Is a new land tax needed to burst the housing bubble?
Edward Lucas, The Economist’s central and east European correspondent, thinks so. He fears a ‘smouldering generational resentment’: “The housing crisis doesn’t just throttle labour mobility; it crimps lives. People start families later than they want, commute longer distances and live in crowded conditions”.
One of his recommendations follows:
“We should introduce a real land-value tax. This would be levied not on the value of the house (as with current council tax, and the old rates) but on the value of the land itself.
“This has many advantages. First, it hits the rich (who own land) much harder than the poor (who don’t). In particular, it raises the cost of living in a big house, but hardly affects people in small flats.
“It penalises those who sit on land waiting for it to rise in value — as was scandalously the case for decades with Battersea Power Station. If you pay tax on land whether you use it or not, you are more likely to bring it into productive use or sell it.
“Most taxes depress economic activity; land-value taxation actually stimulates it. It is cheap to collect and hard to dodge.
“Land-value taxation also tackles the root of the housing problem: unearned income. The value of my house has little to do with my DIY skills. It has a great deal to do with the spectacular development of our once-grotty corner of London, notably the new Imperial Wharf Overground station — for which we paid nothing”.
A search reveals that land value taxation is currently implemented in Denmark, Estonia, Lithuania, Russia, Hong Kong, Singapore, and Taiwan. It has also been applied in subregions of Australia (New South Wales), Mexico (Mexicali), and the United States (Pennsylvania).
Left: latest book on the subject: https://www.qbd.com.au/land-tax-in-australia/vince-mangioni/9781138831254/