Growing up in the Dakotas, I learned firsthand about the value and many uses of land — from family farms and real estate development to the spectacular protected wilderness of our national parks. Responsible land development is foundational to economic growth, but the federal tax code actually disincentivizes development by encouraging the creation of “conservation easements,” which permanently bar land from productive use. As our lawmakers seek to close loopholes and eliminate wasteful deductions, conservation easements should be at the top of the list.
Conservation easements are tracts of private property for which an owner agrees to permanently surrender his right to develop or improve, theoretically “protecting it for future generations.” Noble as this goal may seem, the types of land that become conservation easements often look more like vacant lots than Yellowstone or the Grand Canyon.
Because the requirements for creating a conservation easement are so low, and the tax writeoffs associated with owning such an easement so generous, real estate developers leap at the opportunity to lump “leftover” or otherwise unused land into easements, creating no significant preservation value while potentially avoiding millions in tax liability. In fact, as law professor Ray Madoff noted in the New York Times, one developer avoided paying $10 million in taxes by designating his private golf course — hardly a sensitive environmental area — as a conservation easement.
Society has an interest in protecting scenic, sensitive, and otherwise worthwhile land from development, and fortunately, the federal government already does — in the form of national parks, wildlife reserves, forests, wetlands, coastlines, and other conserved areas. State and local governments protect additional land, and closely regulate development of private property through several levels of bureaucracy. This regulation and conservation takes place entirely outside the scope of conservation easements, which restrict land otherwise suitable for development from ever being put to use.
Conservation easements not only suck money out of the treasury through needless tax breaks, they also hinder economic growth for generations to come. Throughout history, economic growth has been tied to territorial expansion and development, and the powers of the world have consistently expanded and taken advantage of their land and resources. The age of American expansion is over, of course, but to continue to grow our economy, we must make our full spectrum of land available for responsible development. A nation cannot continue to grow without adequate land for housing, business, agriculture, and energy exploration, and when the government encourages landowners to permanently take perfectly suitable land out of commission, it places a cap on its future.
Eliminating the conservation easement loophole would hardly usher in an era of irresponsible development, because the framework of local, state, and federal restrictions on building would remain. As anyone who’s ever attempted to put an addition on their house — much less build a skyscraper, drill for oil, or develop wetlands — knows, our country’s various environmental bureaucracies have significant power to put the brakes on building projects when they perceive even the slightest ecological threat. The government is already good enough at telling landowners what they can’t do with their own property, and landowners don’t need to create easements to dig themselves into an ever deeper grave.
Although we’d all like to pay less of our hard-earned money in taxes, excessive deductions are nothing more than debt-driving federal subsidies. Subsidies for conservations easements are not only wasteful, but encourage landowners to willfully stifle economic growth and job creation. It’s time we deducted them from our tax code.
Jason Stverak is President of the Franklin Center for Government and Public Integrity.