- Tax comes out of rent
- Bad taxes harm the economy by obstructing production
- Good taxes do not harm the economy
- A good economy increases rents and thus house prices
Are there any objections to this idea?
Friday, 8 October 2010
LVT will raise the price of houses
Economists generally agree that:
Are there any objections to this idea?
Are there any objections to this idea?
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4 comments:
If done in a half-hearted fashion, probably yes (see Denmark, 1960s). But that all depends on how high the tax is and what it's spent on (e.g. repaying national debt has different impact to paying out as CD).
Further, if my government announced it was going to replace ALL existing taxes with LVT, and to keep increasing the rate until capitalised land rental values fell to £next to nothing, this fact alone would tend to depress house prices (even if the LVT rate were not increased for several years).
From Tony Vickers
Robin,
I tried to post this comment but don't have a google/blogger account. Too many accounts/passwords, so here it is....
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It is not that simple. There is not enough evidence either way that LVT either increases or reduces "house prices". It all depends on how much LVT, how fast, what else is happening in the economy, etc.
LVT campaigners in Pennsylvania showed me evidence 10 years ago that cities with a higher tax on land than on buildings had lower houses prices than those cities which didn't do 'split rate'. By stimulating more construction on under-used land, supply side economics indicates that house (and land) prices should go down. Again, in PA, split-rate does, in fact, stimulate construction.
When I tell people LVT reduces house prices, nobody ever disagrees with me. I have not seen the Danish or Australian evidence you refer to. It is counter-intuitive. But I'm not prepared to bet wither way!
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Tony Vickers
Mark and Tony are both right here. This is pretty complicated stuff and land prices depend on so many local factors that I think it is extremely dangerous to say that prices will go up or go down as a result of LVT, particularly when other taxes still have an effect. Better to let people know that it could go either way than to make a prediction and get it wrong.
From another commentator:
The effect depends on the percentage rate [i.e. 100% LVT would take all land value and reduce the cost of housing by removing both land value from the capital price and land speculation's "hope" value.
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