How to Optimize the Environmental Tax Shift

by Jeffery J. Smith

The environmental tax shift evolved in three phases: from taxing pollution while untaxing income (a federal tax), thru taxing extraction while untaxing sales (a state tax), to taxing location while untaxing built property (a local tax). The last of these three, the Property Tax Shift (PTS) buys us "more bang for the buck". Look:
    1, "Three birds with one clone", the environmental advantage - Taxing sites spurs efficient use of land. (See "Suburbonomics" in Terrain: a magazine of nature and architecture.) Optimal land use reduces both depletion and pollution, the goals of the ETS. Taxing pollution or depletion, on the other hand, does not better land use choices.

    2, The "bottom line," the economic advantage -- As they succeed, the other two ETSs shrink their own tax base. Yet as they heal the eco-system, they raise site values, which the PTS captures. Thus the PTS could even raise a surplus of rent for divvying up (a la Alaska's oil dividend), shrinking the workweek, bestowing a host of other social benefits. The other two shifts probably are regressive, necessitating a safety-net like the "rent dividend".

    3, "Think globally, act …", the political advantages. The other shifts must be waged at the state and federal level. The Property Tax can be shifted locally in some states (e.g., Pennsylvania). Elsewhere (e.g., Oregon), locals may still be able to shift the PT without statewide legislation. Locals would have to follow the more tortuous path of establishing overlapping districts (Development District, Assessment District, Enterprise Zone, GSOCs, etc) to neuter the Property Tax and yet collect the site rent.

    Plus, the PTS can draw from a wide spectrum of support -- planners, housing advocates, neighborhood associations, unions, crime fighters, small builders (as opposed to speculators), and others who may oppose the regressivity of the other ETSs. An overwhelming majority passed the PTS when it was on the ballot in Allentown, PA in 1996 and 1997.

    4, "The paradigm shift", the ethical advantage. The PTS asks just who does Earth's worth belong to? The other two shifts - derived from the principle of tax bads, not goods -- skirts the issue. Yet if the green ethic is ever to be owned by society, this issue of sharing nature's advantages must be addressed.

Last year, six state legislatures entertained the PTS. Three bills were introduced by environmentalists (in Oregon, Minnesota, and Vermont), three by "geonomists" (in New Jersey, New York, and Missouri). If these two movements focus on one likely state, perhaps the property tax could be shifted. The shift by one state could trigger an avalanche of the entire ETS nationwide. For more information on the PTS and the "rent dividend", please get in touch.