Building a better Main Street -part 4, Taxes

Cities are now the home of more than 50% of the world's population. One of the trends of the industrialization is rapid urbanization. No matter what you think about the cities of the 19th and early 20th centuries, life was better in the city than the countryside. Working 12 hours a day, six days a week in a factory beat working 16 hours a day everyday on the farm . The modern cities of those days offered services like public water, heat and light first through gas and later by electricity, police and fire departments, sewers, mass transportation, entertainment, education and economic opportunities that might not be available only a few miles beyond the city limits.

Up to the mid 1900's cities had an overwhelming economic advantage that came with large numbers of people living close together. The idea of the suburbs existed right from the beginning but the cost of  travel by either steam locomotion or horse was very expensive, this meant the suburbs had to be as physically close as possible to the city and they were prohibitively priced except for the rich.

The automobile became the big game changer. In the United States the affordable automobile liberated the middle class from city living. It made suburban sprawl possible and once the sprawl began it created a whole new world of incentives that changed the direction of social development. Take the supermarket as an example, prior to the 1930's food retailers depended on networks of small interdependently owned grocery stores that people walked to. Even the first A&P supermarkets had 90% of their customers within one mile of the store and only averaged about 2,000 square feet of space. As America learned how to drive in the 1920's the average A&P doubled in size and had to provide free parking spaces. Today the average supermarket is 35,000 square feet and half the customers drive over ten miles to get there. By the 1930's there were already 1 car for every 6 people in the US, in England it was 1 car for every 50 and in Germany it was 1 car for about every 200. Now you can see why the first Volkswagen was such a big propaganda icon.

So here we are in the 21st century. The internet had changed retailing and made the shopping mall passe. Suburban sprawl is coming to the edge of it's physical limitations -meaning the planet ain't big enough for  every body to live in suburbia. Driving is seen as more of a chore. The price and availability of gasoline threatens the whole system. The environmental costs are an issue. The end could be in sight.

The Urban Village, residential townhouses and apartments built around a neighborhood business district, is becoming the new model of sophisticated living. The problem is the old urban landscape has been so thoroughly trashed by decades of neglect and capital fight that American cities small and large have earned checkered reputations. Once again back in the day when the cost of doing business in the cities was relatively low, higher taxes where affordable -even a matter of civic pride because the money paid for roads, bridges, schools and other amenities that made the city an even better place to live in.   

As economic activity in cities declined more of the tax burden was shifted to the real estate tax. Real reform might come in by changing the focus of real estate taxes from the value of the property to just taxing the square footage of the land and of the building or other improvements. It's simple and if the building owner wishes to upgrade the appearance of the building without enlarging it -then there is no additional tax liability. The owner actually has an economic incentive to invest equity into his building because it could be done tax free.

Under this system taxes overall will not go down but building owner will have a chance to increase the value of their properties and not be penalized. That would draw in other investors especially if the surround communities remain on a market value tax base. I could go further but I know for most people talking about taxes is dry, boring and exasperating. The thing is the people who benefit the most my manipulating the system are the ones who'll read this post and pick it apart.

Taxing only the square footage of the land or a combined square footage of the land and improvements is a modified form of the Georgian One Tax System created by Henry George. Without going through long explanations the best thing I can suggest is either doing some research on your own or visiting Arden Delaware. Arden Delaware does not have conventional real estate taxes, they have used the Georgian One Tax System since 1900 and prospered.

Arden is a community of artists. On paper they are statistically above the income average but Arden is not some exclusive enclave of the well to do. It is a mixed income community with houses of every size. What is most striking is there are no shabby homes begging for maintenance or old grand homes that have been cut up into half dozen little squat apartments. They have a wonderful sense of community spirit there but the real credit goes to the tax system.

With conventional property taxes you can have two identical house but the one that is well maintained will be taxed more because it has a higher market value. The other home owner actually gets a tax break by not keeping up his property. Under the Georgian One Tax System there is no such benefit for the person that doesn't take care of their home. Daniel Webster said "the power to tax is the power to destroy"; it's an easy quote to stretch out of context. Taxes can also give a community a direction to grow in and still pay the bills for it's daily operation.


It's also ironic that a community mostly of artists have done a better job of town management than the professional caste of political science majors. The revitalization of the American city might actually be best served by artist making the community a more livable place than having developers erecting sports arenas, corporate centers or other grandiose projects.