Land Tax is a payment for the services to a location. Some locations have better services in terms of public transport, roads and libraries. Other locations are more convenient, more beautiful. These are all factors that influence how much we pay for living in an area. A Land Tax is a simple way to recognise these benefits and repay the rest of society (via this government charge) for the privilege of living there.
Over hundreds if not thousands of years, Land Tax has been understood as the fairest and most efficient tax available. Ask these three questions. Who created the earth? Who should profit from it? How should we finance government?
A Land Tax ensures those who live in the best locations pay a little more than the person near the quarry. This offsets jealousies, enhancing the social contract whilst offsetting the need for territorial disputes. By doing this, we also deter profiteering by hoarding prime locations for easy profit. A Land Tax set at a reasonable rate ensures land is put to its best and highest use. The revenue earned by government could be significant, and would (if taken to its logical conclusion) direct the naturally rising value of the earth towards financing government.
In its simplest form, a Land Tax is an annual percentage charge on the value of the land, payable by the owner. In Australian practice, it is levied at progressive rates, with exemptions.
Land tax can’t be “passed on” to tenants in higher rents, because it isn’t a cost of letting the land. It’s a cost of holding the land whether you let it or not. So you must find a tenant to cover the holding cost. And the more you need a tenant, the less you can demand in rent!
Because land tax can’t be passed on to tenants, landlords/speculators don’t like it. So they campaign against it — by pretending that it can be passed on. Don’t fall for it.
Land Tax should be charged at a flat percentage rate on the prevailing land value. The land must be valued yearly and include no threshold. The Victorian Land Tax threshold rate increased from $85,000 to $250,000 between 2001 – 2009, allowing more of the naturally rising value of the earth – the rent – to be privatised into the bubble we now endure. Read more on Victorian housing policy reform, with many of these issues relating to other states.
The rate at which Land Tax is set is debatable without modelling. We would like to see a 6% rate implemented. We are confident this would reduce land prices in many areas. The resultant revenue at such a rate can fund the removal of company, sales and income tax.