NEW ZEALAND DEBATES A LAND TAX

South Island New Zealand

New Zealanders are debating the introduction of a land tax to counter their savage decline into the GFC.  Of course, it’s arguable that if they already had a significant land tax in place, their economy wouldn’t have experienced the financial collapse caused by their bout of speculation, and would have generated more real wealth instead.

All the old property lobby canards are already being trotted out:  What about the ‘poor widow’? [She needn’t pay the land tax and can put it as a charge on her estate.];  It’s a wealth tax! [Er, yes, it’s based upon the value of the land the community has ceded to your use, and those with more valuable land will pay more than those with less valuable land, or  none. This is unfair? ]

Go for it New Zealand!  The main question is will Australia and the US allow you to go for it – because the first country that raises itself out of the economic mire in this fashion will stand out like a beacon from all the others – and they’ll have to follow.  But Australia and the US both heavied you over your ‘No nuclear ships’ policy and you stood tall.  So, you’re more likely to introduce it than we are in Australia.  This could get very interesting!

2 thoughts on “NEW ZEALAND DEBATES A LAND TAX”

  1. In fact, we have land taxes all around Australia, Robert, but not all properties are included. Apart from these exemptions, there are thresholds and multiple rates (and sometimes aggregation provisions). An “all in” flat rate land tax, levied at a rate significant enough to chase speculators out of the market would be equitable and obviate the repetitive development of property bubbles that have a habit of bursting on us.

    In the current circumstances, I don’t believe the real estate industry’s case that our incredibly high land prices are a result of inadequate land supply and rapidly increasing population. A rapidly rising population will clearly tend to increase prices in ordinary times but, as my ‘barometer of the economy’ suggests, these are not ordinary times: we’re in a ten year-long speculative bubble, which I’ve defined and quantified.

    Unlike rising prices in other items which tend to reduce demand, rising real land prices actually attract people seeking speculative capital gains. This has been aided an abetted by tax regimes that reward speculation and fine incomes and real wealth creation.

    Real incomes have declined since 1972 (as a result of increasing taxes and private rent-seeking). Where the tax system encouraged us to keep our heads above water by investing in speculative pursuits, the GFC supports the case that these wrong signals took us to extremes.

    “Supply and demand” arguments fall to the ground in these circumstances, IMHO.

  2. Hello Brian,

    In New South Wales we already have a land tax. The tax is levied at 1.6% above a minimum unimproved capital value, then at 2% for high valued land (values over about $2million). NSW land tax has had little effect in discouraging property speculation. Exactly what sort of tax would you propose, and how would it discourage speculation? Also, what about the effects on land prices by our ever rising population?

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