As we’ve discussed before, land-value taxation is a smart tool for revitalizing cities. By raising the cost of land speculation, a land-value tax (LVT) would create clear financial incentives to develop underutilized properties near the urban core—helping to create new homes and businesses in the very places where demand is greatest.

The basic idea of LVT is to tax land at a higher rate than buildings. But there’s a significant obstacle to implementing LVT in Washington. Article VII of the Washington State constitution, which covers revenue and taxation, states:

The power of taxation shall never be suspended, surrendered or contracted away. All taxes shall be uniform upon the same class of property…

Would this requirement for “uniform” taxation make a split-rate LVT, in which land and improvements are taxed at different rates, unconstitutional?

Maybe. But I’m convinced that a glimmer of hope exists for proponents of LVT, which includes both old fans of 19th century political economist Henry George and converts from this new Sightline series.

Before analyzing the possible reasons why an LVT might in fact be possible in Washington, let’s take a closer look at Article VII of the state constitution.


This was a pivotal time for Washington. On June 6th, 1889, a small gasoline and glue fire at a cabinet-making shop quickly became a raging inferno, and practically all of Seattle burned to the ground. Today’s Seattle was hastily rebuilt on top of the charred remains. Just over 5 months later, with its constitution agreed, Washington was admitted as the 42nd state. Article VII of the constitution passed with little debate, and its language was a combination of original text mixed with phrases borrowed from contemporary state constitutions, including, Texas, California, Oregon, and Kansas. The original wording read:

All property in the state, not exempt under the laws of the United States, or under this Constitution, shall be taxed in proportion to its value.

No uniformity clause. No talk of separate classes of taxation.

As it happened, the later tax rebellion that transformed the constitution was spearheaded by a dedicated cohort of angry farmers, who although lacking pitchforks in their hands, sustained a 22-year campaign to change the prevailing state law.

The Grange: A Farmer’s Revolt

Political historians dubbed the period between 1867 and 1896 the Farmers’ movement, which was a time when many farmers campaigned for radical social and economic changes, including the abolition of national banks, free coinage of silver, a sufficient issue of government paper money, tariff revision, and a secret ballot. The Grange (the name of the local chapter) was a part of the Order of the Patrons of Husbandry, the national leader of the larger political movement.

Gift for the grangers ppmsca02956u

Grangers, Farmers’ Movement by Strobridge & Co. Lith.

As 1900 approached, the many offshoots of the movement had been rolled into the Democratic Party, but the Washington State Grange worked independently with a powerful local backing.

In 1908 Washington Grange members staged their first attempt to alter Article VII. The ballot measure to amend the constitution was soundly defeated, 60,244 (68%) to 28,371 (32%). The farmers did not give up, and 20 years later the measure was again on the ballot. Pictured below are the 1928 campaign statements for both supporters and opponents.

1928 Pamphlet, via Washington State Library

Pamphlet (1928) by State of Washington (Public domain)

The Grange rhetoric of 1928 will sound quite familiar to a modern audience, as it called for a progressive tax structure that would set down heavier taxes on the rich and lighter taxes on everyone else. Moreover, Grange members vigorously argued that Washington State tax law was both antiquated and ill-designed, permitting a favorable operating environment for “special interests and tax dodgers.”

This clamorous group of advocates rallied around two central points: 1) Preventing rampant tax evasion on stocks and bonds; 2) Ending excessive taxation on property and confiscation as a result of nonpayment. Their prescribed remedy? Creating classes of taxation. The proponents for the ballot measure optimistically predicted that under their proposed constitutional amendment:

The cost of government will be shared by all members of society, and more revenue raised with less cause for complaint, and the taxes of the homeowner, the farm owner, and the landowner, under the new system will be materially reduced.

Much like in 1908, the November 1928 ballot measure was defeated, but by a closer margin, 140,887 (52%) to 131,126 (48%). But, as too often happens, other historical forces reared their heads to considerably alter the public mood on matters of public revenue. Wall Street crashed on Black Tuesday, October 29th, 1929, initiating the 11-year Great Depression, and a new critical mass of support grew around lowering taxation in Washington. In November 1930, the ballot measure amending state tax law passed with overwhelming support, 138,231 (61%) to 88,784 (39%). In the most resounding fashion, the electorate implemented the uniformity clause and taxation classes still seen today.

The Present Day

Following their hard-fought victory, the farmers gradually were replaced by an equally persistent phalanx of lawyers. According to The Washington State Constitution: A Reference Guide, “Virtually every substantive word in Section I has been litigated.” The crucial matter is whether something is a property tax or not, because only a property tax is subject to the constitutional uniformity requirement.

I pose a rather different question: when is a tax not really a tax at all? Three key examples spring to mind. First, there are “special local assessments,” which are charges for improvements that increase property values (e.g. fixing street pavement, maintaining green spaces, extra security for businesses). State courts have labelled these charges placed on businesses not as taxes, and thus not subject to the uniformity clause. (See, Seattle v Rogers Clothing, 1990).

Secondly, a gross receipts tax, like Seattle’s “business and occupation tax,” has been defined by our courts as an excise, rather than an unconstitutional nonuniform property tax. (See, State ex. rel. Stiner v Yelle, 1993).

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  • Lastly, and most importantly, a quasi-land-value tax already exists in Seattle: the Multifamily Property Tax Exemption (MFTE) Program, a city-approved, state-sanctioned measure created in 1998 to stimulate the development of new housing units. The MFTE exempts the residential portion of multifamily projects from city and county property taxes, provided that developers set aside 20% of the units for moderate-wage workers. The tax exemption applies to residential improvements only; commercial portions of the property are still taxed at normal rates. Additionally, the exemption remains in effect for 12 years and is transferable from one property owner to another.

    Pictured are the Joule Apartments, a mixed-use development located in Seattle’s trendy Capitol Hill neighborhood. Marketed as the “premier Seattle apartment development,” it is a beneficiary of the MFTE. The 2013-14 total taxable value for the building’s commercial property is $16,350,400. Conversely, the exempt total for its residential property is $59,321,600. Obviously, it is no small sum being exempted.


    The MFTE is perfectly legal, even though it taxes commercial and residential portions of a single property at different rates. And this raises an enticing possibility: with careful legal wordsmithing and thoughtful construction, perhaps an LVT that taxes land and buildings at different rates might also pass constitutional muster.

    Despite its many benefits, the MFTE has a major flaw: its byzantine application and review process subtly impede the development of housing stock.

    To be eligible for the MFTE, for example, the city requires that:

    • The development site must be located within the boundaries of one of 39 target areas.
    • The development must be a residential or mixed-use project with a minimum of 50% of the gross floor area for permanent residential use.
    • New construction projects must have a minimum of four housing units.
    • Rehabilitation or conversion projects must include the addition of at least four new housing units.
    • For vacant buildings, the residential portion shall have been vacant for at least 12 months prior to application.

    In contrast, a well-designed split-rate LVT would create incentives for new development minus the byzantine process. And if teamed with other smart growth measures—like the removal of building height and parking requirements—the development spurred by LVT could simultaneously increase the city’s tax base and reduce rents.

    So now to travel back to the question of the constitutionality of the land-value tax: Would state courts define this sort of split-rate tax as a permissible excise tax or special assessment? Or would they declare it unconstitutional? Nobody can know for sure. The ultimate answer may lie with the skill of lawyers drafting such a tax, and with the temperament of the judges considering a challenge. But I’m optimistic, and if the legal and political forces align, the LVT—in my view, the most equitable tax of them all—could one day be a reality in the Evergreen State.