Tax Increment Financing

Joe Lancaster had a piece in Reason about schools losing 260 million dollars to economic development subsidies, and in particular to tax increment financing. Tax increment financing, or TIF, is when a local government borrows money to help a private business build something, and then gets the money to make payments on the debt by collecting property tax on the building, with the money being dedicated to that purpose, and not available for general use, like paying for the schools, the police, the fire department, and so forth. Hence, the losses to the schools from TIF.

My take on this is that they wouldn’t need TIF, or have any excuse for it, if people could erect buildings without seeing their property tax bills rise. Just tax the land value, not the buildings, and everyone, not just certain favored persons or businesses, could improve a property without being hit by higher taxes, and wouldn’t need to apply for a special government loan to pay for construction. Taxes on land values could pay for the schools and the fire department. I, for one, would have funding follow the child, not a particular government school, so parents could choose the school that they thought best.

Why can’t most of the world see the benefits of Georgist tax reform?