Fisking a land-tax looney

 

I argued Tuesday that any land tax introduced however presently circumscribed will see the shackles come off bit by bit until it there willl be no escape from the grey ones for any land-owner (When they came for foreign land-owners …”).

Already, not less than twenty-four hours after the trial balloon was afloat Gareth Bloody Morgan had already started blowing his own trumpet for the across-the-bloody-board imposition of the ten percent (or more) land tax on every single land owner in the country. (Not caring what this would do to cash-flow poors land-owners; or what it would do to the valuation of land if its entire income stream were ripped away.)

And not just land – Bloody Morgan wants the tax on land, on houses, on every bit of capital than anyone owns anywhere the government can get its hands on.

Just another reason for someone to slit that insuferrable bastard’s throat.

Few supporters of the tax care either for the economics or the morality. They have their own reasons for wanting land owners cut down. Here below is an ilustration of just how the land tax idea ia already being embraced by those who’d lke to widen the scope immiediately to give “the rich” a good kicking. Not to pick on this particular author per se, (but his intials are SP, and if he’s in for a penny…).

Just to make it easy, I’ve fisked it for you [his comments are in italics, my own are preceded by the ‘|’]:

Land tax is something I've loved for a long time…

| Loved! What sort of person “loves” a tax!

… and although a half assed one won't be enough it would be an amazing start that could be improved in future.

| By “won’t be enough” he means it’s not just foreign home owners he blames for high house prices, and by “improved” he he means “used to smack more people around.”

It doesn't sound sexy but it is awesome.

| “Awesome”?! I don’t know about you, but all this enthusiasm for a new form of legalised theft is already making me ill.

The point of a land tax is that it encourages investment in productive assets, like businesses that export goods, rather than houses, and makes people change their housing choices.

| Well, one sure and very immediate point will be that it will certainly discourage folk owning rental properties (especially if virtually all their rents are stripped from them) so that almost-affordable house renting, virtually the only almost-affordable thing about NZ’s big cities at the moment, will at a stroke be made as unaffordable as house buying. (How else would rental investors make any yield at all, or try to?)

By nature it has to be disruptive. It would make elderly people in big houses in leafy suburbs have to downsize. In theory they would move to nice smaller apartments nearby, but seeing they have fought against any kind of sensible density they will be out of luck.
So that'll be a shit-fight.

| You can almost see his hands rubbing togther as he looks forward to seeing old folk have to leave their family homes because they don’t have the incomes to sustain the level of tax that would be viciously levied upon them.

If universally applied it would halt land-banking, and spur efficient land use, it'd free up capital for productive industries, it'd mean being born asset-rich didn't just compound wealth and lock others out. It won't be that for a while, but there is some hope.

| Would it halt so-called “land-banking”? Well, no it wouldn’t: the predominant “land-banks” lie just outside the planners’ artificial ring-fences around our cities, where land can be bought for around one-tenth of the price of the same land just inside the ring-fence, and owners of this land could still wait just as patiently (and affordably) for the planners to rezone – whereupon they either sell or develop. There is no new “spur” in the newl-floated new tax just as there is no class in NZ born so “asset-rich” that it simply sits on bare land for generations simply for the sake of it. It’s just a class warrior’s pipe dream.
    If our envy-ridden commentator could remove his green-eyed lenses for a moment he might realise that even with the existing holding costs of empty land, you're only going to keep it empty if there's a huge windfall profit at the end of it – and with all New Zealand's major cities ring-fenced by zoning there's an assured bonus if he can just sit tight until the zoning changes (or if he can wine and dine the planners and councillors and encourage them to change it).
    He might understand that the biggest spur to freeing up these “land banks” and ridding us of this cronyism would not be the introduction of another form of legalised theft, but a simple removal of the planners’ ring-fence.

There's the saying only Nixon can go to China. In that same way only the party of landowners can introduce Capital Gains Taxes or land taxes. If National does manage to get a land tax in, in addition to the piss-weak CGT it introduced, then future governments can extend them until properly useful.
Fingers crossed.

And, sadly, what is described is both the modus operandi of this nutless National Government (ably described in yesterday's Herald by the otherwise loathsome Bryan Gould, who this time is almost wholly on the money)), and the certain long-term consequence of the land tax. There is nothing surer than that the inevitable consequence of this circumscribed tax is its extension by either this or subsequent government.

Danyl at The Dim Post is already talking up the opportunity”"::

It sometimes feels to me like Key and English realise they’ve done a pretty shitty job at modernising our economy so they’ve set up freebie policies for the subsequent left-wing government. There’s the capital gains tax on property sales within two years, which can be kicked up to ten years, and now it looks like there will be a land tax for foreign owners, which can easily be adapted to a land tax on undeveloped properties in urban areas (land banks), or even single owner-occupier properties in suburbs like, say, Remuera, to encourage the development of apartment buildings.

Could anything be more certain?

Could anything be more wrong.

RELATED POSTS:

• Spare a thought for Queensland property owners, who were hit with a retrospective land tax going back to June 30, 2002 – along with a redefinition of "unimproved" to include “the hard work of property owners, including (among other things) the buildings they have erected, the leases they have in place, business goodwill and infrastructure charges.” Would you rule out any of that happening here?
  `Retrospective land tax to hit Queensland property investors – PROPERTY TALK
• “The best solution to our housing affordability woes and associated unintended consequences, such as an epidemic of ultra-long commutes from rural towns to jobs in the unaffordable city, would involve a few new towns like “The Woodlands” springing up in the superabundant stretches of undeveloped land with which NZ (one of the world’s most lightly populated countries) is blessed. The existence of these highly competitive alternatives – for both home buyers and businesses (hence the excellent jobs-housing balance) – would soon take the pressure off the market in the existing cities, strangled as they are by NIMBYism as well as misguided planning.
      “Planned ‘releases of land’ however for a specific 10,000+ new homes per year in highly specific locations, could be a failure as a “housing affordability” policy per se. When we analyse previous housing bubbles and crashes around the world, we find that the most volatile ones are those in which the price inflation was accompanied by frantic amounts of building. This seemingly contradictory combination is the result of insufficient market freedom to convert cheap rural land to urban use without its original owners holding out for ‘planning gain’.”
  Will the Housing Accord cure the land banks? – Phil Hayward, NOT PC, 2013
• “Which means in order to make a purchase, developers will have to offer land owners an amount greater than the
  "present value" of what the land owner thinks the value might reach if he holds the land. And every developer has to out-bid every other developer for the parcels that might go on the market.  Meanwhile, the rising prices paid by developers feed heightened expectations on the part of the remaining land owners. And so it goes on like a nuclear chain reaction, blowing up this time in the face of would-be affordable-home owners.
      “And as with a nuclear chain reaction, it is impossible to have "just a little, harmless explosion." Urban planners need to understand that an Urban Growth Boundary does not cause a little, harmless explosion in greenfields land values.”
  How do you stop land banking? – Phil Hayward, NOT PC, 2013
• “Most of the planners in New Zealand's major cities have imposed what's called a Metropolitan Urban Limit around the cities. This is sometimes called an 'urban fence,' inside which development proceeds (in theory) according to the planners' whims, and (in reality) to the extent that developers and builders can get around these whims and get something done.
      “Outside the urban fence, development only proceeds to the extent that land-owners outside the fence can dodge the planners' desire to make a rural museum of the area surrounding the cities, and to the extent that developers who have built up land banks around the city can encourage their chums on council to relax the zoning, or to release the urban fence just a little. You might call this a sort of 'informal' public-private partnership. (Ask around, for instance, about how the car yards of Henderson were re-zoned from rural and who benefited most from the re-zoning; and -- more recently -- ask yourself who the major beneficiaries were of the recent relaxation of controls around Botany, Flat Bush and Albany.)…”
  Message to planners: "Don't fence me in!" - NOT PC, 2007
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