Tuesday, November 25, 2014

'No Land Tax' do not know land tax

The Tenants' Union is for land tax. The great problem is that New South Wales (like other Australian States and Territories) doesn't do it right. In particular, more than 60 per cent of the tax base (that is, land used for owner-occupied housing, and land under primary production) is exempt from the tax! The key thing to do is broaden the base, so that all the benefits of this sound manner of taxation can be enjoyed by the State and citizens alike.

We've just come across another outfit, 'No Land Tax' (hereafter NLT), who are aggrieved that there is any land tax at all.

NLT claims to represent 'mum and dad investors saving for their retirement – and working to improve the lives of their families'. In fact, 'mums and dads' would do better with a broad-based land tax that taxed the unearned gains of landowners, and reduced the tax burden on earnings from work and savings.

We're going to try to talk them around. NLT presents some its members* – presumably the most personable and endearing of the bunch – with their own personal messages about land tax. We'll try to set them straight.

Here's Gordon Brown, of Balmain:


Gordon says: 'Some of us are paying more in Land Tax than we are receiving in rent'.

Gordon, land tax is giving you a hint: you are not using that land of yours as productively as you could. Maybe you've let the building on it get run down; maybe it's ripe for multi-unit redevelopment, or a change to some other more valuable use. Think about doing something more with your land, Gordon – or sell it to someone who will.

Here's Stephen Perri, of Randwick:


Stephen says: 'Property investors are being forced out of NSW into lower Land Tax States like Queensland and Victoria. Less investment means fewer jobs, and that's bad for NSW'.

Stephen, c'mon. Over the last year or two, property 'investment' – more accurately, speculation – in New South Wales has boomed. In particular, residential landlords have been borrowing more than ever, and their share of all borrowing for housing has never been higher. This has inflated house prices and priced out many would-be purchasers – including some would-be speculators, who have gone to other States for lower-priced gambling opportunities. 

Land tax generally discourages speculation, but our system exempts too much land for this discouragement to work as well as it should.

As for jobs – land tax encourages job creation.




 
Simply owning land does not create jobs – not a single one. A person who owns a block of land and does nothing with it creates nothing: no jobs, no valuable goods and services. 
 
It is when land is put to use that things get created; that is, when the owner puts a house on the block, and creates the service of shelter; or puts up a factory or office, and creates valuable widgets or widget-servicing. Land tax encourages owners to put land to use, because the landowner needs to get some money to pay the tax. So, land tax fosters jobs.  
 
Now let's turn it around. Say land tax is removed. The owner might still put their land to use in the creation valuable goods and services from which they might profit... but there's always a risk that an enterprise won't succeed. So why not just do the easy thing and withhold the land from use, and just leave it sitting idle? As long as other people keep working and need land for shelter, business etc, the value of the idle land will rise... and if the owner owns heaps of land, they can withhold heaps from use, and push its value even higher – at the expense of workers and enterprise. So no land tax would kill jobs. 
 

Here's Thomas Lee, of Eastwood:


Thomas says: 'It's inevitable that the GST will be increased. And when that happens, Land Tax must be abolished.'

So Thomas wants everyone to pay more GST, so that he doesn't have to pay tax on unearned increases in the value of his land. Enough said.

Finally, here's Rebecca Schembri, of Mosman:


Rebecca says: 'The NSW state election will be held on 28 March 2015 – and the outcome will be close. The votes of 150 000 Land Tax payers and our families could decide the outcome'.

Rebecca, you'd do better by campaigning for broadening the tax base, rather than eliminating it. With a broad-based land tax, we could get rid other taxes that really do hurt people: payroll tax, which really is a tax on jobs, and stamp duty, which for most families is effectively a fine for moving house. We could also start to think about shifting some of the tax burden on the earned rewards of labour and enterprise onto the unearned rewards of increasing land values.

It's not too late, NLT: get to really know land tax, ditch your present misconceived campaign, and support reforms to broaden the base!

* UPDATE – 23 January 2015: for more about NLT's 'Gordon', 'Stephen, 'Thomas' and 'Rebecca', see this blog post.

12 comments:

  1. Fantastic post. I came across this group a few months back and couldn't really get over the cognitive dissonance that they seem to rely on. It's a bunch of people basically trying to shift the tax burden onto others, rather than use their land more productively.

    ReplyDelete
  2. However be aware that current strata laws can make it all but impossible in many circumstances to redevelop an older building to a higher density.

    ReplyDelete
  3. Top work, Chris. Let me add, renters should insist land tax be the main revenue measure for government. It can't be passed onto tenants and, when you've paid your rent, you've paid your tax!

    ReplyDelete
  4. Hi KS

    Properly, the value of such a property should be lower, to reflect the restriction.

    ReplyDelete
  5. Adam Smith wrote that "nothing could be more reasonable" than that the public charge should be placed against the value of land, which is value that the public itself entirely creates.

    ReplyDelete
  6. Land tax is one of the most unfair taxes in the world. Effectively it confiscates a % of the value of your asset even if it's value has not gone up and no profit has been made.

    As for mom and pops who own their own home, say worth $800K in Sydney with $600K land value, let's see what they say when you come to them with a 1.6% land tax and no threshhold. Effectively raising the cost to them of living in their own home by $9600/year. Plus the council rates they pay, the insurance they cover and the maintenance they do. I bet they will be signing up for that in droves.

    I'm sure a Death Tax will be next in line...

    ReplyDelete
  7. Hi Scott

    Where land value has not increased, it is still valuable, and the owner still has this value at the expense of the rest of society.

    Nothing could be fairer than land tax.

    http://tunswblog.blogspot.com.au/2015/01/land-tax-is-fairest-tax-on-earth.html

    ReplyDelete
  8. 'Rebecca, you'd do better by campaigning for broadening the tax base, rather than eliminating it.'

    SOMEONE has finally said it, thank you!

    ReplyDelete
  9. Charging an owner occupier landtax would only make it more unaffordable for first homebuyers and those who own their own home but don't have a high enough income to support it. How is one supposed to pay a mortgage, council rates, landtax, insurance, maintenance and so forth?, surely this would lead to increased rents as more people are driven to the rental market due to the added costs of home ownership. At the end of the day NSW will become much more expensive for both homeowners and renters alike.

    ReplyDelete
    Replies
    1. Hi Concerned, thanks for asking.

      Check out our later post "Land tax is the fairest tax on earth".

      http://tunswblog.blogspot.com.au/2015/01/land-tax-is-fairest-tax-on-earth.html

      Cheers,
      Ned.

      Delete
  10. such a ordinary article to discussion about 'No Land Tax' do not know land tax really brilliant peace of information about taxation terms.






    Umbrella company IR35 solution for nurses in UK | hire uk tax advisers

    ReplyDelete

Please keep your comments PC - that is, polite and civilised. Comments may be removed at the discretion of the blog administrator; no correspondence will be entered into. Comments that are abusive of individual persons, or are sexist, racist or otherwise offensive will be removed, so don’t bother leaving them.