Land Taxes and Columbia

This past Saturday, the Boone County Chapter 100 Review Panel approved a property tax abatement for Kraft Heinz so that it can modify its plant in Columbia. As I mentioned previously, this would be bad policy. But beyond saying no to awarding subsidies, is there anything Boone County should be doing to make it more affordable for Kraft (and other businesses) to expand and/or modernize?

Boone County could cut its property tax rate. This not only would help Kraft, but all the other property owners in the county as well.

Even better, Boone County could shift away from property taxes and toward a land value tax. Land value taxes are taxes levied against the unimproved value of land and not the buildings, personal property, or other improvements on that land. A broad spectrum of economists support the land value tax versus other types of taxes because it is non-distortionary (i.e., it doesn’t alter behavior, unlike income and sales taxes).

If Boone County imposed a land value tax instead of a property tax, companies like Kraft would not face increased taxes after improving their plant. Unfortunately, only Kansas City is allowed to levy land value tax. There would need to be a change to the State Constitution in order for Boone County to levy a land tax.

Boone County (like other counties and cities) faces a difficult dilemma. It either can erode its property tax base with abatements to select businesses or risk having those companies being lured away to locations that offer subsidies. A land value tax won’t completely eliminate that problem (a jurisdiction could offer to not tax the land at all or provide that business some type of tax rebate), but it will make it more financially viable for businesses to expand facilities already present. If the State Constitution were changed, counties would have another policy option available to retain businesses other than having to resort to tax abatement.