I'd argue the other way, that taxing income is discouraging production. We should be taxing consumption more than we are. If you see deeded property as a non-renewable resource, then ensuring good use through taxation seems essential, not just a good idea. Now, land is not exactly non-renewable since we can build up, as you point out, but in densely developed urban areas, it's pretty close to non-renewable.
We just had a land bubble, and many think the bubble is reinflating, at least in some areas. Putting a check on irrational pricing by adding a consumption tax here seems like a plan worth discussing to me.
The issue with property is that they are being used as an investment opportunity, which undermines the purpose that most people want property for, which is as an affordable place to live.
What we want to discourage is people using property to invest, but without penalising those who want somewhere to live. Therefore, if we're going to have a land use tax it should be based on how someone uses it. If a property is your only home anywhere in the world, then it should be exempt, but anything outside your main home could be taxed. That should discourage those people who buy property but barely live there from driving up prices for the people who want to live there.
Rental prices are already as high as the market will bear (people can't choose not to have a house, so demand is pretty inelastic). A land value tax does exactly what we want: it will keep the net rental price the same, but push down the ownership price. So we'd see a lot less buy-to-let, and more people able to buy homes. As a bonus, it would make it harder for corrupt foreigners to hold empty property as emergency funds, since someone would have to be paying the taxes on it.
How is that creating a perverse incentive? If someone seeks to transform their primary residence from somewhere they live to somewhere they make money, then what's the problem in taxing them?
Also, with regards to the rules of the proposed tax exemption, quoting jrs235... "*2b and only .25 acres of land would be exempt. (Of some other generally agreed amount)""
Furthermore, as has been pointed out already, we could make it so that only properties that sit within a predetermined land mass size would be exempt from tax.
A large estate in the middle of nowhere is still potentially wasteful. For example, could that land not be used for farming or wildlife? How many bathrooms does one person need?
Tax-free primary residences causes at least two problems:
1. People want places to work and shop, too.
2. You end up having to regulate what counts as a primary residence so that Mr. O'Billionaire doesn't get an entire city block tax free. How does working from home affect your tax rate, etc.
To put it another way, why don't people sit on their cash? They're taxed on most cash transactions, right?
Sure, but as long as it can be used to extract rent at no cost, the value of land is going to keep going up.
> why don't people sit on their cash? They're taxed on most cash transactions, right?
Inflation is a de facto tax on holding cash. Without it people probably would sit on their cash.
2. A primary residence is where you live most of the year. To have any property qualify you would need to spend more than 6 months in a year within a country, and would also need to specify which of the properties you own in that country is your primary residence. Problem solved.
Tax exemption for primary residences (under a certain size) + basic income is a far more flexible arrangement, and you lose none of the benefits of determining basic income on land use.
It's a land value tax, not land usage tax. So it would be independent on what you do with the land. (Basically it would be driven by the opportunity costs of what someone else could be doing with the land instead.)
> Tax exemption for primary residences (under a certain size) + basic income is a far more flexible arrangement, and you lose none of the benefits of determining basic income on land use.
Why? That's much more complicated, and full of loopholes.
I do agree that tying land value tax to financing basic income is only potentially a good idea, not necessarily.
Generalising land value tax effectively makes everyone a tenant —land property is abolished. This sounds revolutionary, but since this affects only a minority, I'm not sure how much of a change this would really be. I'm pretty sure for instance that it wouldn't rise the renting prices in big cities.
Pro-forma the land will still be in private hands, thus encouraging people to improve it. (Remember: buildings are not taxed, only the land.)
The government will be very interested in improving the value of land, eg by making saner infrastructure investments, because they automatically get more tax money to play with that way.
With regards to the rental market, people will only rent where they can afford, which is exactly the same as now, what it does change is the amount of profit that landlords can make from each property. If we have a land use tax I'd like to see it increase based on the number of properties you own, which would discourage people buying large numbers of properties just to rent them out.
Again, the purpose of the tax should be to curb the demand for property as an investment. If you do that the increase in house prices should come down, and as a side benefit there's less incentive for companies to expand nationally, which would increase diversity in the marketplace.
Preventing bubbles is another problem. I think in London the problem is that brits have this curious obsession with owning property and be willing to bid as much as they legally can, burrying themselves into debt, in order to achieve that. This is compounded with the lack of supply and foreigners using London property as a safe. But unless this obsession ceases, adding taxes or limits to borrowing isn't going to prevent bubbles. In fact the recent increase in stamp duty on expensive properties does not seem to have any effect.
This is key. A land value tax would have to go hand-in-hand with measures to allow density to increase. That would mean changes in planning laws, and also building of infrastructure like transport, doctors' surgeries, schools, etc. The former can be done at the stroke of a pen, the latter can be funded from the increased tax receipts that come with higher density.
You seem to equate "densification" and "better using the land". That is a narrow definition of "better using the land".
In strictly utilitarian terms any change that increases total utility would be "better using the land", so if a tax increase on land makes some current residents reprioritise their money and decide to move, giving space to other people who value the location more, then that is "better using the land".
I disagree; in fact, I believe the opposite - that income is taxed way too much, simply because it's an easy target - "Look at those rich people drawing a huge salary!" In reality, people who have big salary are almost always not really rich - they are still employed by someone else, they can be fired at any time, and they don't own productive assets.
In an ideal world, ownership of assets would be taxed way more than it's now, or e.g. income tax (all income, including capital gains and dividends) would be proportional to your current assets, not just your income (i.e. if a millionaire earns $1, s/he would pay e.g. 80% tax, while a poor student would pay 0%).
If your painting increases in value that's an indication that the amount of value that that painting could generate for the rest of society has increased, therefore the incentives should encourage you to sell it, not discourage you from doing so.
Unless you require people to voluntarily put a price tag on all their paintings (and other assets) at which they'd be forced to sell to any comer.
I think you are ignoring a couple of things.
First New York has skyscrapers everywhere still prices are sky-rocketing. So claiming that would solve Londons probems isn't really founded.
Second as the article mentions. The value that someone accrue by owning land is 99% of the times based on the surrounding 99% of society increasing that value. If anything it's much fairer to tax the value of land because compared to income tax you aren't actually doing anything for that value.
In New York right now. Chinese or buying apartments cash. Go to Miami and you will see plenty of amazingly expensive apartment complex be ghost towns because it's owners live in Brazil and just have it as a backup.
The people who actually develop new areas with a few exceptions are artist and young people who make an area hip enough that developers want to a house here and there and slowly but surely push out those who made the area worth investing in to begin with. Who benefits. Some of the people who lived in the neighbourhood for a long time but had nothing to do with the increase in value of a place.
Infrastructure choice isn't irreversible it just takes time. London wasn't bombed to anywhere close to the degree of a place like Berlin so of course it wasn't really going to change the width of the street.
More taxes on land is solving the fact that urbanization is pushing people to move into the bigger cities. Again reasons unrelated to the fact that someone own land.
There are plenty of ways to discuss taxation on land that would be both more effective and fair. There is nothing useful about people using property as an investment tool it just drive prices way up.
We should reward money that work and tax money that doesn't.
But sure if taxation isn't your thing then economist and most other magazine about economy isn't your thing either.
Property is widely considered the only form of investment that is safe and pays a decent return, while interest rates hover near zero.
London could really do with a property tax that isn't capped like council tax. The recent SDLT changes are a surprising improvement, and there's even work being done on the "holding company" loophole. I'd suggest 1%, or 5% if the beneficial owner isn't resident in the UK for income tax purposes or is a company in a tax haven.
But it is absurd to tax someone on an income he doesn't have.
Well, maybe if you get a "rollover" relief - but otherwise, such a tax would significantly lower the velocity of the property market (which is already suffering, not least because of a similar tax - stamp duty).
You have the income. It's just never hits the market. If you have your own property and live in it, you are producing and consuming `housing'. That can be taxed.
Similar arguments apply for idle property. Opportunity costs are real.
Are there limits placed on the heights of buildings in residential areas of London?
As for narrow streets, I'm glad they kept them. Compared to some other big cities London feels more 'human friendly' (for want of a better term), wide streets can make a place feel more car focused, less a place that feels like a destination and more somewhere you travel through to get to where you want to be. Dedicated bike lanes are the only changes worth making IMO, but you can create that by working with the existing roads so long as you reduce the demand for cars. It seems that the London Underground has been increasing in capacity over the past 10 years or so, hopefully that will continue.
Dublin has had strong restrictions on building height since the 1960s. An argument for this was to maintain the character of the city, although the destruction of many Georgian buildings was allowed by planners, on spurious health and safety grounds.
The worst effects of the policy were felt during and after the boom of the early 2000s, when accommodation was built further and further out from the city, leading to sprawl, and a commuter belt that stretched 100 kilometres in all directions, which put immense pressure on transport infrastructure. With so much construction, this represents in hindsight a missed opportunity to create more liveable centres or hubs in the style of London or other large cities.
Allowing taller structures for residential purposes in central city areas, would have improved Dublin's liveability. Instead, there is now a critical housing crisis that no one seems to know how to solve.
I believe it captures most of what is important in making a livable city that people enjoy living in.
As for the narrow streets, I am not questioning their charm, but they make transportation very slow, and therefore make it difficult to build out to compensate not builing up.
Tokyo is another interesting type of urbanism. You have very large avenues delimiting blocks. The blocks can either be residential, in which case you walk in what feels like a quiet little village with its narrow streets. Or they can be "entertainment", with a dense web of noisy bars, restaurants and game arcades, lots of light and people.
Isn't the plan to eventually replace all fixed assets with rental assets? Thus solving this problem.
No, the building is private property.
> all land belongs to government which rents it to a citizens?
Yes. The idea is that taxing land (not: buildings or property!) is less distortionary than taxing income or consumption. Hyper-capitalistic Hong Kong operates on that model. Property is expensive, but income tax is around 15% and consumption/sales tax is 0%.
Not communism though, more like corporate ownership of everything. That is, corporations own the property since they exist forever, humans rent them, since their existence is transient.
Remote working, minimalism, cheap flights, universal passport, home rental through Airbnb, Uber for travel. The pieces exist, they just need a little time to work through the system.
In London the primary cause of the housing crisis isn't unused lands. It is a combination:
1. very restrictive planning, which doesn't allow to build up except in a few limited spots. We end up with this absurd outcome of 3 storey houses everywhere and skyscrappers in 3 or 4 areas. Instead London would be much better off allowing to build 10 storey buildings everywhere.
2. Terrible infrastructure choices made decades ago which are now impossible to reverse. London has kept the narrow streets from XIX even when it had an opportunity to plan a better urbanism after the war. And the tunnels in the tube are too narrow to support the current traffic.
More taxes isn't really going to change any of that.