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Won’t this piss the P³

Housing wealth is now between two and four times as large as GDP in many Western economies. This column reintroduces land and housing structures to the theory of optimal taxation, and finds that first-best taxation is achieved through a property tax on land and requires no tax on capital. Even absent land taxes, one can tax land indirectly and reach a Ramsey second best still with no tax on capital and positive housing rent taxes in the steady state.

If it’s land prices that are the problem then tax land prices, not capital or rich folks.

10 thoughts on “Won’t this piss the P³”

  1. Is it just me, or do others find these quotes over-wordy and abstruse? Why not just say ‘land value tax would be a good idea because it taxes rents’?

  2. @MVA: It’s Academic English. The active voice is avoided and superfluous, gratuitous, pleonastic, redundant verbosity and prolixity are mandatory and required.

  3. What’s an absent land tax? Is it something like the way Hong Kong is able to tax land that doesn’t exist but that they can create out of thin air – or rather, medium-thin reclaimed water. Or is it a typo for absent landlord tax?

  4. @ Arthur the Cat
    It’s English as written by French Academics, rather than Academic English which doesn’t include “first best” as an alternative to “second-best”

  5. The problem is not land prices – it is the price of planning consent for a house. The price of the same piece of land without planning consent is quite small.

  6. A land tax is the same as the government having a portfolio of ground rents on all properties.
    The existing taxation is represented in current prices – so that is fine.
    As per the IFS review of taxation it doesn’t matter if the tax as a percentage differs from site to site.
    Reductions (business rate exemptions) are the government gifting a ground rent to someone – and ground rents being inflation linked annuities are crazy valuable.
    Increasing the tax is the government just expropriating x% of all property.
    The state would then be rich, would be able (different from would) to reduce other taxation.
    But only because of a massive one-off expropriation.
    All other taxes, the government sets out the framework and you decide whether to play. Don’t like the new income tax rates, work less, or move abroad.

    And yes increase the supply of land (that can be built on) is a much better way to reduce the rents that existing properties enjoy.
    I didn’t pay for the right to block others from building on their land when I bought mine, so why should I enjoy that benefit.

  7. @jgh – “What’s an absent land tax?”

    Not sure if you were making a joke here, but I think by “absent” they mean “in the absence of”.

    “Even in the absence of land taxes, one can tax land indirectly…”

  8. Every time the government fiddles with the so-called housing market it screws it up still further

    Land costs are directly attributable to government policy

  9. I have to say I love the Ragging on Ritchie column as much as a loathe the fat ignorant cunt (Murphy that is). But isn’t it time for our host to square off with Kartoffel and end the feud once and for all. Naked, with Rocco the referee?

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