Land Taxation: an Idea Whose Time Has Gone Alan Evans

Henry George Proposed in Progress and Poverty in 1879 People saw the world differently after reading it. Led to the ‘Single Tax’ Movement. Still an active idea.

£ D P’ P D’ T T’ O S Q A Ricardian View - A tax on land values or rent will not affect the amount of land made available (because it is fixed), and will not affect the price, OP, to the occupier – only its value to the land owner.

Labour Land Value Tax Campaign “Would encourage new capital investment rather than sterile land speculation.” “Would encourage the use of empty sites zoned for development.” “Would help avoid urban sprawl.” “Would provide automatic compensation fo those sites which are disadvantaged by a new development.”

Two Obvious Problems How much is the rate of tax? How often is the land valued? The Labour LVT Campaign assumes that the tax is relatively high (to incentivise), and that valuations are frequent, (for the purpose of compensation).

A Third (Political) Problem If it is such a good idea why is it so rare? Of the countries in western Europe only Denmark and France have land taxes, and in France it is together with a buildings tax. (Austria has a tax on vacant land.)

Reason 1 - Practicality Taiwan has a land tax. But Taipeh has little undeveloped land coming on the market. So land values have to be estimated.

Methodology First – value the whole property. Second – value the cost of construction of the existing building. Third – subtract one from the other to find the estimated land value.

Problems First, the cost of valuing the land is much higher than the cost of valuing the property alone. Second, the values obtained are difficult to defend and open to argument.

The New Zealand Evidence Communities can choose which form of tax to apply. Four out of five larger urban areas have chosen property taxes. Land taxes are primarily levied in rural areas.

Elsewhere In the state of Victoria, Australia, the move has been away from land tax to a property tax. In South Africa choice was possible but since 2004 a property tax has been required.

Finally -the Planning Problem Nowadays land values depend on what is permitted. So, firstly, the local valuer will not second guess the planning committee. And, secondly, in the UK, where constraints mean that land values are high, the relevance of a LVT would be negligible.

The Political Problem When Henry George was writing few people owned land. Now the majority of the population in many countries own their own homes and therefore land. A meaningful land tax would be political suicide.