AHR forum: U.S. tax policy and the shopping-center boom of the 1950s and 1960s

American Historical Review

Volumn 101, Issue 4, 1996, Pages 1082-1109

  Hanchett, Thomas W ^a  

^a NONE

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EID: 0003379390     PISSN: 00028762     EISSN: None     Source Type: Journal    
DOI: 10.2307/2169635     Document Type: Review

References (284)

1. A good brief treatment of recent urban history is Carl Abbott, Urban America in the Modern Age: 1920 to the Present (Arlington Heights, Ill., 1987).
2. Work specifically on downtown revitalization includes Jon C. Teaford, The Rough Road to Renaissance: Urban Revitalization in America, 1940-1985 (Baltimore, Md., 1990);
3. Bernard J. Frieden and Lynne B. Sagalyn, Downtown, Inc.: How America Rebuilds Cities (Cambridge, Mass., 1989).
4. On edge cities, consult Joel Garreau, Edge City: Life on the New Frontier (New York, 1991);
5. William Sharpe and Leonard Wallock, "Bold New City or Built-Up 'Burb?: Redefining Contemporary Suburbia," American Quarterly 46 (1994): 1-30.
6. Robert Fishman, Bourgeois Utopias: The Rise and Fall of Suburbia (New York, 1987), chap. 7.
7. On a decline in public life, see, for example, Michael Sorkin, ed., Variations on a Theme Park: The New American City and the End of Public Space (New York, 1992);
8. James Howard Kunstler, The Geography of Nowhere: The Rise and Decline of America's Man-Made Landscape (New York, 1993), particularly chap. 7.
9. For contrasting views, read John Brinkerhoff Jackson, A Sense of Place, a Sense of Time (New Haven, Conn., 1994);
10. Lynn Hollen Lees, "Urban Public Space and Imagined Communities in the 1980s and 1990s," Journal of Urban History 20 (1994): 443-65.
11. Witold Rybczynski, "The New Downtowns," Atlantic Monthly 271 (May 1993): 98-106.
12. Examples of the voluminous literature on the post-industrial service economy are Thomas Stanback, Understanding the Service Economy: Employment, Productivity, Location (Baltimore, Md., 1979);
13. Robert G. Sheets, Stephen Nord, and John J. Phelps, The Impact of Service Industries on Underemployment in Metropolitan Economics (Lexington, Mass., 1987).
14. On the federal aid to cities, read, for example, Thomas R. Swartz and Frank J. Bonello, eds., Urban Finance under Siege (Armonk, N.Y., 1993);
15. Nicholas Lehman, "The Myth of Community Development," New York Times Magazine (January 1994).
16. On the under-class debate, consult Thomas Sugrue, "The Structures of Urban Poverty: The Reorganization of Space and Work in Three Periods of American History," in The "Underclass" Debate: Views from History, Michael B. Katz, ed. (Princeton, N.J., 1993);
17. William Julius Wilson, When Work Disappears: The World of the New Urban Poor (New York, 1996).
18. For the purpose of this essay, a "shopping center" (or "shopping plaza") is defined as a group of stores, developed by one development group, with adjacent parking space included as part of the development package. A "shopping mall" is defined as an enclosed shopping center. While a few highly publicized shopping centers have been created within traditional central business districts, the overwhelming majority of American examples are located outside of downtown. Statistics for numbers of centers quoted in the essay are from industry sources (as noted), which do not distinguish between downtown and suburban plazas.
19. A handful of scholars briefly mention federal tax policy as a factor shaping commercial development, but none have given it in-depth study. It is indicated as an area meriting future research in Marc A. Weiss, "Real Estate History: An Overview and Research Agenda," Business History Review 63 (1989): 241-82.
20. The premier history of suburbia, despite much discussion of other federal incentives to suburbanization, allots a single sentence to depreciation policy: Kenneth T. Jackson, Crabgrass Frontier: The Suburbanization of the United States (New York, 1985), 191.
21. See also Roger J. Vaughan, Anthony H. Pascal, and Mary E. Vaiana, The Urban Impacts of Federal Policies: Volume One, Overview, RAND Study R-2206 (Santa Monica, Calif., 1980), 14-15;
22. Edward J. Logue, "The Impact of Political and Social Forces on Design in America," in Who Designs America? Laurence B. Holland, ed. (New York, 1966);
23. Peter Blake, God's Own Junkyard: The Planned Deterioration of America's Landscape (New York, 1964), 28.
24. Jon C. Teaford, The Twentieth Century American City: Problem, Promise and Reality (Baltimore, Md., 1986), 105-06;
25. Peter O. Muller, Contemporary Suburban America (Englewood Cliffs, N.J., 1981), 120-24;
26. William Severini Kowinski, The Mailing of America: An Inside Look at the Great Consumer Paradise (New York, 1985), 103-05;
27. Yehoshua S. Cohen, Diffusion of an Innovation in an Urban System: The Spread of Planned Regional Shopping Centers in the United States, 1949-1968, research paper 140 (Chicago, 1972), 24-28;
28. Howard P. Chudacoff and Judith E. Smith, The Evolution of American Urban Society, 4th edn. (Englewood Cliffs, N.J., 1994), 261;
29. David Goldfield and Blaine Brownell, Urban America: From Downtown to No Town (Boston, 1979), 352-53;
30. Simon Eisner, Arthur Gallion, and Stanley Eisner, The Urban Pattern, 6th edn. (New York, 1993), 355.
31. Brian J. L. Berry and John D. Kasarda, Contemporary Urban Ecology (New York, 1977), 265-66.
32. Maurice Yates and Barry Garner, The North American City, 3d edn. (San Francisco, 1980), 329-34.
33. Included in this category is the increased need for parking, which presumably rose at the same rate that car ownership increased. Quotations from John B. Rae, The Road and the Car in American Life (Cambridge, Mass., 1971), 229-33;
34. Muller, Contemporary Suburban America, 120-24;
35. Kowinski, Mailing of America, 49-52;
36. Cohen, Diffusion of an Innovation, 24-28;
37. Truman A. Hartshorn and John W. Alexander, Economic Geography, 3d edn. (Englewood Cliffs, N.J., 1988), 305.
38. Emery Wister, "Trade Talk: Watch for More Shopping Centers," Charlotte News (November 11, 1959).
39. On Charlottetown Mall, see Charlotte Observer (October 28, 1959): special section.
40. On Charlottetown's subsequent history, see J. Dennis Lord, "Revitalization of Shopping Centers," in Shopping Centre Development: Policies and Prospects, John A. Dawson and Dennis Lord, eds. (New York, 1985).
41. "Shopping Centers Are Now in Every Part of Charlotte," Charlotte Observer (April 23, 1961): 19A.
42. Howard E. Covington, Jr., Belk: A Century of Retail Leadership (Chapel Hill, N.C., 1988), 166, 200, 217-20.
43. Directory of Shopping Centers in the United States and Canada, 12th edn. (Burlington, Iowa, 1971).
44. 1994 data (not including separate, free-standing buildings), Town Assessor's Office, Cortlandville Town Hall.
45. Directory of Shopping Centers in the United States and Canada, 12th edn. Cortland city directories.
46. The steep-walled valley kept urban development contained within Scranton's surrounding Lackawanna County and Wilkes Barre's surrounding Luzerne County. As late as 1970, the Standard Metropolitan Statistical Areas drawn for Scranton and Wilkes Barre by the Census Bureau included only those two counties.
47. Directory of Shopping Centers in the United States and Canada, 12th edn.
48. Michael P. Conzen and Kathleen N. Conzen, "Geographical Structure in Nineteenth Century Urban Retailing: Milwaukee, 1836-1900," Journal of Historical Geography 5 (1979): 45-66.
49. Chester H. Liebs, Main Street to Miracle Mile: American Roadside Architecture (Boston, 1985);
50. Brian Berry, Commercial Structure and Commercial Blight, Research Paper 85 (Chicago, 1963).
51. The impact of this suburban strip development was large enough to worry downtown businessmen. A study measuring retail employment in center cities versus suburbs noted declines everywhere between 1929 and 1948, a period when little or no shopping-center construction had yet occurred in most places. For instance, central Boston's share of metropolitan retail employment fell from 61 to 52 percent, central Baltimore's from 95 to 88 percent, and central Buffalo's from 79 to 70 percent. George Sternlieb, The Future of the Downtown Department Store (Cambridge, Mass., 1962), 32;
52. Raymond Vernon, The Changing Economic Function of the Central City (New York, 1959), 45, 66-67.
53. Liebs, Main Street to Miracle Mile, 14, 36;
54. Jackson, Crabgrass Frontier, 257-58.
55. William S. Worley, J. C. Nichols and the Shaping of Kansas City: Innovation in Planned Residential Communities (Columbia, Mo., 1990), 232-63;
56. J. C. Nichols, "Shopping Centers: Look before You Leap," Urban Land 7 (June 1948): 1, 3;
57. Jackson, Crabgrass Frontier, 177, 258-59.
58. Country Club Plaza and several of Nichols's other store groups as they looked circa 1950 are illustrated in Geoffrey Baker and Bruno Funaro, eds., Shopping Centers: Design and Operation (New York, 1951), 79-89.
59. "The inclusion of a shopping center as part of a planned community is not a new idea. Noteworthy examples have been in existence for thirty years or more. The J. C. Nichols Company's Country Club Plaza in Kansas City [1922], Shaker Heights Shopping Center in Cleveland, River Oaks Center of Hugh Potter in Houston [1937], Hugh Prather's Highland Park Village in Dallas [1931], and Westwood Village of the Janss Bros. in Los Angeles, as well as others have been nationally known for years. For the most part, these older shopping centers were built in communities where there were to be large residential developments which catered to the higher income group, and it has only been in comparatively recent times that shopping centers have been included in the planned neighborhoods for more modest homes." "Shopping Centers: A Neighborhood Necessity," part 1, Urban Land 3 (September 1944): 1, 4. Other early examples included Upper Darby Center in West Philadelphia (1927), Suburban Square in Ardmore, Pennsylvania (1928), Hampton Village in St. Louis (1941), Colony in Toledo (1944), and Shirlington in Arlington, Virginia (1944).
60. Homer Hoyt, "The Status of Shopping Centers in the United States, October 1960," Urban Land 19 (October 1960): 5.
61. See also Howard Gillette, Jr., "The Evolution of the Planned Regional Shopping Center in Suburb and City," Journal of the American Planning Association 51 (1985): 449-60.
62. Illustrations of a number of these early centers may be found in Baker and Funaro, Shopping Centers: Design and Operation.
63. Longstreth, "Neighborhood Shopping Center."
64. Muller, Contemporary Suburban America, 48.
65. "[The] real push in shopping center construction did not begin until after 1954," wrote Art Zuckerman, "America's Shopping Center Revolution," Dun's Review and Modern Industry 71 (May 1958): 36, 93-102;
66. See also John A. Dawson, "Suburbanization of Retail Activity," in James H. Johnson, ed., Suburban Growth: Geographical Processes at the Edge of the Western City (London, 1974), 165;
67. John M. Findlay, Magic Lands: Western Cityscapes and American Culture after 1940 (Berkeley, Calif., 1992), 38;
68. George H. Sternlieb and James W. Hughes, "Introduction: The Uncertain Future of Shopping Centers," in Shopping Centers, USA, Sternlieb and Hughes, eds. (Piscataway, N.J., 1981), 1-16;
69. J. Ross McKeever, "As the Year Begins," Urban Land 12 (January 1953): 1, 3-4.
70. Longstreth, "Neighborhood Shopping Center," 18.
71. For illustrations of small centers as part of housing schemes, see Gustave Ring, "Modern Trends in Garden Apartments," Urban Land 7 (May 1948): 1, 4;
72. "Plan Analysis Session of the Community Builders' Council," Urban Land 8 (January 1949): 1, 3-5.
73. There is considerable disagreement in the literature as to the "first" planned regional shopping center. The Cameron Village project was planned for Raleigh developer J. W. York by Seward Mott and Max Wehrly of the Urban Land Institute in consultation with the economic geographer Homer Hoyt. Its initial shops opened November 17, 1949. Raleigh News and Observer (November 17, 1949);
74. Homer Hoyt, "Market Surveys for Shopping Centers," in According to Hoyt: Fifty Years of Homer Hoyt; Articles on Law, Real Estate Cycle, Economic Base, Sector Theory, Shopping Centers, Urban Growth, 1916 to 1966, Hoyt, ed. (Washington, D.C., 1966), 622-30;
75. Linda Harris Edmisten, J. W. Willie York, His First Seventy-five Years in Raleigh: An Historical Biography (Raleigh, N.C., 1987), 63-87, 95-99.
76. On Northgate in Seattle, see Meredith L. Clausen, "Northgate Regional Shopping Center: Paradigm from the Provinces," Journal of the Society of Architectural Historians 43 (1984): 144-61.
77. On Shoppers World, see Eugene J. Kelley, Shopping Centers: Locating Controlled Regional Centers (New York, 1956), 79;
78. Kathleen Kelly Broomer, "Shoppers World and the Regional Shopping Center in Greater Boston," Society for Commercial Archeology News Journal 13 (1994-95): 2-9.
79. All three pioneering centers are illustrated in Baker and Funaro, Shopping Centers: Design and Operation, 147-60, 198-99, 212-21.
80. Edmisten, J. W. Willie York. Northland, which opened outside Detroit in 1954, required a similarly complex development package;
81. Rybczynski, "New Downtowns," 100. So did the early 1950s Lloyd Center in Portland, Oregon;
82. Richard Horn, "Trends from Regional Center to 'Complete City,'" Urban Land 21 (September 1962): 9-10.
83. Homer Hoyt, "Impact of Suburban Shopping Centers in September, 1956," Urban Land 15 (September 1956): 1, 3-7;
84. Muller, Contemporary Suburban America, 121-23.
85. Max S. Wehrly, "Trends for Modern Communities," Urban Land 12 (September 1953): 1, 3-5;
86. Hoyt, "Impact of Suburban Shopping Centers," 4.
87. Revenue Act of 1913 quoted in Jerold L. Waltman, Political Origins of the U.S. Income Tax (Jackson, Miss., 1985), 26;
88. Revenue Act of 1916 quoted in William T. Hogan, Depreciation Policies and Resultant Problems (New York, 1967), 2-15.
89. Hogan, Depreciation Policies, 6.
90. Hogan, Depreciation Policies, 7-8.
91. On the typicality of Treasury allowance of a forty-year useful life, see Paul Taubman and Robert Rasche, "The Income Tax and Real Estate Investment," in Tax Institute of America, Tax Incentives (Lexington, Mass., 1971), 113-42, esp. 119.
92. A few critics also questioned the "useful life" data in specific situations, such as oil refineries, where structures wore out faster than the Treasury Dept. estimated. Hogan, Depreciation Policies, 8-9.
93. William J. Casey and J. K. Lasser, Tax Sheltered Investments (Washington, D.C., 1951), 81. Casey went on to become one of America's leading investment writers, producing numerous books, including several editions of The Real Estate Deskbook and The Tax Shelter Deskbook through the 1960s. The Treasury Dept. liberalized depreciation slightly in 1946, allowing a 150 percent declining balance. The deduction could be taken only if that 150 percent depreciation formula was used in the taxpayer's own accounting system, and each taxpayer was required to prove the legitimacy of the deduction on a case-by-case basis. Few people made use of the option.
94. Boris Bittker and Lawrence M. Stone, Federal Income Taxation, 5th edn. (Boston, 1980), 384;
95. Casey and Lasser, Tax Sheltered Investments, 80-87;
96. Royal Shipp and Robert Moore Fisher, The Postwar Boom in Hotels and Motels (Washington, D.C., 1965), 31.
97. Janet Davies, Real Estate in History (Washington, D.C., 1958), 225.
98. Congressional Budget Office, Real Estate Tax Shelter Subsidies and Direct Subsidy Alternatives (Washington, D.C., 1977), 16, 25.
99. Joseph Pechman and Henry Aaron, eds., How Taxes Affect Economic Behavior (Washington, D.C., 1981), 1-25;
100. Ned Eichler, The Merchant Builders (Cambridge, Mass., 1982), 4.
101. One of the few histories of capital gains policy is to be found in Office of the Secretary of Treasury, Office of Tax Analysis, Report to Congress on the Capital Gains Tax Reductions of 1978, T 1.2:C17/2 (Washington, D.C., 1985), 29-39.
102. John F. Witte, The Politics and Development of the Federal Income Tax (Madison, Wis., 1985), 146-50;
103. Hogan, Depreciation Policies, 9-11.
104. The depreciation proposal merited front-page coverage in the New York Times (January 23, 1954).
105. On the legislative history of the 1954 Revenue Act, see Eugene N. Feingold, "The Revenue Act of 1954: Policy and Politics" (PhD dissertation, Princeton University, 1954);
106. William L. Cary, "Pressure Groups and the Revenue Code: A Requiem in Honor of the Departing Uniformity of the Tax Laws," Harvard Law Review 68 (1955): 745-80.
107. The 1953 recession is described in Herbert Stein, The Fiscal Revolution in America (Chicago, 1969), 292-93.
108. On tax debates in the 1953-54 Congress, see E. J. Dione, Jr., Why Americans Hate Politics (New York, 1991), 171;
109. Nichol C. Rae, The Decline and Fall of Liberal Republicans: From 1952 to the Present (New York, 1989), 39;
110. Gary W. Reichard, The Reaffirmation of Republicanism: Eisenhower and the Eighty-Third Congress (Knoxville, Tenn., 1975). Proposals for tinkering with depreciation policies may have come not only from businessmen but also from military theorists. Concern over the devastating effects of atomic weapons led strategists in this era to urge a policy of "industrial dispersion" - building factories away from existing industrial cities - which was to be encouraged through generous tax breaks for new factory construction.
111. See Roger Lotchin, Fortress California, 1910-1961: From Warfare to Welfare (New York, 1992), 322-34;
112. Neil P. Hurley, "The Role of Accelerated Tax Amortization in the National Industrial Dispersion Program" (PhD dissertation, Fordham University, 1956).
113. One expert referred to "sum-of-the-years'-digits" as "an ancient formula familiar to accountants and which only an accountant can make absolutely clear." Miles L. Colean, "Realities of Today's Real Estate Investment," Architectural Forum 102 (April 1955): 189. "Under this method, you total the years that make up the useful life. For example, if the useful life is 5 years, you add together 1, 2, 3, 4, and 5, for a total of 15. Then, the first year's depreciation is 5/15 of your cost (say $1500), or $500. The second year, you deduct 4/15 of $1500, then 3/15 of 1500, etc."
114. William J. Casey, Real Estate Desk Book (New York, 1964), T3.
115. Marion Schiefer, Study of Legislative History of the Rapid Depreciation Provision (Washington, D.C., 1974),
116. reprinted in Congressional Record, daily edition (March 1, 1974): 4948-49.
117. Internal Revenue Code of 1954, section 167 (a).
118. Quoted in Schiefer, Study of Legislative History of the Rapid Depreciation Provision, 4949. Surrey served as assistant secretary of the Treasury from 1961 to 1969.
119. The partnership, rather than the sole proprietorship or the corporation, was the business structure overwhelmingly preferred for real estate deals. Unlike a sole proprietorship, a partnership could harness the financial power of two or more investors, a necessity for most building projects. Unlike a corporation, a partnership paid no corporate income tax. Norman B. Ture, Accelerated Depreciation in the United States, 1954-1960 (New York, 1967), 52-54;
120. Stanley Surrey, Pathways to Tax Reform: The Concept of Tax Expenditures (Cambridge, Mass., 1973), 103.
121. Colean, "Realities of Today's Real Estate Investment," 125-27, 188-89, 194.
122. Also see Miles L. Colean, "Impotency of FHA Policies on Apartment Finance," Architectural Forum 102 (June 1955): 110-11, 162;
123. E. H. Welter, "Tax Facts," National Real Estate and Building Journal 55 (August 1954): 42.
124. Miles L. Colean, "The Mortgage Pattern Predicament," Architectural Forum 102 (May 1955): 128-29, 184-85, 190;
125. also see Stanley W. Penn, "Profits in Losses: Real Estate Investors Turn Depreciation Write-Offs into Gains," Wall Street Journal (July 17, 1961): 1.
126. Colean, "Realities of Today's Real Estate Investment," 194. In the language of economics, the tax break lowered the "hurdle rate" for projects.
127. On hurdle rate, see, for instance, Lawrence Lindsey, The Growth Experiment: How the New Tax Policy Is Transforming the U.S. Economy (New York, 1990), 115-17, 185-86.
128. Economists debate the semantics of calling such tax policy a "subsidy" or simply an "incentive." In the case of the shopping center, the debate seems moot. Developers who chose to build shopping centers ended up with more cash in their pockets - due to the federal tax law - than those who did not. On the debate, see Congressional Budget Office, Real Estate Tax Shelter Subsidies, xiv, 56-57;
129. Chester W. Hartman, Housing and Social Policy (Englewood Cliffs, N.J., 1975), 145-51;
130. Paul Taubman and Robert Rasche, "Subsidies, Tax Law, and Real Estate Investment," in Economics of Federal Subsidy Programs: A Compendium of Papers Submitted to the Joint Economic Committee of Congress, EC7: Sul/4/pt. 3. (Washington, D.C., 1972), 434-69;
131. Anthony Downs, Federal Housing Subsidies: How Are They Working? (Lexington, Mass., 1973), 1.
132. Ture, Accelerated Depreciation, 21;
133. Casey, Real Estate Desk Book [1964], 189;
134. Urban Land Institute, The Dollars and Cents of Shopping Centers, 1963 (Washington, D.C., 1963), 82-88.
135. On the typicality of a development period of two to two-and-a-half years, see, for instance, Clausen, "Northgate Regional Shopping Center," 145;
136. Edmisten, J. W. Willie York, 81. By the 1990s, development time would be even shorter.
137. On a shopping center for which land was purchased in April, construction begun in June, and stores set for opening by September of the same year, see "Locust Grove Outlet Center to Break Ground Friday," Atlanta Journal/Constitution (June 4, 1994): C2.
138. Homer Hoyt, "Impact of Suburban Shopping Centers in September, 1956," Urban Land 15 (September 1956): 1, 3-7.
139. The phenomenon was also reported in a front-page story in the business section of the New York Times (October 21, 1956): III, 1.
140. Cohen, Diffusion of an Innovation, 36-37.
141. As was increasingly true in this period, the project was put together by an experienced out-of-town developer, in this case Don M. Casto of Columbus, Ohio. "Truman Sells Plot for Shopping Site," New York Times (July 2, 1955): 6.
142. On Casto's pioneering career in shopping-center construction, beginning in 1928, see John A. Dawson, Shopping Centre Development (London, 1983), 7-8.
143. Bart J. Epstein, "The Trading Function," in Metropolis on the Move: Geographers Look at Urban Sprawl, Jean Gottman and Robert A. Harper, eds. (New York, 1967), 93-101.
144. The shift from "consequent" to "catalytic" occurred about 1960, according to Muller, Contemporary Suburban America, 121-23.
145. Epstein and Muller's observations were tested in a study of Orange County, California: Robert A. Young, "Regional Shopping Centres as Suburban Growth Poles," in Dawson and Lord, Shopping Centre Development: Policies and Prospects, 243-64.
146. For a similar observation by a leading historian of city planning, see Lawrence C. Gerckens, "Historical Development of American City Planning," in The Practice of Local Government Planning, Frank S. So and Judith Getzels, eds., 2d edn. (Washington, D.C., 1988), 46.
147. Hoyt predicted that construction would slow at least into the mid-1960s. Hoyt, "Impact of Suburban Shopping Centers," 4.
148. See also "Too Many Shopping Centers?" Business Week (November 17, 1956): 136-44.
149. Penn, "Profits in Losses," Wall Street Journal (July 17, 1961): 1. "A large amount of investment money, much of it new to real estate and much of it very professional, is pouring into this market," confirmed a lengthy article in Fortune the same year, which noted that the "new participants have been attracted by yields and 'tax shelters' that are favorable in comparison to the stock market."
150. John McDonald, "The $2 Billion Building Boom," Fortune (February 1960): 119-22, 232-46.
151. Penn, "Profits in Losses," Wall Street Journal (July 17, 1961): 1.
152. Colean, "Mortgage Pattern Predicament"; Joseph A. Ruskay and Richard Osserman, Halfway to Tax Reform (Bloomington, Ind., 1970), 170-73;
153. Roger H. Gordon, James R. Hines, Jr., and Lawrence H. Summers, "Notes on the Tax Treatment of Structures," in The Effects of Taxation on Capital Accumulation, Martin Feldstein, ed. (Chicago, 1987), 223-57;
154. "Law Allowing Fast Income Tax Write-Offs for Rental Housing Assailed by Treasury," Wall Street Journal (October 29, 1968): 7. The write-off became even quicker in 1962 when Washington revised depreciation standards to allow a shorter "useful life" for many structures and other components.
155. Hogan, Depredation Policies, 7;
156. Bittker and Stone, Federal Income Taxation, 380-83;
157. Urban Land Institute, Dollars and Cents of Shopping Centers, 1963, 86;
158. William D. Andrews, Basic Federal Income Taxation, 2d edn. (Boston, 1979), 472-73;
159. Howard Winant, Stalemate: The Political Economic Origins of Supply-Side Policy (New York, 1988), 60-61.
160. Mary Alice Hines, Shopping Center Development and Investment (New York, 1983), 101-04, 272. With Charlotte's 1958 Charlottetown Mall, for instance, developer James Rouse leased the site from an Episcopal orphanage. Nationally, another twist in ownership came in 1960 when Congress passed legislation facilitating the creation of Real Estate Investment Trusts. REITs allowed many small investors to act together under a skilled investment manager. The REIT passed along at least 90 percent of its proceeds directly to its members, who paid taxes on it as personal income - avoiding corporate income taxes.
161. See Bittker and Stone, Federal Income Taxation, 879;
162. Hines, Shopping Center Development and Investment, 245-47, 258-66;
163. Penn, "Profits in Losses," Wall Street Journal (July 17, 1961): 1;
164. Casey, Real Estate Desk Book [1964], 162-67;
165. Congressional Budget Office, Real Estate Tax Shelter Subsidies, 25-27.
166. For a history of the REIT phenomenon, consult Alan Rabinowitz, The Real Estate Gamble: Lessons from Fifty Years of Boom and Bust (New York, 1980), 207-20.
167. Casey, Real Estate Deskbook [1964], 70-78;
168. Hines, Shopping Center Development and Investment, 306-07;
169. Stephen E. Roulac, Tax Shelter Sale-Leaseback Financing: The Economic Realities (Cambridge, Mass., 1976);
170. Sherman J. Maisel, Financing Real Estate: Principles and Practices (New York, 1965), 345-46, 362-67.
171. Maisel, Financing Real Estate, 386-87, 410;
172. Hines, Shopping Center Development and Investment, 221, 228-45, 270;
173. Congressional Budget Office, Real Estate Tax Shelter Subsidies, 100-01;
174. William N. Kinnard, Jr., Industrial Real Estate (Washington, D.C., 1967), 146, 299-300;
175. R. Bruce Ricks, Recent Trends in Institutional Real Estate Investment (Berkeley, Calif., 1964). Whereas in the early 1950s centers had been considered questionable ventures by pension funds, lending officer Martin Cleary of the Teachers Insurance and Annuity Association (TIAA) recalled that "the shopping center has now become the Cadillac of the lending industry. There have been fewer defaults and problems with the shopping center than with any other type of mortgage."
176. Martin Cleary, "Shopping Center: A Lender's Perspective," in Sternlieb and Hughes, Shopping Centers, USA, 298.
177. The 1958 provision could not be used for buildings but could be taken on any other capital investment above $10,000. Casey, Real Estate Deskbook [1964], 194-96;
178. Bittker and Stone, Federal Income Taxation, 389-90;
179. Congressional Budget Office, Real Estate Tax Shelter Subsidies, 26-27;
180. American Enterprise Institute for Public Policy Research, Investment Tax Credit: Should It Be Repealed? An Analysis of the Tax Credit Repeal Provision in the Surcharge Tax Proposal (Washington, D.C., 1969), 5.
181. Bittker and Stone, Federal Income Taxation, 393.
182. Colean, "Mortgage Pattern Predicament."
183. Daniel M. Friedenberg, "The Coming Bust in the Real Estate Boom," Harper's (June 1961): 29-40.
184. Daniel S. Bernman and Sheldon Schwartz, Tax Saving Opportunities in Real Estate Deals (Englewood Cliffs, N.J., 1971);
185. William J. Casey, The Real Estate Tax Shelter Deskbook (New York, 1975);
186. Robert M. Weiss, How to Maximize Tax Savings in Buying, Operating and Selling Real Estate, 2d edn. (Englewood Cliffs, 1972);
187. National Institute of Real Estate Brokers, How to Use Taxation and Exchange Techniques in Marketing Investment Real Estate (Chicago, 1969);
188. Paul F. Wendt and Alan R. Cerf, Real Estate Investment Analysis and Taxation (New York, 1969);
189. Robert Warren Kent, How to Get Rich in Real Estate (Englewood Cliffs, 1961), 173-76, 194-200;
190. Paul E. Anderson, Tax Factors in Real Estate Operations (Englewood Cliffs, 1960).
191. On the rise of a "tax industry" in these decades, see Victor E. Ferrall, "Appendix: Role of the Tax Institute of America in the 'Tax Industry,'" in Tax Institute of America, Tax Incentives, 291-99.
192. For instance, New York City developer Daniel Friedenberg called for tax reform before "overbuilding sets off a panic that leads to a new depression." Further, he questioned the morality of a system that allowed "enormous real estate profits to be accumulated through tax tricks while 14 percent of the Negro and 8 percent of the white workers in America have no jobs." Friedenberg, "Coming Bust in the Real Estate Boom," 39, 40.
193. Similar concerns were voiced in Philip M. Stern, The Great Treasury Raid (New York, 1964);
194. Jerome R. Hellerstain, Taxes, Loopholes and Morals (New York, 1963);
195. Ruskay and Osserman, Halfway to Tax Reform.
196. Architectural critic Peter Blake added aesthetic objections with his book God's Own Junkyard, 28.
197. "Law Allowing Fast Income Tax Write-Offs for Rental Housing Assailed by Treasury," Wall Street Journal (October 29, 1968): 7;
198. Office of the Treasury, Office of Tax Analysis, "Estimated Federal Income Tax Expenditures, Calendar Years 1967-71," in General Tax Reform: Panel Discussions before the Committee of Ways and Means, House of Representatives, Ninety Third Congress, First Session, part 1 of 11, Y4.W36: T19/64/pt. 1 (Washington, D.C., 1973), 29.
199. On the development of the tax expenditure concept, see Congressional Budget Office, Real Estate Tax Shelter Subsidies, 56-57;
200. Surrey, Pathways to Tax Reform;
201. Witte, Politics and Development of the Federal Income Tax, section 4;
202. Stanley S. Surrey and Paul R. McDaniel, Tax Expenditures (Cambridge, Mass., 1985).
203. The deficit in the 1970 annual federal budget totaled $2.8 billion. Bureau of the Census, Statistical Abstract of the United States, 1971 (Washington, D.C., 1971), 373. Despite some tightening of tax regulations in 1969, as discussed below, the 1970 tax expenditure for accelerated depreciation in excess of straight-line stood at $755 million.
204. Office of the Treasury, Office of Tax Analysis, "Estimated Federal Income Tax Expenditures, Calendar Years 1967-71," 29.
205. Treasury Department, Tax Reform Studies and Proposals: Joint Publication of the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate, Y4.W36: T19, pt. 3 (Washington, D.C., 1969), 443. "[S]ubsidy comes through the tax system whether management and maintenance is good, bad, or indifferent."
206. Congressional Budget Office, Real Estate Tax Shelter Subsidies, 4, see also 63-66;
207. Blake, God's Own Junkyard, 28.
208. Hines, Shopping Center Development and Investment, 78.
209. Such swift deterioration did not occur in Sweden. David Popenoe, The Suburban Environment: Sweden and the United States (Chicago, 1977), 131.
210. On rapid deterioration of U.S. centers, see Jackson, Crabgrass Frontier, 271.
211. Taubman and Rasche, "Subsidies, Tax Law, and Real Estate Investment";
212. Paul Taubman and Robert Rasche, "The Income Tax and Real Estate Investment," in Tax Institute of America, Tax Incentives, 113-42.
213. Congressional Budget Office, Real Estate Tax Shelter Subsidies, 6, 55. In a sample of 1966 tax returns filed by thirteen large real-estate corporations, Treasury researchers found that nine paid no tax at all, and two paid tax of less than $25.
214. Treasury Department, Tax Reform Studies and Proposals (1969), 452-58.
215. Congressional Budget Office, Real Estate Tax Shelter Subsidies, 1-2;
216. Ruskay and Osserman, Halfway to Tax Reform, 168-78.
217. Under the 1964 recapture rules, the percentage of profit taxed as "ordinary income" decreased the longer an investor held the building. The recapture law cut down on the tendency of investors to buy and immediately resell property, which had become a popular strategy for "converting" ordinary income to capital gains income. But the law had relatively little effect on the investor who built a new structure and held it for several years - the standard practice for those seeking the depreciation tax shelter. Casey, Real Estate Deskbook [1964], 191-93, 259-65;
218. Congressional Budget Office, Real Estate Tax Shelter Subsidies, 28;
219. Ruskay and Osserman, Halfway to Tax Reform, 174-76;
220. Treasury Department, Tax Reform Studies and Proposals: Joint Publication of the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate, Y4.W36: T19, pt. 3 (Washington, D.C., 1969), 440-41, 446-51;
221. Gerald Brannon and Emil M. Sunley, Jr., "The 'Recapture' of Excess Tax Depreciation on the Sale of Real Estate," National Tax Journal 29 (1976): 413-21. Preceding the recapture provision, Congress had tried a law stating that if a property sold for more than its depreciated value, no tax deduction for depreciation could be claimed in that year. This modest initial attempt to align tax law and reality proved easy to circumvent, however. A seller could simply "wait until just after the close of his taxable year to complete the sale," advised one shopping-center manual, "and thereby avoid application of this rule." Urban
222. Land Institute, Dollars and Cents of Shopping Centers, 1963, 86.
223. Bittker and Stone, Federal Income Taxation;
224. Congressional Budget Office, Real Estate Tax Shelter Subsidies, 24;
225. Jenard M. Gross, "Real Estate: Office Buildings, Shopping Centers and Apartment Buildings," in Corporate and Executive Tax Sheltered Investments, Peter C. Reid, ed. (New York, 1972), 176-83.
226. Office of the Treasury, Office of Tax Analysis, "Estimated Federal Income Tax Expenditures, Calendar Year 1971," in General Tax Reform: Panel Discussions before the Committee of Ways and Means, House of Representatives, Ninety-Third Congress, First Session, part 1 of 11, Y4.W36: T19/64/ pt. 1 (Washington, D.C., 1973), 18-19. The 1970s became known as the era of the "super-regional" mall. It is possible that the 1969 decrease in the shopping-center tax break stimulated investors to create larger projects, in order to reap tax benefits commensurate with the paperwork involved.
227. In the 1970s, the major tax legislation passed by Congress was the 1976 Tax Act, which did not affect real estate depreciation directly. It did curtail many non-real-estate tax shelters, such as those for oil drilling and cattle ranching, however, which may have served to make real estate more attractive. The 1976 Tax Act also offered a 25 percent investment tax credit for the renovation of buildings deemed eligible for the National Register of Historic Places, providing partial redress to the years of favoritism toward new construction. Congressional Budget Office, Real Estate Tax Shelter Subsidies, 28-31.
228. Bruce S. Lane, "The Tax Reform Act of 1976: What It Means for Real Estate Limited Partnerships," Journal of Real Estate Taxation 4 (Spring 1977): 195-214.
229. Note that Joel Garreau dates the "Edge City" concept to 1978 - exactly two years after the 1976 Tax Act made offices and shopping centers America's last great tax shelter. Garreau, Edge City, 112.
230. The ACRS law also allowed investors to take 175 percent declining balance depreciation. Gordon, Hines, and Summers, "Notes on the Tax Treatment of Structures," 229;
231. Hines, Shopping Center Development and Investment, 329-31;
232. Lindsey, Growth Experiment;
233. Witte, Politics and Development of the Federal Income Tax, chap. 11;
234. Stephen Messner, Victor Lyon, Robert Ward, and Charles Freedenberg, Real Estate Investment and Taxation, 4th edn. (Englewood Cliffs, N.J., 1991), 219-25;
235. Charles H. Wurtzebach and Mike E. Miles, Modern Real Estate, 3d edn. (New York, 1987), 55-56.
236. On the political battles leading to passage of ACRS, see Cathie J. Martin, Shifting the Burden: The Struggle over Growth and Corporate Taxation (Chicago, 1991), 117-34.
237. Anthony Downs, Rental Housing in the 1980s (Washington, D.C., 1983), 61. By contrast, under the accelerated depreciation of the 1954 Tax Code, it had taken five years to write off 23 percent of a building's cost.
238. Treasury Department, Tax Reform Studies and Proposals: Joint Publication of the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate, Y4.W36: T19, pt. 3 (Washington, D.C., 1969), 439.
239. The increase was calculated in constant dollars. Gordon, Hines, and Summers, "Notes on the Tax Treatment of Structures," 227. Retail insiders also decried overbuilding, at least in retrospect. Much of the "current malaise . . . high vacancy factors for commercial real estate, slow lease-up periods for new shopping centers, stagnant rental rates . . . can be traced directly to the artificial financial stimuli associated with the excessive 1980s that produced commercial buildings at a faster rate than market demand."
240. Malcolm R. Riley, "The Reality behind Retail Overbuilding," Shopping Center World 20 (May 1991): 288.
241. Under MACRS, commercial property could be depreciated in either 31.5 or 40 years, while residential income property could be depreciated in either 27.5 or 40 years. Messner, Lyon, Ward, and Freedenberg, Real Estate Investment and Taxation, 220-25.
242. On the 1986 fight over tax policy, see Jeffery H. Birnbaum and Alan S. Murray, Showdown at Gucci Gulch: Lawmakers, Lobbyists, and the Unlikely Triumph of Tax Reform (New York, 1987);
243. Martin, Shifting the Burden.
244. Directory of Shopping Centers in the United States and Canada, 11th edn. (Burlington, Iowa, 1970), 6.
245. Gurney Breckenfeld, " 'Downtown' Has Fled to the Suburbs," Fortune (October 1972): 80-87, 156-67.
246. "Quiet Decay Erodes Downtown Areas of Small Cities," New York Times (February 8, 1972): 1. A statistical study using data from 1972 and 1980 showed shopping-center floorspace expanding by 80 percent while U.S. population increased by only 8.9 percent, indicating that shopping-center development "reflects as much a substitution process as it does a response to growth in new demand."
247. Dennis A. Lord, "The Mailing of the American Landscape," in Dawson and Lord, Shopping Centre Development: Policies and Prospects, 209-25.
248. Sorkin, Variations on a Theme Park;
249. Kunstler, Geography of Nowhere, particularly chap. 7;
250. Frieden and Sagalyn, Downtown, Inc., 346-47;
251. Garreau, Edge City, 52;
252. Kowinski, The Mailing of America;
253. George Ritzer, The McDonaldization of Society: An Investigation into the Changing Character of Contemporary Social Life (Newbury Park, Calif., 1993).
254. Sugrue, "Structures of Urban Poverty";
255. Garreau, Edge City;
256. Muller, Contemporary Suburban America, 110-11;
257. Hartshorn and Alexander, Economic Geography, 304;
258. Wilson, Truly Disadvantaged;
259. J. D. Wacquant and William Julius Wilson, "The Cost of Racial and Class Exclusion in the Inner City," Annals of the American Academy of Political and Social Science 501 (January 1989): 8-23.
260. Federal direct grants to cities under the Urban Renewal program totaled just $712 million for the entire period 1953-1962. Martin Anderson, The Federal Bulldozer: A Critical Analysis of Urban Renewal, 1949-62 (Cambridge, Mass., 1964), 29.
261. Projected expenditures for Urban Renewal grants in 1967 were $600 million, according to The Budget of the United States Government, Fiscal Year Ending June 30, 1967: Appendix (Washington, D.C., 1966), 551-53.
262. On the push for downtown revitalization, see, for instance, Frieden and Sagalyn, Downtown, Inc.
263. Canadian law did allow more rapid depreciation than permitted under straight-line formulas in the United States. But that depreciation could be taken on renovation of existing buildings, not just new construction. More important, the depreciation write-off could not exceed income from the property: in other words, could not be used to "shelter" other income. S. W. Hamilton and David Baxter, "Industrial Real Estate: A Canadian Overview," in William N. Kinnard, Jr., Stephen D. Messner, and Bryl N. Boyce, Industrial Real Estate, 3d edn. (Washington, D.C., 1979), 641-44;
264. Robin W. Broadway and Harry M. Kitchen, Canadian Tax Policy (Toronto, 1980), 101-04;
265. O. J. Firestone, Residential Real Estate in Canada (Toronto, 1951), 504;
266. J. N. Mongia, Tax Patterns around the Globe (A Treatise on Comparative Taxation Systems) (New Delhi, 1984), 62-63, 663; telephone interview by author with Peter Gusen, Employment and Investment Income Section, Canadian Department of Finance, Ottawa, Canada, August 1993.
267. The 1956 numbers are based on a figure of 1,600 shopping centers in the United States that year, an estimate made by Chain Store Age, the first careful observer of the shopping-center phenomenon. "Shopping Center Boom Continues," Chain Store Age 32 (May 1956): 27-34. The 1961, 1966, and 1971 U.S. data represent more exact counts prepared by the National Research Bureau, a trade organization. The data on the number of centers in Canada were compiled by Canadian census officials.
268. F. H. Leacy, ed., Historical Statistics of Canada, 2d edn. (Ottawa, 1983), series V132-42. Outside North America, the disparity is even larger. For instance, England possessed just five large "regional" shopping centers as late as 1990; scholars calculated "it would require 340 such regional centers in Britain to provide the same number per head of population as in the USA."
269. Peter J. McGoldrick and Mark G. Thompson, Regional Shopping Centers: Out of Town versus In Town (Aldershot, 1992), 16.
270. On shopping-center development outside the United States, see also Dawson, Shopping Centre Development;
271. Dawson and Lord, Shopping Centre Development: Policies and Prospects;
272. Allen M. Findlay, Ronan Paddison, and John A. Dawson, eds., Retailing Environments in Developing Countries (London, 1990).
273. Seymour Freedgood, "The Motel Free-for-All," Fortune 59 (June 1959): 119-23, 163-71;
274. see also Seymour Freedgood, "The Hotels: Time to Stop and Rest," Fortune 68 (July 1963): 162-65, 202-13;
275. Royal Shipp and Robert Moore Fisher, The Postwar Boom in Hotels and Motels, Federal Reserve Staff Economic Study (Washington, D.C., 1965), 28-37;
276. Howard E. Morgan, The Motel Industry in the United States: Small Business in Transition (Tucson, Ariz., 1964);
277. Liebs, Main Street to Miracle Mile, 184-91.
278. McDonald, "The $2 Billion Building Boom."
279. See also "Apartments in the Suburbs," Urban Land 18 (September 1959): 2. Single-family housing starts, by contrast, slowed in the late 1950s and 1960s.
280. Gerald D. Nash, The American West in the Twentieth Century: A Short History of an Urban Oasis (Albuquerque, N. Mex., 1977), 257;
281. Charles E. Silberman and Todd May, "The Coming Changes in Housing," Fortune 60 (August 1959): 89-93, 194-96.
282. On accelerated depreciation in the development of rental housing, see Max Neutze, The Suburban Apartment Boom: Case Study of a Land-Use Problem (Washington, D.C., 1968), 31-34, 91-93, 157-63;
283. Martin Mayer, The Builders: Houses, People, Neighborhoods, Governments, Money (New York, 1978), 334, 337-40;
284. Harvey Rosen, "Housing Subsidies: Effects on Housing Decisions, Efficiency, and Equity," in Handbook of Public Economics, vol. 1, Alan J. Auerbach and Martin S. Feldstein, eds. (Amsterdam, N.Y., 1985).