What if property taxes are the best way to tax?
Warning: get off housing gravy train
| The media is making sense! Not once but three times recently, reporters have addressed an unpopular but vital reform. Thanks to them, millions of readers get appraised of geonomics, the powerful idea of public recovery of natural rents in lieu of taxing human efforts. We trim, blend, and append three 2009 articles from: (1) Down Under’s ABC News, July 30 on banker’s warning by Online business reporter Michael Janda; (2) the Wisconsin Policy Research Institute, the state’s free-market think-tank, July30, on the property tax by Christian Schneider; and (3) Forbes.com, July 22, on charter cities by Bruce Upbin. |
by Michael Janda, by Christian Schneider, and by Bruce Upbin
- Warning: get off housing gravy train
Further increases in house prices could take Australia's housing bubble to the point at which it becomes completely unsustainable and bursts, throwing us into the same chaos as the US, just a bit later on.
A broad based land tax would encourage development as it increases the cost of holding vacant land for longer than necessary; land that isn't being used will be put up for sale more quickly, rather than investors holding onto it during downturns until prices improve.
Making prime land available to develop would also curb sprawl.
But having paid through the nose to jump on the real estate gravy train, presently all the incentives are there for the majority of the population to call for policies that maintain, and increase, house prices.
Just like a giant ponzi scheme, people have paid to join and will only realize profits when the next generation pays even more to jump on board.
JJS: From Australia, which has a history of taxing land more than do other places, to Wisconsin, which like the rest of America has a history of throttling the property tax, half of which is the useful land tax.
- What if property taxes are the best way to tax?
Poll after poll demonstrates that Wisconsin residents object to paying the property tax more than any other -- even if, say, their income tax liability is greater than the amount they pay in property taxes.
Rather than a tax automatically added to sales or deducted from wages, paying property taxes is a proactive endeavor.
But what if there is a case to be made for more reliance on the property tax? If we have to choose one tax over the other, which one does the most good?
Taxes on income, sales, and corporations punish work, job creation, and production. Naturally, the more you tax these activities, the less of them you get.
In this month’s Atlantic Monthly, New America Foundation fellow Reihan Salam proposes ending all taxes except one:
“In 1879, Henry George, a brilliant if slightly crankish autodidact, published Progress and Poverty. A staunch believer in laissez-faire economics, George found it perverse that we tax productive activities like work and innovative investment while letting landowners grow rich simply because they scooped up property at the right time... There’s a certain compelling logic to the Single Tax. When you tax income, aren’t you punishing people for working hard? But when you tax an asset like land, you’re simply encouraging the most valuable use of that land.”
Increasing property taxes would hurt those people who have little income and high location values. Such individual examples may exist, but in the aggregate, income and property wealth are tied fairly closely. And for those with low incomes, programs such as the Homestead Tax Credit can be reconfigured to give the largest relief to those who need it the most.
For bettering our state, perhaps the state could set up a program to pay property taxes automatically out of paychecks, which people don’t seem to mind.
JJS: From existing localities to an academic’s imagined ones.
- Charter cities are discussed at TEDGlobal
Paul Romer, economics professor at Stanford University, proposed the idea of setting up charter cities, scaled projects that would use some of the vast tracts of available land in Cuba, Africa, and elsewhere. These cities could be financed by leveraging the increasing property values of the land being developed. This is how Singapore could afford its incredible development.
JJS: There’s more examples than just Singapore. Take a peek at our list click here.
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Jeffery J. Smith runs the Forum on Geonomics.
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Also see: DC fixer-uppers become tax ruins or renewals?
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