52 
(b) Difficulties in determining the value of the rights taken (a 
diminished title is still left in the hands of the private individual) 
by the public entity. 
(c) Public costs associated with acquisition of development 
rights approach costs associated with “taking” land through 
eminent domain procedures. ; 
(d) Securing of development rights does not usually permit 
unrestricted public use of land.° 
5. Effectiveness of taxation and economic incentives as land use controls 
Manipulation of tax policy, credit programs and subventions are 
rather important mechanisms public decision makers have to affect 
basic land development. Effectuation of a coordinated strategy relative 
to the use of these economic incentives is a difficult task. “To achieve 
fine grain effects by economic controls requires highly sensitive 
management and close attention to relative shifts in the magnitude of 
effects.” 1° 
(a) The property tax is the most important tax affecting the 
course of land development.'! Reliance on the property tax leads 
to noticeable differences in the ability of cities and towns to 
provide urban services. This fact is somewhat related to noticeable 
disparities in the tax base and the regressive tendencies in the 
State tax structure.” Flexible use of this tax as a strategic tool 
for affecting land use, is impeded by legal requirements neces- 
sitating uniformity of taxation within specific areas and assess- 
ments of property at market value.® 
(b) Preferential assessment indicates a break with a rigid legal 
criterion for assessing at market value. A preferential assessment 
law is designed to preserve open space and agricultural land. 
Agricultural assessments may be valuable, too, in implementing 
certain public policies for structuring growth, if combined with 
a state and regional development plan and program of imple- 
mentation to guide the urbanization process." 
(c) Capital gains tax. ‘Perhaps the tax provisions with the 
most influence on the land development pattern in suburban 
and ex-urban areas is the federal capital gains tax and the deduct- 
ibility features with respect to property taxes of the Federal 
income tax. Both these provisions seemingly unrelated to any 
national land policy encourages the withholding of land from 
development on the part of those playing the optimization of 
income game.”’ ® ) | 
The treatment of land areas as capital gains allows owners 
(especially those with large financial resources) to retain land 
with relatively little holding costs. No income tax is collected 
until the land is sold. Upon sale the return from the transaction 
is taxed up to 25% rather than at ordinary income tax rates. 
Elimination of capital gains benefits might cause large land 
9 Ibid. ; MER 
‘0 John Dyckman, “The Control of Land Developments and Urbanization in California,” Appendix to 
the Report on Housing in California (Sacramento, California: State Printing Office), 1963, p. 310. ae 
i aplan, op. cit., pp. 34-39. : SB as 
v 
18 Thid. 
14 Thid. 
15 Tbid, 
