The UK’s Economist: Levying the Land
|July 26, 2013||Posted by Staff under Good Press|
The average rich country, including all levels of government, raises under 5% of total tax revenue from annual levies on land or the buildings on it. The norm in middle-income emerging economies is lower still, at around 2% of all tax revenue (see right-hand chart). Including property-transaction taxes like stamp duty raises the total a bit but not by much.
These averages mask big differences. Property taxes loom largest in Anglo-Saxon economies. In America they still account for 17% of all government revenue; in Britain and Canada the figure is around 12%. Only 2% of revenues come from annual property taxes in Germany and Italy; in Switzerland it is a mere 0.4%. A small share of national tax revenue can belie the importance of property taxes for the local governments that tend to levy them. In Australia and Britain taxes based on property are the only source of local-government tax revenue. America’s local authorities get around 70% of their revenue from property taxes. But, overall, property taxation plays a relatively small role.
That’s a pity. Taxing land and property is one of the most efficient and least distorting ways for governments to raise money. A pure land tax, one without regard to how land is used or what is built on it, is the best sort.
Why don’t governments raise more money from property? A few are trying to. Mr Norregaard cites almost 20 countries that have recently introduced new property taxes, or are considering doing so. Namibia recently introduced a land tax on agricultural land; Ireland is reintroducing a tax on residential property that was abolished in 1997. Britain’s opposition Labour Party has suggested taxing developers who sit on land and don’t build on it.
These taxes are wildly unpopular, often spawning opposition quite out of proportion to their scale. Mario Monti, Italy’s former technocrat prime minister, lost the election earlier this year for many reasons but his much-loathed decision to raise a tax on property played a substantial part. Asked in surveys what is the worst or least fair tax, Americans consistently cite property taxes.
Most American homeowners pay property taxes in one or two lump sums during the year. Around a third (mainly those with mortgages) have their payments bundled in with monthly mortgage payments. How people pay property taxes affects their tolerance for them. The more people pay in lump sums, the lower property taxes are likely to be.
For property taxes to become a much bigger source of revenue, governments must apparently ensure people don’t realise how much they are paying.
JJS: People love land and hate taxes, so it’s no wonder that the tax-land movement makes so little progress. Perhaps if they offered a dividend to everyone from the raised revenue …