A new report says a land value tax would benefit Cincinnati residents by shifting part of the property tax burden to vacant and under-developed lots.
The report is a joint effort from the Student Policy Network at the University of Notre Dame and the Center for Land Economics, a Washington, DC-based nonprofit think tank focused on land value tax policy.
"The current winners of our property tax system, which taxes buildings and land together, are the people who build less, particularly the vacant landowner," says Center for Land Economics Executive Director Greg Miller. "We have vacant lots sitting right next to housing, and the housing is paying 10 times more."
The report considers a proposal for a split-rate tax that would have a higher rate for land and a lower rate for buildings.
Researchers identified nearly 17,000 vacant parcels in Cincinnati; about 8,000 additional parcels are considered "underdeveloped," meaning buildings account for 50% or less of the total property value. Combined, these parcels represent $1.87 billion in taxable land value.
If Cincinnati taxed land at four times the rate of buildings, applied to the city's 6.1 mill general operating levy, it would generate the same amount of revenue by collecting more from properties like vacant land and parking lots, and collecting less from single-family homes and multi-family housing.
"Neighborhoods in the lowest two income quintiles would see median tax reductions of approximately 17%, while middle-income neighborhoods would experience reductions of 10-11%," the report says. "Only the highest-income quintile would face a median tax increase, of roughly 11%."
Cincinnati Council member Mark Jeffreys, chair of the Housing and Growth Committee, says he likes the idea, at least in theory.
"Surface parking lots are not the best form of development. You're taking up a lot of valuable land in the urban core [and] the city is getting very little yield in terms of revenue from it," Jeffreys told WVXU.
He says the city would need to consider many other factors before moving forward.
"What is the implication of this on the entire ecosystem of incentives and property taxes and revenue that the city pulls in?" Jeffreys said.
Read the full report below (article continues after):
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Proposed constitutional amendment
It's not currently legal for municipalities in Ohio to approve a split-rate property tax, but one local lawmaker wants to change that.
State Sen. Bill Blessing (R-Colerain Twp.) introduced a constitutional amendment last fall that would allow jurisdictions to adopt a land value tax. Senate Joint Resolution 7 got a committee hearing earlier this year, but Blessing tells WVXU it's unlikely the measure will move forward before the end of the General Assembly in December. He plans to reintroduce it next session.
Blessing touted the idea on WVXU's Cincinnati Edition in March.
"If you tax improvements less, you get more improvements, which is good," he said. "If you're going to have a country club in a highly desirable, developable area that takes up a ton of land, it is going to pay a premium on that compared to single-family homes in the area or even apartments."
Three-fifths of both chambers of the legislature would need to back the idea before it could go before Ohio voters for consideration.
How property taxes are calculated in Ohio
Currently in Ohio — and in most places in the U.S. — land and buildings are taxed at the same rate.
County auditors assess the value of a plot of land, then assess the value of "improvements," which means anything added to that land, like buildings, parking lots, and landscaping. Those two are added together and equal the appraised value; that's the estimated market value if the property were to be sold.
Property taxes are based on the assessed value. Auditors first deduct any approved exemptions or abatements, then multiply the total by 0.35 because Ohio's effective tax rate is 35%.
These taxes are based on mills, where 1 mill is equal to $1 of tax for every $1,000 of assessed value. Here's an example of what that looks like, from the Ohio Department of Taxation:
$100,000 (appraised value) x 35% = $35,000 (assessed value)
$35,000 (assessed value) x 1 mill (0.0010) = $35 tax per mill
Total millage for each property varies, with possible taxes levied by the county, municipality, and school district.
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