The Economist on Land Taxes – “Taxes on immovable property are the most growth-friendly of all major taxes.”

“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. Since the amount of land is fixed, taxing it cannot distort supply in the way that taxing work or saving might discourage effort or thrift. Instead a land tax encourages efficient land use. Property developers, for instance, would be less inclined to hoard undeveloped land if they had to pay an annual levy on it. Property taxes that include the value of buildings on land are less efficient, since they are, in effect, a tax on the investment in that property. Even so, they are less likely to affect people’s behaviour than income or employment taxes. A study by the OECD suggests that taxes on immovable property are the most growth-friendly of all major taxes.”
– from ‘Levying the land’, The Economist, 29 Jun 2013 [hat-tip clive]

31 responses to “The Economist on Land Taxes – “Taxes on immovable property are the most growth-friendly of all major taxes.”

  1. Cyril Tourneur

  2. “Rich bachelors should be heavily taxed. It is not fair that some men should be happier than others.” – Oscar Wilde

    “The avoidance of taxes is the only intellectual pursuit that still carries any reward.” – John Maynard Keynes

    • UBCghettodweller

      >“The avoidance of taxes is the only intellectual pursuit that still carries any reward.” – John Maynard Keynes

      I dunno man, I just landed on the Mun and return to Kerbal safely in “Kerbal Space Program.” That was at least as good as mediocre sex.

      (If you want to be productive for the rest of the week, please, for the love of god, don’t download the demo of that game.)

  3. Somehow I think this will just turn into another great excuse to hike / implement new taxes but not remove any existing taxes.

    Also, this is such typical NGO special interest group report – just tax everything. A lot of prime farmland would also make for prime residential / industrial use. So should we slap on huge taxes on those farmlands just because its value could be a lot higher? Great way to destroy farmland which is essential for survival.

    • I’m all for preservation of viable farmland, the quibble is that many plots of farmland, even according to many who tend them, “don’t grow much.”

      • Ford Prefect

        I have farmed for the past 40 years. The problem for Canadian farmers is that Canada has a cheap food policy. It achieves this goal by essentially allowing Canadian consumers to be free riders on food produced in other countries, often with heavy subsidies, or if you will, payments from taxpayers from those other countries. This process violates anti dumping rules but when cheap food is involved no politician will interfere.

        Canada itself pays no subsidies to its farmers although supply management does exist principally in dairy and poultry.So the foodstuffs in our stores are markedly below the cost at which you could produce them in Canada. Since prices are so low relative to the cost of production it is generally not worth working farmland.

      • Well they may not produce much but it’s still being kept as land suitable for farming. Once it’s dugged up and then filled and covered with concrete and asaphlt, it’s going to be very hard to convert it back to farm land without a lto of toxic sustances in the soil.

      • @Ford Perfect:
        “The problem for Canadian farmers is that Canada has a cheap food policy”

        Wow. Just like that. A few questions for you then.
        1. Did you ever do grocery shopping across the border? Noticed the price difference?
        2. Have you ever heard about Canadian national dairy policy (245% tariff on cheese etc)?
        3. Compare food prices in Germany (leave alone US) and Canada:

        Ignorance or hypocrisy? Or maybe I am missing something here?

  4. The reason land taxes are nice is simple: land values are the buffer that squares construction costs with property income. If we increase the taxes on land values, even substantially, marginal land values will drop. The ROI for the marginal investor before and after the tax adjustment is unchanged, with one slight (ahem) hiccup: existing owners who have assumed tax regimes remain constant over time get Bangkoked. In Vancouver, or anywhere else for that matter, that might raise a bit of a pickle.

  5. Nice idea but 100% un-possible to implement, full stop. Next subject please.

    Another in the same category is the elimination of all sales and income taxes, and instead taxing every individual financial transaction at the same very low rate. No can do, under any circumstances, even if we all agreed that it would be better.

    You may as well propose that we level the Rockies for farming, boil the ocean, then bring the moon into low orbit to give astronauts a shorter commute and improve the views at night.

  6. It would be no less impossible to implement than having a gigantic bureaucracy to tax income. Taxing income could be equally “un-possible” if by that you mean doing it fairly for everyone and efficiently. Government will always screw it up. The idea is to have the least costly to implement method.

    But, please, do enlighten us. Why is this completely impossible?

  7. Real Estate Tsunami

    Many businesses are fleeing Richmond, so the remaining ones have to pay higher taxes.

  8. Real Estate Tsunami

    Another example of City Councils caving in to developers.

    • Councils are elected, and the pressure to keep taxes down without cutting services is always there, and Richmond is arguably an acute local example of this drive.

      The best way of reducing taxes for voters is extracting taxes from property speculators via permit fees and future property taxes on the new construction. Ironically, the construction activity many decry as influence peddling is a form of the tax regime vreaa highlights.

      • Real Estate Tsunami

        Councils are elected. A clueless electorate will elect clueless politicians.
        That’s why we deserve the governments we elect.
        Witness C.C.

  9. Referral to the previous post indicates why highlighting RET is an act that should be reserved for the most exceptional of circumstances.

    Think of it like opening your back door knowing there is a colony of mice who have nested just outside. Don’t be surprised if one or two of them set up shop indoors. and start eating your Doritos.

  10. Hey heads up – looks like the MSM is finally admitting that Vancouver eats its young.

  11. vancouver homeowners are first to cry poverty if their property taxes go…
    and the first to brag how rich and successful they are when their house rises in value

  12. The best “tax” idea I have seen is the Automated Payment Transaction Tax (APT) by Edgar L. Feige PhD University of Wisconsin Professor of Economics. The APT would eliminate the tax complex. Gone would be personal, corporate, property, estate, capital gain, income, sales, excise and all manner of taxes or levies disguised as fees as well as the elimination of tax returns, deductions and special interest exemptions. Links to Feige’s work are here:

    ps… I have the June real estate charts updated now:
    …and a new chart on the real 10yr yield which leads me to think that ZIRP may be dead.

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