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Local taxes and urban spatial development

University of British Columbia

Policy makers have tended to ignore the connection between local fiscal policy and urban development, in spite of the fact that taxation influences development and is entirely under the control of the public sector. Through a review of the literature, this thesis provides a theoretical analysis of the effects on spatial patterns of development of the existing property tax and of a number of alternative taxes. It is concluded that the existing property tax contributes to urban sprawl by distorting the market in two ways. The portion of the tax levied on improvements depresses investment in repairs and construction. A shift to a tax solely on land or location values should increase the intensity of land use. Because the property tax is not directly related to the benefits and costs of supplying services, especially those that are density and distance related, private locational decisions are made without regard for public expenditures. Marginal cost pricing, through multi-part tariffs and specific project betterment levies, for financing extensions of services to new development on the urban periphery, would produce more compact forms of expansion. Several forms of taxes particularly applicable to the urban periphery have the potential to increase control over new development. Betterment levies, in the form of land value increment and progressive development value taxes, induce earlier development. Of the various preferential taxes for agricultural and open space lands, use value assessment with a flat rate tax penalty, independent of development value and levied upon change of use, is the most effective in delaying development. A tax system incorporating these alternatives to the property tax has the potential to increase the intensity of land use in developed areas, to promote infill within scattered development, and to reduce the premature conversion of peripheral land. These tax reforms combined with traditional planning controls offer greater consistency between fiscal and planning policies.

Text

2010-03-30

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http://hdl.handle.net/2429/23095

Planning

University of British Columbia

Graduate