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”.

land tax australiaA 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/

 

 

 

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Posted on August 3, 2016, in Taxes and tagged . Bookmark the permalink. 2 Comments.

  1. Jeremy Heighway

    How about at least peppering in considerations which are less positive, such as even higher pressures for all land to earn revenue unless some ‘agency’ can maybe be persuaded to give plots of land a really low valuation? What about people being priced off their own land over time?
    What is the value/cost of an urban allotment which could be used for housing instead? How would land use zoning issues be tackled?

    What is the most sensible question which a lay person such as myself can ask about land value taxation?
    Is it whether or not the systems in place around the world have a minimum permitted area of ownership per capita or so, regardless of land plot locations, and thus value?
    Is it what happens to stewardship and protection issues over time?

    Like

  2. I did think the Australian system sounded grim Jeremy – will forward your questions to someone more knowledgable than me

    Like

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