. El impacto de las decisiones gubernamentales sobre los presupuestos de las familias se torna más evidente”.

Brendhan Zubricki, administrador municipal de Essex (una comunidad de aproximadamente 3.500 habitantes que se encuentra a unos 40 km al norte de Boston), comprendió rápidamente de qué manera la herramienta presupuestaria interactiva podía ayudar a los residentes de su comunidad a tomar decisiones financieras importantes en tiempo real. Durante los últimos cien años, el municipio ha estado alquilando a arrendatarios del sector privado una parcela de una propiedad pública costera conocida como Conomo Point. Essex depende de una suma aproximada de US$500.000 todos los años en impuestos a la propiedad sobre el terreno para cubrir el presupuesto de US$6,4 millones financiado por impuestos, sin incluir los US$7,4 millones que paga para participar en dos distritos escolares regionales. En mayo de 2015, los contribuyentes de Essex solicitaron votar para decidir si continuaban o no dando en alquiler esa parcela con un acceso público mejorado a la franja costera principal o convertir la totalidad de la parcela en una propiedad de uso público. Si los residentes votaran a favor de un parque público, el terreno ya no estaría sujeto a impuestos, con lo cual los residentes experimentarían un aumento en sus impuestos para cubrir la suma de US$500.000 que se perdería en concepto de recaudación.

Zubricki recurrió a la herramienta del presupuesto visual con el fin de generar varios modelos impositivos para presentar en una asamblea municipal que se convocó antes de la votación. “El modelo básico era una herramienta de visualización que ayudaba a las personas promedio a comprender el presupuesto. Pero fuimos más allá y lo utilizamos para explicar el futuro financiero de Essex en relación con este concepto principal. Y funcionó. Obtuvimos muchísimas opiniones positivas de los asistentes a la asamblea”, comenta Zubricki. Meses más tarde, en una votación no vinculante, los residentes votaron, con una mayoría abrumadora, por continuar dando en alquiler el terreno de Conomo Point y analizar diferentes formas de mejorar el acceso a los parques costeros existentes y otros espacios públicos (la votación vinculante se realizará en mayo de 2016).

De conformidad con los principios del movimiento de tecnología cívica (es decir, “datos abiertos y código abierto”), LaCourt, Jones y el equipo de Involution Studios puso la herramienta del presupuesto visual a disposición del público de manera gratuita. Esto permitió que diferentes funcionarios municipales pudieran adaptar la herramienta, sin costo alguno, a sus respectivos municipios, simplemente mediante la incorporación de los datos presupuestarios de sus comunidades, todos los cuales se encuentran disponibles al público.

“Gracias a la característica de código abierto del software, Annie y Alan realmente están ayudando a los municipios más pequeños que no pueden permitirse los servicios de un funcionario especializado en tecnología o un desarrollador o un estudio de diseño, y que deben encontrar un equilibrio entre cuestiones que compiten entre sí, tales como financiar un programa escolar o crear un sitio web”, señala Germán. “Estas comunidades pueden utilizar la herramienta simplemente introduciendo sus propios datos”.

Germán añade que este software también ayuda a los funcionarios municipales a planificar mejor el futuro. “El Presupuesto Visual permite a los funcionarios públicos generar modelos para diferentes escenarios durante varios años. El pronóstico y la planificación para varios años es fundamental para la salud y estabilidad fiscal, pero no necesariamente está disponible en las ciudades pequeñas”. El sitio ha recibido muchos galardones, como el Premio a la Innovación 2014 de la Asociación Municipal de Massachusetts.

A principios de este año, LaCourt, Jones y el equipo de Involution Studios creó Visual Government (visgov.com) en respuesta al creciente interés en el software. Visual Government “continúa con el compromiso de poner a disposición de municipios y grupos civiles de todo tipo presentaciones presupuestarias significativas”. Aunque el software sigue estando disponible sin costo alguno, Visual Government también ofrece un paquete de asesoramiento que incluye construir y alojar un sitio web y prestar asistencia a los municipios compilar datos presupuestarios pasados, presentes y futuros. Con la determinación de continuar siendo asequibles, este paquete cuesta US$3.000 y ha sido diseñado principalmente para las comunidades que carecen del personal necesario para desarrollar sus propios sitios web.

“Los sitios web de presupuesto visual no son sitios de gran volumen”, indica Jones, “pero tienen un alto valor. Muestran las consecuencias de las decisiones financieras de tal manera que parecen estar más fundamentadas y ser menos anecdóticas. Las denominamos ‘zonas sin curvas’.”

Loren Berlin es escritora y consultora en comunicaciones en el área del Gran Chicago.

Una versión más actualizada de este artículo está disponible como parte del capítulo 4 del libro Perspectivas urbanas: Temas críticos en políticas de suelo de América Latina.

Estudiosos y funcionarios públicos preocupados por la justicia social consideran que la redistribución de los valores de la tierra es un objetivo especialmente importante de política urbana en los países latinoamericanos, donde las enormes diferencias de acceso a los escasos servicios e infraestructura urbana llevan a una injusta distribución de los valores del suelo. Sin embargo, las políticas e instrumentos de captura de plusvalías, utilizados en principio para “redistribuir la valorización del suelo” o para “promover la redistribución de los incrementos en el valor de la tierra”, son rechazados por algunos sectores progresistas que argumentan que, en la práctica, dichos instrumentos no están realmente destinados para la redistribución.1 Este artículo explora un número de interrogantes que deben analizarse a fin de mejorar el entendimiento del concepto de captura de plusvalías y de su potencial para desempeñar un papel verdaderamente redistributivo en América Latina.

El principio distributivo y la meta redistributiva

El principio básico de la captura de plusvalías2 es devolver a la comunidad los incrementos de valor de la tierra que resultan de la acción comunitaria. La manera más común de definir tales incrementos es enfocándose en aquellos aumentos particulares resultantes de acciones públicas específicas y fechadas. Así, los correspondientes instrumentos de captura de plusvalías podrían ser definidos como herramientas para recuperar para la población el incremento en el valor de la tierra asociado con acciones públicas, aumento que de otra manera sería capturado por entidades privadas. El objetivo de esta política distributiva es restablecer un estado previo de distribución que, en esencia, se considera como propio o como dado.

Una interpretación alterna se basa en el principio establecido por Henry George, de que todo valor de la tierra, sin importar su origen, es producto del esfuerzo de la comunidad. Bajo este punto de vista, la idea de la captura de plusvalías puede adquirir una perspectiva verdaderamente redistributiva únicamente si se considera todo el valor de la tierra, y si se introduce la meta de alterar el estado presente de la distribución de dicho valor.

La redistribución de los valores de la tierra es apenas una de varias metas posibles de la política de suelo urbano. Otras son el aumento de los ingresos públicos para financiar servicios urbanos, la regulación y el manejo de los usos del suelo urbano, y el control de manifestaciones indeseables que resulten del funcionamiento de los mercados de suelo urbano. Es decir, la redistribución puede ser una guía para políticas distributivas más progresivas, pero no es necesariamente el principio básico de la captura de plusvalías.

De esta manera, podemos distinguir entre el principio distributivo de las políticas de captura de plusvalías -para restablecer un cierto grado de distribución- y una meta redistributiva de políticas de suelo urbano -para alterar un cierto estado de distribución. Esta distinción nos permite aclarar la confusión existente entre la distribución y la redistribución, cuando aplicadas a los valores del suelo y a la idea de la captura de plusvalías.

La práctica de la captura de plusvalías en América Latina

En un sentido genérico, la idea de la captura de plusvalías se aplica a cualquier imposición o herramienta de planificación que tenga como finalidad distribuir los aumentos del valor del suelo. Casi todos los países latinoamericanos han experimentado con el impuesto predial, y muchos emplean otras herramientas de planificación tales como la donación obligatoria de tierras para propósitos públicos en proyectos de parcelación o subdivisión de terrenos. Históricamente el desarrollo de la idea de la captura de plusvalías ha estado asociado con un instrumento específico conocido como Contribución de Valorización/Contribución de Mejoras. Este mecanismo especial de tasación o valorización, incorporado en la legislación de la mayoría de los países latinoamericanos, tiene el objetivo de capturar una porción de los beneficios especiales (valorización del suelo) que resulten de las inversiones públicas en infraestructura y servicios públicos, para financiar tales inversiones.

Incluso bajo esta estrecha definición, la aplicación de la captura de plusvalías ha estado plagada por limitaciones y polémicas. Tanto la influencia política de los propietarios como las deficiencias técnicas -y a menudo también legales- para poder hacer avalúos adecuados de los valores del suelo, han sido identificadas por estudiosos y funcionarios públicos como entorpecedoras de su aplicación en muchos países. Colombia es quizás el único país que se destaca por su tradición establecida de uso del instrumento, pero incluso allí su aplicación ha tropezado con serias limitaciones. Algunos observadores defienden el argumento de la incapacidad del instrumento para la redistribución, mientras que otros señalan que frecuentemente pierde su vínculo con el principio distributivo, convirtiéndose simplemente en una forma práctica de pagar a la comunidad para subsanar los costos de una acción pública que genera beneficios sólo para ciertos individuos.

Una mirada más cercana a la experiencia latinoamericana en la aplicación de instrumentos de captura de plusvalías lleva a una conclusión inquietante: en vez de desarrollarse a partir del principio ético de justicia, según el cual el incremento del valor del suelo resultante de acciones comunitarias debe retornar a la comunidad, pareciera que la idea de captura de plusvalías ha sido adoptada en América Latina como un mecanismo pragmático de recuperación de costos para resolver la escasez crónica de ingresos públicos y poder financiar proyectos de infraestructura urbana. A la larga, la meta principal de tales instrumentos ha sido aumentar las rentas públicas, sin importar si se basan o no en un principio distributivo.

Vinculación entre la captura de plusvalías y la redistribución

Incluso si el principio distributivo está asegurado, la meta de aumentar los ingresos públicos puede diferir de, o incluso contradecir, otras metas de la política de suelo urbano, incluyendo la importante meta redistributiva. Por ejemplo, cuando aumenta el valor del suelo de una región muy valorizada debido a una inversión pública en infraestructura urbana, y entonces el ingreso derivado de la captura de plusvalía se reinvierte en la misma región, el resultado no sólo no es redistributivo, sino que puede llegar a ser regresivo.

A fin de poder entender las contradicciones que surgen entre el uso tradicional de los instrumentos de captura de plusvalía para aumentar los ingresos fiscales, y la necesidad de incorporar las metas de redistribución en tales políticas, debemos contemplar el concepto de la captura de plusvalía con una visión mucho más amplia. Aun limitándonos a su usual definición centrada en incrementos específicos del valor del suelo, es preciso que al menos tres acciones o decisiones públicas no autónomas estén asociadas con el principio distributivo de captura de plusvalía:

1. una acción pública original (regulación, inversión, etc.) que genere incrementos en el valor del suelo;
2. una segunda acción para capturar (parcialmente) este valor; y
3. una tercera acción relacionada con el destino o uso de los recursos recolectados.

Si bien la segunda acción implica el uso de un instrumento general o específico de captura de plusvalía, la primera y la tercera, aunque están relacionadas a decisiones específicas, están inexorablemente ligadas a dos preguntas básicas referentes a las decisiones públicas como un todo: ¿Cómo se asignan obras públicas en el espacio? y ¿Cómo se distribuyen los ingresos fiscales generales?

Asignación de las obras públicas

Cuando el sistema tiene las metas concurrentes de aumentar los ingresos y fomentar la redistribución, la segunda no sigue necesariamente a la primera. De hecho, en Latinoamérica estas metas son frecuentemente contradictorias. Dadas las enormes diferencias en la distribución de la riqueza y la escasez de fondos para financiar las obras públicas, habitualmente es más fácil garantizar el aumento de los ingresos si los recursos para obras públicas se asignan (acción original) a regiones en donde se puedan recaudar más entradas absolutas. Incluso con el uso de un instrumento de captura de plusvalía, cuando la decisión subsiguiente (destino de los recursos) mantiene el mismo estado de distribución de la riqueza, la acción pública entera se vuelve más regresiva.

Por otra parte, el rechazo de los instrumentos de captura de plusvalía tampoco combate la asignación inadecuada de las obras públicas, y de hecho sólo contribuye a mantener el status quo. Por ejemplo, los trabajos de renovación de Copacabana en Rio de Janeiro, con plantación de árboles nuevos y modernización de aceras, fueron financiados por el presupuesto general y no por un dispositivo específico de captura de plusvalías. Sin embargo, muchas de las zonas pobres de la ciudad carecen de aceras y no tienen un solo árbol en sus calles. Esta ironía impone la necesidad de establecer una nueva estructura de análisis para las políticas de captura de plusvalía, de manera que pueda hacerse una asignación más equitativa de las obras públicas.

Distribución del ingreso general

América Latina presenta diferencias extremas relativas y absolutas en la provisión de infraestructura pública, por lo cual se exigen criterios de equidad para evaluar las políticas distributivas. Pero los criterios de equidad son subjetivos y existen diversos criterios sobre lo que es o no justo. En vista de las disparidades en riqueza y acceso a suelos urbanizados, es importante considerar no sólo las diferencias relativas sino también las diferencias absolutas entre los niveles más altos y los más bajos.

Para ilustrar este punto podemos aplicar el clásico argumento redistributivo a la distribución de valores del suelo en una sociedad que tiene 10 unidades de riqueza (es decir, valor del suelo) distribuidas entre dos grupos: el grupo más alto posee 8 unidades u 80 por ciento de la riqueza, mientras que el más bajo posee 2 unidades (véase la tabla 1). Este ejemplo puede representar las típicas diferencias entre las áreas urbanizadas ocupadas por unos pocos ricos y las cuantiosas áreas desprovistas de servicios ocupadas por los pobres en las ciudades latinoamericanas. Un aumento del 50 por ciento en esta riqueza (5 unidades en total), si se distribuye en la misma relación, no cambiaría las diferencias relativas, pero la diferencia absoluta entre los dos grupos aumentaría en un 50 por ciento, de 6 a 9 unidades.

TABLA 1: Políticas distributivas de captura de plusvalía Riqueza total Grupo inferior Grupo superior Diferencias relativas Diferencia absoluta

Original: 10 unidades 2 unidades 8 unidades 1:4 6 unidades

Aumentada: 15 unidades 3 unidades

(2+1) 12 unidades

(8+4) 1:4 9 unidades

Otra consideración importante es el nivel del grupo en la posición inferior. Los instrumentos de captura de plusvalía se justifican como herramientas distributivas para devolver a la comunidad los beneficios especiales resultantes de una acción pública que sólo algunos individuos reciben. Pero esta justificación, a su vez, plantea la necesidad de separar claramente los beneficios especiales de las necesidades básicas. Si consideramos el acceso a la infraestructura urbana como una necesidad básica, la sociedad debe decidir sobre el nivel mínimo de acceso para el grupo inferior. Es necesario dar prioridad a las acciones que conduzcan a esos niveles mínimos antes de que el grupo superior acumule otros beneficios. Si esta sociedad decide que el nivel mínimo de riqueza debería ser de 6 unidades para el grupo inferior, entonces el aumento de 5 unidades de valor del suelo sería distribuido de tal manera que disminuya tanto las diferencias relativas como las absolutas (véase la tabla 2).

TABLA 2: Vinculación de la captura de plusvalía y la redistribución

Riqueza total Grupo inferior Grupo superior Diferencias relativas Diferencia absoluta

Original: 10 unidades 2 unidades 8 unidades 1:4 6 unidades

Aumentada: 15 unidades 6 unidades

(2+4) 9 unidades

(8+1) 2:3 3 unidades

Captura de plusvalía y equidad socioespacial

Las decisiones sobre planificación urbana, tales como las normas y los reglamentos sobre el uso del suelo y los derechos de desarrollo, afectan también la distribución de los valores del suelo urbano y deben integrarse a las políticas de captura de plusvalía. En América Latina, donde las diferencias de acceso a la infraestructura pública y servicios urbanos están marcadas por una acentuada segregación social y exclusión, esta integración trae consigo una dimensión socioespacial que puede hacer frente a las disparidades entre los centros urbanizados adinerados (para unos pocos) y las periferias pobres carentes de servicios (para la mayoría). Por tanto, las políticas de redistribución del valor de la tierra adquieren un contexto político particular en el cual la generación de incrementos en el valor del suelo y el destino de los fondos correspondientes se asignan a diferentes áreas socioeconómicas de la ciudad.

Sin embargo, incluso cuando se incorpora esta dimensión socioespacial, la mayoría de los instrumentos redistributivos de captura de plusvalía reúnen condiciones necesarias, pero no suficientes, para una mejor distribución de los valores del suelo. Mientras que la redistribución desde áreas ricas a todas las áreas involucra alterar la distribución del presupuesto general para lograr su objetivo de equidad, la redistribución de todas las áreas hacia las áreas pobres implica alterar la asignación de obras públicas y/o de los derechos de desarrollo del suelo para llegar a una mejor distribución de los valores del suelo.

Debido a que estos enfoques implican mayores cambios institucionales, surge una tercera opción que busca estimular la generación de incrementos en el valor del suelo de los sectores adinerados a fin de generar ingresos que puedan redistribuirse a los sectores pobres. Estas “políticas de Robin Hood” (como algunos las llaman) están siendo contempladas para tratar las necesidades urgentes de zonas necesitadas, en combinación con oportunidades y demandas específicas de las zonas pudientes. Un ejemplo son las “Operaciones Interligadas” recientemente popularizadas en muchas grandes ciudades brasileñas, donde la negociación de excepciones legales para el desarrollo genera pagos que se destinan para la construcción de viviendas de interés social. Sin embargo, un análisis detenido de esta herramienta de transferencia muestra que la estimulación de los incrementos en el valor del suelo de los sectores ricos, en realidad termina aumentando la diferenciación intraurbana y por ende puede ahondar la brecha entre las áreas pobres y ricas.

Éste y otros efectos negativos imprevistos evidencian que el desarrollo de políticas e instrumentos de captura de plusvalía para los países latinoamericanos no puede ser considerado independientemente de una política urbana orientada a reducir las desigualdades socioespaciales. Para lograr esa reducción de la inequidad, es fundamental emprender acciones directas orientadas a alterar la presente distribución de los valores del suelo. Esto significa que, aunque no está necesariamente involucrada en la idea de la captura de plusvalía, la redistribución debe ser incorporada deliberadamente en el desarrollo de políticas distributivas de captura de plusvalías en América Latina.

Pautas para la implementación de políticas de captura de plusvalías

Esta discusión refuerza el argumento de que, en América Latina, las políticas de captura de plusvalía deben estar precedidas por cambios en el proceso de distribución de los valores del suelo en el más amplio sentido, especialmente cuando se busca la redistribución como una meta prioritaria de la política urbana. Esta perspectiva ayudaría a considerar de manera integrada, en cada decisión pública asociada a la distribución de valor del suelo, las varias otras formas mediante las cuales el sector público contribuye a esa distribución, incluyendo:

• El diseño y la recaudación de los impuestos sobre la tierra;
• La asignación de los ingresos públicos para las obras públicas;
• La aplicación (o no) de instrumentos específicos de captura de plusvalía;
• La repartición de los recursos recaudados; y
• La definición de los usos y los derechos de desarrollo del suelo.

El potencial y los límites de instrumentos específicos de captura de plusvalía están condicionados por dichas acciones y decisiones públicas de distribución. Cuando los instrumentos de captura de plusvalía específicos se utilizan sin tomar en cuenta estas consideraciones, se puede arruinar el proceso entero debido a que: 1) usualmente se descuida la recaudación de los impuestos tributarios; 2) se hacen asignaciones injustas de las inversiones públicas; 3) abundan los impedimentos políticos para el uso de los instrumentos de captura de plusvalía; 4) los ingresos no se distribuyen de una manera socialmente equitativa; 5) los derechos de desarrollo se incorporan en los derechos de propiedad, etc. En consecuencia, no se puede conseguir la redistribución y se compromete el principio distributivo.

El desafío latinoamericano, por lo tanto, consiste en analizar las precondiciones para el uso mejorado de la idea de la captura de plusvalía, en vez de simplemente concentrarse en vencer las dificultades operacionales para la aplicación de los instrumentos existentes, o de rechazar aquellos instrumentos en favor de nuevas herramientas usualmente sujetas a problemas similares. Para que se pueda hablar de una verdadera redistribución, estas decisiones distributivas deben considerar todos los componentes del valor del suelo, incluyendo los incrementos acumulados, potenciales y específicos, y no sólo los incrementos de valor en el sentido más estricto. Los esfuerzos que se hagan en esta área contribuirá a una perspectiva redistributiva de las políticas de captura de plusvalía.

¿Cuánta captura de plusvalía es “suficiente”? La respuesta a esa pregunta puede variar según el país, pero desde un punto de vista general, las políticas deberían basarse en las siguientes directrices básicas:

• El mejoramiento y fortalecimiento del impuesto predial, especialmente de su componente “suelo”, basado en el valor total de la tierra (en vez de basarse en incrementos específicos de dicho valor);
• La universalización de la provisión de infraestructura pública y servicios urbanos (es decir, necesidades básicas en contraposición a beneficios especiales); y
• Las respuestas socialmente responsables a la definición y la reglamentación de los derechos de propiedad y desarrollo del suelo.

Estas directrices tienen una sólida asociación a los incrementos en el valor de la tierra urbana en el sentido más amplio, y pueden utilizarse para reducir las diferencias socioespaciales absolutas y relativas. Si continuamos descuidando estas diferencias y seguimos confinando la captura de plusvalía a los incrementos específicos en el valor de la tierra, fracasarán los intentos de redistribución en los países latinoamericanos. Además, la aplicación de los instrumentos de captura de plusvalía continuará sirviendo como un mecanismo antisocial que sólo exacerba el abismo ya existente entre ricos y pobres.

Fernanda Furtado, fellow del Instituto Lincoln, recibió una beca del Instituto para finalizar su tesis doctoral “La recuperación de plusvalías urbanas en América Latina”, en la Facultad de Arquitectura y Urbanismo de la Universidad de São Paulo, Brasil.

Notas

1 Ver Donald Shoup, “Is under-investment in public infrastructure an anomaly?”, en: Gareth A. Jones y Peter Ward, editores, Methodology for Land and Housing Market Analysis. Cambridge, MA: Lincoln Institute of Land Policy (1994). El artículo de Shoup contiene un análisis del debate efectuado en el “Fitzwilliam Workshop on Land Values and Land Valorization in Developing Countries” realizado en la Universidad de Cambridge en 1991. Allí se debatió sobre si los instrumentos de captura de plusvalías están destinados a redistribuir la valorización del suelo, o si son un simple mecanismo para fortalecer las finanzas gubernamentales.

2 Un término más preciso sería recuperación de plusvalías, porque además de representar mejor las intervenciones públicas a fin de devolver a la comunidad la plusvalía del suelo capturada inmerecidamente por entidades privadas, el término se refiere a la redistribución como una manera específica de desarrollar tales políticas. Sin embargo, en este artículo se utiliza el término más genérico captura de plusvalías.

Proposition 13, adopted by a referendum in California in 1978, was the most notable in a series of relatively recent actions to limit the property tax in the United States, and many experts view it as a watershed in state and local public finance. The property tax in virtually every state is now limited to some degree by statutorily or constitutionally imposed base restrictions, rate limits or revenue limits. These limits have influenced the use of the property tax, and there is substantial evidence that the rate of growth of the property tax has declined. The mix of funding for local expenditures also has changed, as cities, towns, counties, school districts and special districts are relying more and more on user charges, special fees, franchise fees and local option sales and use taxes.

The limits on the property tax also have many policy and expenditure implications. There is evidence, significant in some cases and simply indicative in others, that the property tax restrictions have fostered a variety of policy outcomes in the delivery of services to citizens. Some of these tax limits have affected educational outcomes: reduced the number of teachers in classrooms, reduced the qualifications of individuals entering the teaching profession, and reduced student performance in math, reading and science.

The literature detailing the possible effects of property tax limits on local government also reports the following changes: reduced infrastructure investment by local governments, reduction in the rate of salary increases for public employees, and a shift to state-controlled revenue sources that has led to the centralization of power toward state governments (Sokolow 2000). In this context, property tax limits may reduce intergovernmental competition and the discipline on the growth in government that results. Few observers would disagree that Proposition 13 and its imitators in other states have resulted in substantial nonuniformity in the property tax system (O’Sullivan, Sexton and Sheffrin 1995).

These outcomes illustrate the competing tradeoffs that accompany property tax limits. Depending on individual perspectives these consequences could be considered a plus or a minus. Supporters of Prop 13 and its derivatives want lower property taxes and less government (at least for others), but it is unlikely they also want less government for themselves. David Sears and Jack Citrin (1982) have labeled this behavior the “something for nothing” syndrome.

Therese McGuire (1999) notes that among public finance economists the advantages of the property tax for funding local governments approach “dogma.” In an opinion survey of more than 1300 Canadian and U.S. members of the National Tax Association, 93 percent of the respondents with training in economics favored the property tax as a major source of revenue for local governments (Slemrod 1995). This result probably explains why the World Bank and other international advisory groups are spending significant sums of money and offering assistance to improve and implement the property tax in developing and transitional countries. However, it also presents an interesting dilemma: experts support the property tax but voters want to limit it. Why the conflict?

Advantages of the Property Tax

The property tax provides local governments with a revenue source that they can control and avoids the strings that normally accompany fiscal transfers from a regional, state or national government. The result is local autonomy that allows local governments to select the level and quality of services demanded by local citizens. The property tax is relatively stable over the normal business cycle and provides a dependable funding source to local governments that must balance their budgets. Stability is important for certainty in operating budgets and is critical in the financing of long-term debt obligations.

The importance of a stable revenue source has been painfully exposed during the recent economic downturn in the U.S. State governments that are funded by less stable revenue sources are scrambling to balance their current and future budgets by cutting services and increasing taxes and fees. The fact that the property tax is imposed on an immobile base and is difficult to evade also makes it an attractive source of revenue for smaller governments.

Political accountability is another important element of the property tax. A noted function of a responsive tax system is one that provides price signals, or political accountability, on the cost of government to citizens. Compared to almost all other taxes, the direct and visible nature of the property tax suggests that it scores relatively high in this regard. The case for political accountability becomes even stronger when zoning for land use is included in the discussion. Bruce Hamilton (1975) has demonstrated that the property tax, when coupled with local zoning, becomes a benefit tax that leads to efficient outcomes. The combination of property taxation and zoning is the way many public finance scholars describe the characteristics of local finance in the U.S.

Disadvantages of the Property Tax

On the other hand, the property tax is difficult to administer. It requires substantial administrative effort on the part of public officials to discover and maintain the property records of every land parcel. Even with effective methods to discover property, determining its taxable value has always been a challenge to public assessors. Unlike other sales taxes and income taxes, there is no annually occurring event to place a market value on unsold properties. Assessors must value property as if it had sold. Assessors also confront limited budgets and a finite number of trained experts.

Nevertheless, we want public assessors to value property, land and the improvements to land accurately, and to do so as inexpensively as possible. Fortunately, progress has been made in the technical area of property valuation. It is now common to find large and small taxing jurisdictions using statistically driven valuation processes to estimate property values based on carefully designed hedonic models. The technical advantages of statistically driven appraisal systems in terms of efficiency and effectiveness are substantial.

However, the advantage of accurate and timely property appraisals highlights what I believe is a fundamental problem with the property tax and why it receives such low marks from taxpayers and elected officials. When an assessor conducts a reappraisal, the outcome is likely to increase assessed property values. If there is no reduction in the tax rate that was applied to the old tax base, the local government that relies on the property tax receives a potential windfall. It is not surprising, then, that in such situations the assessor and the assessor’s office are quickly identified as the villains of the tax increase. More importantly, these circumstances are powerful incentives to not reassess property regularly and thus avoid the angry backlash of property owners and voters.

Public finance experts have an expectation that the assessor will follow the legal and professional requirements and value property according to state law and professional practice. But, because of the uncertain political outcome when property is revalued, the assessor may act in self-interest, understandably being more concerned about reelection or reappointment than in ensuring that property is revalued properly. A system has been created that requires a reappraisal process and penalizes any assessor foolish enough to ignore it, but over time such avoidance behavior can foster nonuniformity in the property tax.

Political Challenges and Full Disclosure

We have solved many of the technical problems of property appraisal but not the political problems. Nevertheless, I believe there is at least one viable response to the political challenges: states and assessors can adopt a process of truth-in-taxation or full disclosure. The logic of full disclosure design is simple. A chilling effect on property tax growth is posited to occur when the “real” causes of increased property taxes are exposed to property owners. Helen Ladd (1991) states that full disclosure laws “tighten the link between taxpayer voter demand and local budgetary decisions.”

The standard annual tax notice, common in thousands of local tax jurisdictions, does not create a similar chilling effect. A typical tax notice informs property owners about the assessed value of the property, often a modest percentage of market value, tax rates listed in mills, and the total taxes due. If any increases in the assessed value of properties are not offset by reduced tax rates, the new assessed values create additional revenue for the taxing authority. In fact, elected officials can honestly boast that property tax rates have not changed and thus avoid most of the responsibility for any tax increase. An analysis of the behavior of elected officials in Massachusetts found precisely this type of behavior following several cycles of increases in assessed value due to revaluations (Bloom and Ladd 1982).

A property tax full disclosure law generally proceeds in the following manner. Local taxing districts are required to calculate a rate that, when applied to the tax base, produces property tax revenue that is identical in amount to the property tax revenue generated during the previous year. The rate to accomplish this is often referred to as the certified rate; it is calculated by dividing the new assessed value into the property tax revenue from the previous year. The resulting rate is the rate that, when applied to the taxable value of the taxing jurisdiction, will generate the same amount of revenue as the previous year.

This process forces elected officials to reduce the property tax rate—or at least acknowledge that any increase is their choice. If the elected officials choose not to reduce the rate, a public notice must be given that a tax rate increase is anticipated. The public notice is generally carried in a newspaper with specific requirements about the size, placement and language of the notice. In some states a preliminary tax notice is also sent to the taxpayers before that actual budget is adopted, to announce when and where the particular budget hearings on the issue will be held.

Full disclosure laws are intended to create a system with opportunities for input on property tax rate changes and the subsequent size and mix of government, but not at the expense of informed outcomes (Council of State Governments 1977). Full disclosure laws have the aim of a process to inform citizens and limit the rate of growth in property taxes. Nevertheless, like the property tax, full disclosure laws have not enjoyed universal or even modest acclaim. Researchers hold full disclosure laws in such subdued regard that when studying the implications of property tax limitations they commonly classify states having full disclosure laws among the states having no property tax limits.

It is not surprising that many observers suspect that full disclosure laws have little influence on policy outcomes. In states with full disclosure laws, the property tax increases more rapidly than in states with legally binding limits. This suggests that, because full disclosure laws cannot prevent all growth in the property tax, the strongest antagonists of the property tax and the often single-minded opponents to any growth in government will never find the approach acceptable.

However, I believe that full disclosure laws, like property tax limits, have other positive unintended outcomes. They may facilitate improvements in the administration of the property tax because they create a climate that fosters more frequent property tax appraisals by elected county assessors and more thorough and rigorous intervention on property tax matters by state revenue departments. If I am correct, the result is improvement in property tax uniformity. If this posited outcome is validated, then full disclosure laws can and should be judged beyond their immediate role in controlling the rate of increase in the property tax.

Gary C. Cornia is a visiting senior fellow of the Lincoln Institute this year and a member of the Institute’s board of directors. He is also professor in the Romney Institute of Public Management at Brigham Young University and president of the National Tax Association.

References

Bloom, H.S. and Helen F. Ladd. 1982. Property tax revaluation and tax levy growth. Journal of Urban Economics 11: 73-84.

Council of State Governments. 1977. 1978 Suggested State Legislation 37. Lexington, KY: Council of State Governments, 125-28.

Hamilton, Bruce. 1975. Zoning and property taxation in a system of local governments. Urban Studies 12 (June): 205-211.

Ladd, Helen F. 1991. Property tax revaluation and the tax levy growth revisited. Journal of Urban Economics 30: 83-99.

McGuire, Therese J. 1999. Proposition 13 and its offspring: For good or evil. National Tax Journal 52 (March): 129-138.

O’Sullivan, Arthur, Terri A. Sexton, and Steven M. Sheffrin. 1995. Property taxes and tax revolts: The legacy of Proposition 13. Cambridge, England: Cambridge University Press.

Sears, David O. and Jack Citrin. 1982. Tax revolt: Something for nothing in California. Cambridge, MA: Harvard University Press.

Slemrod, Joel. 1995. Professional opinions about tax policy. National Tax Journal 48: 121-148.

Sokolow, Alvin D. 2000. The changing property tax in the West: State centralization of local finances. Public Budgeting and Finance 20 (Spring): 85-102.

The Institute’s June 2007 Land Policy Conference focused on decentralization—the degree to which local and provincial governments exercise power, make decisions about their revenues and expenditures, and are held accountable for outcomes. Because the services,regulatory constraints, and institutional environments provided by local governments are major factors in the location decisions of households and firms in urban areas, decentralization is a key determinant of policies that affect land and property taxation.