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The ‘Central Park Effect’

An important aspect of Site Value Tax is that is enables local or national government to recover its spending on public services, i.e. infrastructure and amenities, from increased land values. Without such a tax, public investment amounts to a taxpayer subsidy of private landowners. With such a tax, a government can use a forecast of increased returns to do cost/benefit analysis of investment decisions. To increase returns, the local government must make its area a more desirable place to live, i.e. it must try increase the attractiveness of the area through planning and investment.

A good illustration of this is in New York, where Central Park has a major effect on surrounding property prices. A study by Appleseeed Consulting found that “in 2007 Central Park generated about $656 million in New York City tax revenues” because of its effect on real estate. Of course, as it is a property tax rather than a tax on land value, the increase in land values will benefit landlords, who can pass the cost onto tenants.

This point, or at least something similar, was made by the erstwhile gubernatorial candidate, Jimmy McMillan, who argued forcibly that ‘the rent is too damn high‘.

Photo-Credit: andrew mace-

Posted in Site Value Tax.