1725Re: [LandCafe] No land price with full land tax - simply is not true
- Nov 14, 2006Neil Gilchrist wrote:
>Mark,You seem to be arguing definitions not results. I'm saying that
>A tax rate of 100% of land price means that the annual tax rate equals the
>sale price by definition. Not zero.
increasing a tax on land must eventually wipe out selling price. This
is the inevitable result. It doesn't matter what value attaches to the
site. Value is subjective. The essential fact is that if the land
title holder is required to pay full annual value, there is no value to
left to charge as selling price when he moves. At this point the land
title owner is essentially a tenant with special lease terms that
guarantee the location in perpetuity as long as he keeps up the rent
payments (except in cases of eminent domain, of course). Since the
incoming tenant gets the same terms, there is no opportunity left to be
capitalized as selling price.
> I don't understand the point ofSee my latest response to Dan Sullivan.
>hypothesising a system where land value is reduced to zero. As I said in
>another paper I wrote in the Land Theory group, I think there is a value
>beyond any annual value; a value in owning something in perpetuity,
>something for which one should pay to acquire and be paid for surrendering.
>I think I had further arguments - I can look for it if you are interested.
>In a discussion with Nic Tideman the other day I realised that as the land
>value decreases due to the LVT rate increasing, it will get harder to
>accurately assess the land value as it will constitute an increasingly
>smaller proportion of the property value. That is a concern for me as it is
>important to me that the system works in practice. On the other hand it
>does not bother me too much because I doubt I'll see an LVT rate anywhere
>near 100%. However, it may have significance for your argument when you
>consider that an assessment of value while based on market data and building
>costs still has a subjective element. Margin for error means that when a
>property sells for say $250,000 the assessment of $200,000 for improvements
>and $50,000 for land may not be exact but I would like to think accurate
>enough to instil confidence.
I'll address your other points in a future post.
>No one should be punished for having lent money. The system should not
>differentiate between those who borrow to buy and those that do not. What
>is equitable about favouring those who borrow over the thrifty who pay off
>their debts or save to buy? I have proposed a phased introduction. I assume
>that land values will trend up until LVT is introduced/increased/extended.
>Therefore those that buy latest will lose most. They will also have paid
>larger transfer taxes. If those that bought in the last year prior to LVT
>should be exempt. Those a year only pay a proportion of the LVT liability,
>say 20%. And so on. If it were phased in over 20 years - and I am not
>proposing that - a given land value would probably drop to what they worth
>20 years before introduction.
>A full land value tax will put land debtors in the position of owing
>their creditors as well as the taxing jurisdiction. Do the bankers have
>a moral basis for collecting land rent in the form of land debt? The
>state can decide who has the higher moral claim: bankers or producers.
>I would give debt relief to land owners at the expense of bankers.
>Fred says you can't invest in land, by which he probably means you can't
>improve it. I would argue that you must invest in land, i.e. commit money,
>in order to do anything with it, for example put improvements on it or
>cultivate it. I see a difference between that and speculation. Those who
>want to use land must purchase it. There is no blame in that. I can't even
>feel animosity to those who speculate. I think it is inevitably part of any
>Yes, I do believe that "Selling price appreciation is the problem". That is
>part of my argument. If under LVT the price you buy for is pretty much the
>same price you sell for, there is no unearnt income. If the price goes up a
>little and every year more LVT is paid as a result does it matter much. If
>the purchase price is negligible compared to average income, better still.
>Of course uninformed, ill-perceived interest will keep land owners from
>choosing LVT. You would have to be crazy to think otherwise. That does not
>mean one should be dishonest. It means on must inform, correct perceptions
>and address self interest. It is in everyone's self interest to have a
>wealthier happier community. Incomes will be higher, goods and services
>cheaper, crime lower, and so on. Their children will have better futures.
>You know the list.
>The system must be credible. The basis for calculating LVT must be based on
>empiric evidence not 'imputed'.
>The system must have a fair transition. Those who purchase most recently
>will lose the most. Imagine someone who has paid income taxes all their
>lives and then retires only to find income tax has gone and their land
>assets are then taxed.
>The system needs to be simple. No exemptions. No thresholds. Equity and
>progressivity can be addressed by a Citizen's Dividend.
>Taxing something that is theoretical - economic rent - is not credible.
>LVT starts with a low rate. Even were it true that land values would
>disappear given a particularly high rate it is not relevant. Why scare
>people with wild supposition out of some ideological purity. If we want any
>success let's talk about the benefits that will be seen at politically
>achievable tax rates. When we get those benefits lets move forward.
>Finally, let's not attack the people whose support we need. Most people are
>land owners. Let us address their concerns with sensitivity.
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