With Rep. Thomas M. Davis III (R-Va.) dangling a $1.5 billion incentive to persuade our region to give Metro a dedicated source of funding [Metro, Oct. 4], the time is ripe for an area-wide land-value tax for this purpose.
Metro has created billions of dollars in land value in the region and will continue to do so as long as it remains an attractive amenity. What could be more fair or logical than to recycle what the Metro system creates to support its operation and maintenance?
Metro boosts land values along its routes because people want to live or run businesses near its stations. Sites not close to Metrorail and Metrobus also benefit to the extent that transit reduces traffic congestion throughout the Washington area. Businesses gain from the easy access that Metro provides for employees and customers.
The reason for taxing only land value, and not the value of homes or business structures, is simple:
Taxing improvements discourages good use of land and favors land speculation. Taxing the land alone has the opposite effect. It induces infill and the kind of compact development that makes a transit system more efficient and productive.
The mechanics for instituting such a land tax are in place.
Maryland, Virginia and the District assess land values separately from building values, so each could derive the land tax rate needed for its share of the Metro budget. This rate could then be charged to the land value of each parcel.
Using a land tax to keep Metro financially healthy would bring side benefits to our region. Unlike most taxes, which increase the price of the object being taxed, a land tax actually reduces the selling price of land. Because land-price escalation is the single biggest factor in our skyrocketing housing costs, a land tax would keep housing more affordable. The icing on the cake would be that a land tax discourages sprawl, sparing taxpayers the high cost of premature extensions of Metro and other infrastructure.
Center for Public Dialogue