That kind of restriction is easy to game, and creates perverse incentives. Imagine a billionaire with an enormous house: if they start renting out half of it to someone else, suddenly they have to pay more taxes? That's not right.

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.

> "That kind of restriction is easy to game, and creates perverse incentives. Imagine a billionaire with an enormous house: if they start renting out half of it to someone else, suddenly they have to pay more taxes? That's not right."

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)""

That distorts the incentives by encouraging everyone to use the full exempt size. Why not just give everyone a fixed amount of money to spend as they wish? That way people who want a substantial house can spend it on their land tax, and people who have better uses for it can spend it on those instead.

The perverse incentive is: the billionaire would be wasting less space for himself and sharing it with other people---but the tax system would discourage that.

Based on the relatively small number of billionaires/rich people in the world, that's a compromise I'm willing to make. If the rich want to house the poor they can do so through a charitable foundation.

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.

Why go by size and not by value? Someone having a huge estate in the middle of nowhere is not a problem, vs occupying the same amount of space (or even a much smaller, but still large one) in the city centre is.

Value is open to fluctuations, size is not.

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?

So why not aggressively tax profits from property sales then?

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.

Taxing sales encourages people to hold onto property that they're not really using optimally any more, which is the opposite of what we want.

You're taxing profits, not sales. If the value of land more closely tracked inflation, people will look to other markets for growth.

To put it another way, why don't people sit on their cash? They're taxed on most cash transactions, right?

> If the value of land more closely tracked inflation, people will look to other markets for growth.

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.

1. Taxes on companies could be adjusted to compensate for the introduction of a land use tax.

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.

*2b and only .25 acres of land would be exempt. (Of some other generally agreed amount)

No exemption necessary. Just eg pay out all the land value tax as a basic income. And automatically anyone sitting on less than the average amount of land (in terms of value, not size), will get a net income. People sitting on more, will make a net payment.

Let's not make it unnecessarily complicated. Basic income is a good idea on its own, but mix it with land use taxation and you get into all sorts of problems. For example, how do handle a rented block of flats, would your land usage tax/income vary depending on how many tenants were currently renting in that block of flats?

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.

> [...] would your land usage tax/income vary depending on how many tenants were currently renting in that block of flats?

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.

But why not just tax profits from sales instead of fiddling around and implicitly creating special interest groups?

Taxing sales doesn't tackle the misuse of land that has already been sold.

Sure it does. It discourages using land for speculation. If the appreciation curve flattens out, some people buying property as an investment will look to other markets that don't impact the standard of living so directly.

What about the land people already own?

Remember that most people do not own their home. Land value tax or no, most landlords are going to price their rent as high as they can get away with. Tenants are effectively paying a land value tax (the rent), whose amount is determined by the market.

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.

Yes, you got the effects exactly right. The land value tax would have no direct effects on rent. That's why it's such an awesome tax: it does not distort economic activity. Unlike eg income tax which discourages working.

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.

Land property isn't abolished by taxing it.

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.