THE SENATE                           S.C.R. NO.            167
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                    SENATE  CONCURRENT
                        RESOLUTION

  REQUESTING THE COUNTIES TO ENACT ORDINANCES TO IMPLEMENT A
    SYSTEM OF LAND VALUE TAXATION IN EACH COUNTY.


 1        WHEREAS, under a system of land value taxation, land
 2   assessments are generally taxed at a higher rate than that of
 3   building assessments; and
 4   
 5        WHEREAS, a system of land value taxation provides a number
 6   of benefits over conventional property taxation; and
 7   
 8        WHEREAS, for example, a land value taxation system may
 9   preserve open space while discouraging urban sprawl, such as
10   strip malls and large lot subdivisions; and
11   
12        WHEREAS, the traditional single rate tax makes it cheaper
13   to develop undeveloped sites in remote locations where there is
14   little or no infrastructure, producing a "leap frog" pattern.
15   Developers seek cheaper sites since people who own vacant or
16   underutilized sites in urban areas are holding out for a price
17   that may exceed what developers are willing to pay; and
18   
19        WHEREAS, however, the cycle repeats itself once the sites
20   have been developed.  The new residents eventually pressure the
21   municipality for sewers and other amenities, which drives up
22   land costs to the point where they choke off further
23   development, thus causing developers to seek new undeveloped
24   sites in other remote areas; and
25   
26        WHEREAS, this logic is reversed by a two-rate land value
27   tax, which encourages developers to select sites in developed
28   areas where the roads, sewers, and other infrastructure are
29   already in place; and
30   
31        WHEREAS, a lower tax rate on buildings makes that
32   development more profitable and encourages compact, energy
33   efficient urban design; as a result, the greater use of land
34   adjacent to existing infrastructure reduces the demand for
35   developing outlying areas; and
36   
37        WHEREAS, inefficient land use causes the premature
38   disappearance of open space.  A tax on land values causes land

 
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 1   to be used more efficiently as landowners seek to gain as much
 2   income or use as possible from their improvements in order to
 3   at least cover the higher land tax; and
 4   
 5        WHEREAS, with development taking place in the more
 6   urbanized areas, legitimate agricultural and open space lands
 7   will be freed from the speculation that is artificially
 8   inflating their price.  If the land price there is low, so will
 9   be the land value tax.  Therefore, these lands will be
10   preserved and used for agriculture or open space; and
11   
12        WHEREAS, in addition to preserving open space and the
13   environment and deterring urban sprawl by discouraging
14   speculative land holding, land value taxation also encourages a
15   more efficient land market.  The necessity to pay the tax
16   obliges landowners to develop vacant and under-used land
17   properly or to make way for others who will; and
18   
19        WHEREAS, a system of land value taxation will also help to
20   finance environmental programs and is particularly apt for
21   establishing parks and playgrounds.  Since the tax lowers land
22   price, governments will find it easier to buy land with land
23   value taxation revenue; and
24   
25        WHEREAS, land value taxation will also help to strengthen
26   the economy.  A tax on labor, buildings, and machinery
27   discourages people from constructive and beneficial activities
28   and penalizes enterprise and efficiency.  The reverse is the
29   case with a tax on land values, which is payable regardless of
30   whether or how well the land is actually used; and
31   
32        WHEREAS, it is better for the economy to tax land sites
33   into use rather than to tax workers and building owners out of
34   production.  In the long run, land value taxation will help to
35   stimulate new business and new employment, with reductions in
36   the need for costly government welfare; and
37   
38        WHEREAS, a system of land value taxation also reduces
39   bureaucracy and prevents avoidance or evasion.  Land value
40   taxes are straightforward and will not require complicated
41   forms and demands for information.  Re-evaluation would become
42   relatively simple.  Moreover, land cannot be hidden, removed to
43   a tax haven, or concealed in an electronic data system; and

 
 
 
 
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 1   
 2        WHEREAS, during the 1960s, the State of Hawaii, which was
 3   suffering from a high demand for available land and from a high
 4   concentration of land ownership, experimented with land value
 5   taxation by imposing a slightly higher tax on land values; and
 6   
 7        WHEREAS, published studies by recognized property tax
 8   experts indicated that the use of land value taxation
 9   stimulated housing construction and that investments in
10   improvements increased by a maximum of twenty-five per cent;
11   and
12   
13        WHEREAS, a 1990 report on real property tax valuations
14   further found that the counties of Kauai and Hawaii taxed land
15   assessments at a slightly higher rate than building
16   assessments; and
17   
18        WHEREAS, other states have also considered land value
19   taxation.  The Virginia Legislature recently considered a bill
20   to study whether this type of taxation would benefit
21   municipalities; and
22   
23        WHEREAS, the City of Baltimore adopted a resolution in
24   1992 urging the Maryland State Legislature to amend the
25   Annotated Code of Maryland to permit that city to modernize its
26   property tax system and differentiate the tax rate placed on
27   land from that placed on buildings and improvements; and
28   
29        WHEREAS, in 1996, Maryland's attorney general found that
30   municipalities could levy land value taxes, although none have
31   apparently done so; and
32   
33        WHEREAS, Pennsylvania has also allowed specified
34   municipalities and school districts to levy land value taxes,
35   including the municipalities of Pittsburgh and Scranton, which
36   have levied land value taxes since 1913; and
37   
38        WHEREAS, in 1979 and 1980, Pittsburgh restructured its
39   property tax system by raising the rate on land to more than
40   five times the rate on structures; and
41   
42        WHEREAS, in the 1980s, Pittsburgh experienced a dramatic
43   increase in building activity, far in excess of other cities in

 
 
 
 
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 1   the region.  A recent National Tax Journal study suggests that,
 2   while a shortage of commercial space was a primary driving
 3   force behind the expansion, the reliance on increased land
 4   taxation played an important role by enabling Pittsburgh to
 5   avoid rate increases in other taxes that could have impeded
 6   development; and
 7   
 8        WHEREAS, land value taxation has also been used
 9   successfully in Australia.  For example, in Brisbane, state law
10   since 1896 has forbidden any taxes on improvements, but the
11   unimproved value of the land is subject, above a small
12   exemption, to a nine per cent annual tax, regardless of whether
13   one builds a fifty story building on the land or uses it as a
14   parking lot; and
15   
16        WHEREAS, according to Colin Clarke, the Oxford economist
17   who lived in Australia for twenty years, the City of Brisbane,
18   with a metropolitan population of almost three-quarters of a
19   million people, is "the only great city in the world without a
20   slum"; and
21   
22        WHEREAS, in addition to Australia, local government
23   variants of land value taxation, also known as site value
24   rating, are accepted practice in Denmark and South Africa; and
25   
26        WHEREAS, Article VIII, Section 6 of the Hawaii
27   Constitution provides that "all functions, powers and duties
28   relating to the taxation of real property shall be exercised
29   exclusively by the counties"; and
30   
31        WHEREAS, there is a need for Hawaii's counties to enact
32   ordinances to establish a system of land value taxation in each
33   county, including pilot programs in selected areas; now,
34   therefore,
35   
36        BE IT RESOLVED by the Senate of the Twentieth Legislature
37   of the State of Hawaii, Regular Session of 1999, the House of
38   Representatives concurring, that the counties are requested to
39   enact ordinances to implement a system of land value taxation
40   in each county; and
41   
42        BE IT FURTHER RESOLVED that the ordinances enacted by the
43   counties are requested to be in the form of pilot programs to

 
 
 
 
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 1   determine the feasibility of implementing land value taxation
 2   on a permanent basis in each county; and
 3   
 4        BE IT FURTHER RESOLVED that the City and County of
 5   Honolulu is specifically requested to establish a land value
 6   taxation pilot program to revitalize Wahiawa; and
 7   
 8        BE IT FURTHER RESOLVED that certified copies of this
 9   Concurrent Resolution be transmitted to the Governor and the
10   Mayor and Chairperson of the Council of each county.
11 
12 
13 
14                         OFFERED BY:  ____________________________