VIRTUES UNFULFILLED: THE EFFECTS OF LAND VALUE TAXATION IN THREE PENNSYLVANIAN CITIES By ROBERT J. MURPHY, JR. A THESIS PRESENTED TO THE GRADUATE SCHOOL AT THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS IN URBAN AND REGIONAL PLANNING UNIVERSITY OF FLORIDA 2011 1 © 2011 Robert J. Murphy, Jr. 2 To Mom, Dad, family, and friends for their support and encouragement 3 ACKNOWLEDGEMENTS I would like to thank my chair, Dr. Andres Blanco, for his guidance, feedback and patience without which the accomplishment of this thesis would not have been possible. I would also like to thank my other committee members, Dr. Dawn Jourdan and Dr. David Ling, for carefully prodding aspects of this thesis to help improve its overall quality and validity. I‟d also like to thank friends and cohorts, such as Katie White, Charlie Gibbons, Eric Hilliker, and my parents - Bob and Barb Murphy - among others, who have offered their opinions and guidance on this research when asked. 4 TABLE OF CONTENTS page ACKNOWLEDGEMENTS .............................................................................................. 4 LIST OF TABLES........................................................................................................... 9 LIST OF FIGURES ...................................................................................................... 10 LIST OF ABBREVIATIONS .......................................................................................... 11 ABSTRACT.................................................................................................................. 12 CHAPTER 1 INTRODUCTION ................................................................................................... 14 Problem Statement ................................................................................................ 14 Definition of Land Value Taxation .......................................................................... 15 Case Study Logic .................................................................................................. 16 Summary ............................................................................................................... 17 2 LITERATURE REVIEW ......................................................................................... 19 Land Value Taxation: An Alternative to the Traditional Property Tax ..................... 19 Land Taxation ........................................................................................................ 20 The Uniqueness of Taxing Land: An Economic Perspective .................................. 20 Land Intensity .................................................................................................. 20 Incidence......................................................................................................... 21 Neutrality ......................................................................................................... 23 Speculation ..................................................................................................... 24 Land Development Pattern Implications .......................................................... 25 Consequences to Landowners ........................................................................ 27 Summary......................................................................................................... 29 What is Land Value Taxation? ............................................................................... 30 International Implementation ........................................................................... 31 Implementation in the United States ................................................................ 32 New York .................................................................................................. 32 Hawaii ....................................................................................................... 33 Pennsylvania ............................................................................................ 33 Previous Studies of Land Value Taxation .............................................................. 36 Theoretical Models .......................................................................................... 36 General Equilibrium Models ............................................................................ 39 Regression Models ......................................................................................... 41 Comparison Approach..................................................................................... 44 5 Summary of Previous Studies ......................................................................... 44 Relevance to Planning ........................................................................................... 45 3 METHODOLOGY .................................................................................................. 48 Study Approach ..................................................................................................... 48 Case Studies ................................................................................................... 49 Study Areas .................................................................................................... 51 Altoona ..................................................................................................... 51 Pittsburgh ................................................................................................. 52 Wilkes-Barre ............................................................................................. 53 Cross-Sectional Study ..................................................................................... 54 Before-And-After Study Design ....................................................................... 54 Data Collection ...................................................................................................... 55 U.S. Census of Population and Housing and American Community Survey .... 55 Bureau of Labor Statistics Data ....................................................................... 58 Limitations ............................................................................................................. 59 Summary ............................................................................................................... 63 4 RESULTS AND ANALYSIS ................................................................................... 66 Overview ............................................................................................................... 66 Housing Variables ................................................................................................. 66 Variable – Total Housing Units ........................................................................ 66 Expectations based on theory ................................................................... 66 Observed .................................................................................................. 67 Determination ........................................................................................... 68 Variable – Occupancy Status .......................................................................... 69 Expectations based on theory ................................................................... 69 Observed .................................................................................................. 69 Determination ........................................................................................... 69 Variable – Units in Structure ............................................................................ 70 Expectations based on theory ................................................................... 70 Observed .................................................................................................. 71 Determination ........................................................................................... 71 Variable – Property Value ............................................................................... 72 Expectations based on theory ................................................................... 72 Observed .................................................................................................. 73 Determination ........................................................................................... 73 Variable – Gross Rent ..................................................................................... 74 Expectations based on theory ................................................................... 74 Observed .................................................................................................. 75 Determination ........................................................................................... 75 Variable - Year Built ........................................................................................ 76 Expectations based on theory ................................................................... 76 Observed .................................................................................................. 77 Determination ........................................................................................... 77 6 Variable – Density Measures........................................................................... 78 Expectations based on theory ................................................................... 78 Observed