Shifting Oregon's property tax structure to a land-value tax base could improve equity among homeowners of various income levels, according to a study conducted by Portland State University's Northwest Economic Research Center (NERC).
A pure land-value tax assesses property taxes based purely on the value of the land, regardless of the structures built on site. NERC's study looks at a modified land-value tax, that assesses a significantly higher rate on land than improvements. Property taxes in Portland and in Oregon are currently guided by Measure 5 and Measure 50, which place limits on property tax rates.
Measure - Property - Tax - Rate - Value
Measure 5, approved in 1990, limits the property tax rate to $15 per $1,000 of assessed value. Measure 50, approved in 1997, prevents the assessed value of individual properties from increasing more than 3% annually. In a 2014 report, NERC showed how these laws made it so that higher-income areas pay a lower proportion of their property's values in taxes than low-income areas.
"Right now if you own land and you build up on it, the total amount is counted toward your property tax," said Peter Hulseman, a NERC senior economist. "Land value taxes, basically they primarily tax the land. You can see based off that concept how it would incentivize development because improving your land doesn't cost anymore."
Portland - Land - Value - Tax - LVT
In Portland, shifting to a land value tax (LVT) would increase the property taxes for land in more desirable areas—primarily inner Portland—and reduce tax payments elsewhere.
Generally speaking, Hulseman said under this type of tax structure, higher-income areas would pay more in tax and lower-income areas would pay less. The structure taxes land based on "highest and best use."
"But the policy...
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