We need a fairer property tax system.
Property taxes should capture the value of public investment while rewarding private investment, making housing more affordable.
We need a split rate tax shift.
The District is assessing how to better align its tax policy with the city’s values and shifting economic base. This is a great opportunity to propose to the DC Tax Revision Commission a property tax approach that rewards private investment (in housing and commercial buildings), and returns value created by public investments (like Metro stations, better streets).
A split rate tax can shift the property tax off of privately-created housing and building values and onto publicly-created land values. Most would pay less or the same. Higher value commercial properties, like in downtown, are incentivized to maintain or rebuild, potentially as housing. Owners of surface parking lots, vacant lots and boarded-up buildings pay more, motivating redevelopment to housing and other uses.
Below are some statements that you can borrow for your public comment form submission.
Industry / Sector
Thank you for the work of the DC Tax Commission. I would like to urge the Commission to adopt a split rate property tax where we capture the value of public investment while rewarding private investment. A split rate tax is particularly important now as DC struggles to revitalize and remake its downtown. A split rate tax is a particularly good tool for incentivizing redevelopment of buildings and vacant lots by lowering the tax rate on private improvements.
The split rate tax also improves equity because property owners pay taxes in proportion to the public benefits that they receive. Under the traditional property tax, many commercial landowners receive big windfalls from Metro-created land values. A split-rate tax shift would make these owners pay more for the benefits they receive from Metro. It also improves racial and economic equity because low-income neighborhoods receive a larger percentage tax reduction than affluent neighborhoods.
Thank you for your consideration.
What’s wrong with our property tax system and how split rate makes a difference
The existing property tax is upside down because it punishes owners who construct and improve buildings while rewarding those who allow buildings to deteriorate. Owners of vacant lots pay less property tax than neighbors with buildings, even though it costs the community about the same to operate and maintain infrastructure in front of all these properties. According to a report to the DC Tax Revision Commission in 2012, the District’s vacant property penalty tax has not worked as intended.
Some communities have remedied the upside-down incentives associated with the traditional property tax by reducing the tax rate applied to privately-created building values while increasing the return of publicly-created land values. This tax shift makes both buildings and land more affordable, without any new spending or any loss of revenue.
As a bonus, shifting the property tax off of building values and onto land values encourages the development of high-value land. Under the traditional property tax, it is easy to hoard land (vacant lots, surface parking lots, boarded-up buildings) because the cost of doing so is small. Shifting the property tax off of building values and onto land values makes it more expensive to hold vacant and underutilized land. The cost is greatest where land values are high and this is where the tax shift creates the greatest incentive for development. This in turn reduces suburban sprawl. It also creates a competitive advantage for the District when compared to similar cities and to nearby suburbs.
Get more information on Split Rate Tax
Check out these resources on how the split rate tax can benefit DC, and how it’s working in other cities.
- “Land value return” and building a more equitable economy
- Mayor Duggan unveils policy to impose higher tax rate on vacant land
- For those interested in affordable housing, see “Want Affordable Housing? Look to the Land!“
- For those interested a case study, check out the impacts on Pennsylvania cities