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Innovative taxation approach implemented in Connecticut

Land value taxation

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Three communities in Connecticut will be trying out a new way of taxing urban land, in which community contributions are incorporated into land values according to Commons Magazine:

On June 20, 2013, Connecticut Governor Dannel Malloy signed into law an act permitting – as a pilot program – a tax reform that turns traditional taxation on its head, as it also embraces the idea of the commons as a resource for the community to provide for the everyday public life of urbanized areas. That program is land value taxation (LVT) . Initially, three communities will have the opportunity to apply for permission to use the program, with more to follow if LVT is proved successful.

What is LVT

LVT is an alternative version of the real property tax used by a number of cities, school districts and counties in Pennsylvania, as well as most municipalities and states in Australia and New Zealand. (For more information on this approach to valuing urban land see Land is a Commonwealth.)

Typically, property tax rates (called mills) fall equally upon land values and building values. LVT shifts the bulk of property tax revenue from buildings ( products of private capital and private labor) to the assessed value of land (a public good created by public and community investment).

LVT works to leverage the tax system to work as a tool to help utilize that part of the Commons – schools, public works, parks, police and fire services, etc – that is expensive to build and is often pocketed by private hands in form of speculation and absentee ownership.

For example, the city of Allentown Pennsylvania has dual tax rates of 50.38 Mills on land values and 10.72 Mills on building values. So, the land tax rate is therefore nearly 5 times greater than the building tax rate. Under a standard tax, Allentown would have a single rate of 17.52 Mills to collect the same revenue.

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