Land Value Taxation: Solving the Efficient Tax Problem
Thursday, May 21st, 2009Dr Terence Dwyer
- B.A. (Hons) B.Ec. (Hons) (Syd.) M.A. Ph.D. (Harvard), Dip. Law (Syd.), FTIA, Visiting Fellow, Crawford School of Economics and Management, Australian National University.
Dr Dwyer’s Submission to the Henry Tax Review
Executive Summary
- The Treasury tax paper acknowledges the three factors of production but needs to follow through on the logic of its’ analysis.
- All taxes resolve themselves into taxes on the incomes of the three factors of production, land, labour and capital.
- All taxes are distorting, save a tax on economic rent. Taxes on capital and labour are both distorting – they suppress factor supplies to the economy.
- Land value taxation has long been endorsed by economists as a perfectly efficient tax. It also has long roots in Australian history.
- A basic argument for land value tax is that it is the one and only tax base that cannot flee in response to a tax. Capital and labour can emigrate – land cannot.
- Nor can a land value tax be shifted as an extra cost to business. Ultimately, a land value tax must be borne by the landholder at the time of introduction.
- Once a land value tax has been established, any purchaser of land discounts the price to allow for the tax and, in that sense, it is not a burden on anyone other than the owner at the time of introduction.
- Land value taxation is not distorting because it is capitalized – it cannot be avoided. A land value tax becomes a burden-less tax and has a zero marginal tax rate.

