Another 3 Pundits Push True Tax Sanity
|January 24, 2014||Posted by Staff under Good Press|
These three 2014 excerpts on land tax sanity are from: (1) The Canberra Times, Jan 23, by the Editors; (2) Quartz, Jan 23, by Noah Smith of Stony Brook University; and (3) Slate, Jan 24, by Matthew Yglesias, author of The Rent Is Too Damn High.
Scrapping Stamp Duty and Taxing the Land is the Only Fair Solution
A good tax – from a government’s perspective, at least – is one that is cheap to administer and almost impossible to avoid. It also helps if the tax applies very widely, because that lightens the burden on individual taxpayers. The perfect tax, in this respect, is land value tax.
Land cannot be hidden: governments record the use and ownership of all land in Australia. This no doubt helps explain why taxing land has always been so difficult politically: no matter how clever one’s accountants are, land tax cannot be dodged.
Former federal Treasury secretary Ken Henry, whose thorough review of Australian taxes was published in 2010, recommended abolishing many of the narrow, inefficient, unfair taxes currently levied on Australians – including stamp duty, payroll tax, and others – and replacing them with a simpler tax on land value.
Unfortunately, his sensible, considered advice has been largely ignored. The sole exception has been the ACT, where the Gallagher government began, in 2012, a generational switch to land tax that it says will be completed in 10 to 20 years’ time. The benefits will be immense.
As such, it is disappointing that the ACT’s Liberal opposition campaigned strongly against the policy at the last election. Equally disappointing has been the refusal of other jurisdictions to embrace similar reforms.
This 100-year-old Idea could End San Francisco’s Class War
The solution was thought of more than 100 years ago, by a San Francisco economist. His name —- sadly forgotten in this day and age —- was Henry George.
As any broker will tell you, there are three important things in real estate: Location, location, location. A plot of land in downtown Manhattan will be worth much more than an identical plot in rural Kansas, even if they have identical houses built on top of them. So when a city grows or enjoys a boom, a lot of the new economic value will go to the people who own the land, regardless of what they build on it.
A century later economists realized that the land value tax (or Henry George Tax) was not just fair but efficient as well. Joseph Stiglitz, along with co-author Richard Arnott, showed that it makes sense for the city to tax the value of land to pay for things like infrastructure. As Paul Krugman showed when a bunch of people move to the city —- for example, as the result of a tech boom —- productivity goes up. Some of the fruits of that productivity will be captured by whoever owns the locations.
A George Tax actually encourages landlords to build useful, valuable stuff on top of the land they own. What San Francisco needs now is a Henry George Tax. The policy would bring rents down. At the same time, it would raise the money the city needs to build better trains, run more bus lines, and build more public housing that will benefit the poor and middle class of San Francisco.
It’s time for San Francisco to embrace the brainchild of its first legendary economist. It’s time for Henry George to become a household name again.
Land Value Tax Won’t Fix San Francisco
I love the idea of a land value tax. Instead of taxing human labor (and disincentivizing work) or taxing accumulated capital (and disincentivizing savings) you tax land. You get revenue (good!) in a progressive way (because landowners are rich!) without any bad incentives (amazing!) and everyone’s happy. Noah Smith thinks it could greatly ameliorate the class tensions currently gripping San Francisco. I’m afraid that I’m skeptical.
There are lots of places in the United States of America —- most places, even —- where a tax on land value would be a great thing for housing affordability. For example, if Harris County in Texas replaced its property tax with a land value tax it would alter the incentives facing property owners in the Houston area. You’d get more building, less idle land, more housing supply, and lower rents.
But in a place like San Francisco (or Cambridge, Mass.; or Manhattan; or Santa Monica, Calif.; or D.C.), the constraint on the supply of new buildings isn’t really taxes it’s zoning.
The median value of an owner-occupied house in San Francisco is $750,900 —- almost double the California average and more than quadruple the national average. Under the circumstances, the financial incentives to build new housing units are already extremely strong. The problem is that it’s hard to get regulatory permission to build.
If a city wanted to have robust population growth, affordable housing, and lots of construction sector job opportunities then it could easily change its zoning code to allow for more housing. Having upzoned for density, prosperity, and environmental sustainability, it would find itself in a situation where a land value tax is much smarter than a traditional property tax. But for the already-built-up, already-expensive, restrictively-zoned cities of America you need to fix your zoning first.
Ed. Notes: Some have suggested that if society were to recover all of its socially-generated location value (the presence of society generates it), it might be able to dispense with zoning all together. Instead, have government really go after anyone creating a nuisance with their noise or pollution, and anyone putting neighbors at risk by disturbing steep cliffs and riparian areas, and anyone taking too much of any natural resource without compensating neighbors. Do all that and land users and owners would leave space open along creeks and cliffs. To open up space in the city center for a plaza, well, that’s where site value is at its absolute spendiest, and the city, as the richest local entity, could outbid anybody. Looks like another issue that public recovery of publicly-created rents could resolve.