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The Forum > Article Comments > Propping up Australian real estate > Comments

Propping up Australian real estate : Comments

By Bryan Kavanagh, published 13/1/2010

We tax people who are doers, yet reward those who live off the citizensí rent.

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Fascinating article.

thanks
Rosie
Posted by Rosie Williams, Wednesday, 13 January 2010 10:15:32 AM
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If the supply of land remains fixed, the land tax will just be passed on to the users of the land (with some substitution away from land intensive uses because prices will rise).

The way to break the problem is to liberalize land use regulation as proposed by demographia.com Remove artificial scarcity imposed by government (and those rent-seekers manipulating government rules for their own gain). Of course, the only savings for most Australians are their houses so the political backlash would be tough to deal with. But every day the distortion goes on, the more capital is misallocated to unproductive uses. The problem will need to addressed one way or another.
Posted by Stev, Wednesday, 13 January 2010 1:34:51 PM
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Mr. Cavangh,
I regrert being one who got his Economy wrong.
Thirty years ago I saved for my old-age.
To-day I bought a lemon for half a dollar.
That half dollar, when I saved it, would have bought ten lemons.
Who robbed nine lemons from me?

The hundred Economists who have before you contributed to this publication on the same matter never told me the tief's name.

There is though one fact I know.
They are not building any house or flat. They are in an air conditioned office writing something important about housing for a fat salary
Posted by skeptic, Wednesday, 13 January 2010 10:42:10 PM
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Thanks for this article, Bryan Kavanagh.

I was surprised that an article written by someone from inside real estate could write an article which seems to me to be against the whole justification for that sector of the economy.

One thing about taxing land.

It seems to me that land taxes in Queensland are unfair to a certain kind of land owner, that kind being one who owns a large amount but is not seeking to use that land to gouge profits from rent, land speculation or property development. One such land owner is in my family. Most of his land has been left largely untouched, whilst all around others have raked in huge profits by bulldozing natural habitat to build free standing houses, or where houses exist, knocking them down and the surrounding trees to build blocks of units.

As a result land values have skyrocketed and has to pay taxes according to those values.

None of the invaluable ecological services provided by his land are paid for by those around and there is no commensurate discount from his land taxes or council rates.

As a consequence of one huge land tax bill he is left with no choice but to sell a large block of land on which one of the few decent contiguous of urban rainforest is to be found in Brisbane.

Almost certainly that will be massively degraded by the new owner as a consequence even if council rules are properly adhered to and the overall microclimate and ecology of Brisbane will be further degraded.

Ultimately my family member would agree that it is not particularly fair that he owns so much land whilst many others don't own any. If the system was set up to rectify that, instead of just ultimately enriching speculators at his and everyone else's expense, he would not object.

I fear that your proposal to increase land taxes, unless it takes account of people in his circumstances, will only make matters worse.
Posted by daggett, Thursday, 14 January 2010 12:52:26 AM
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Disclosure:

Bryan Kavanagh is my colleague in the Land Values Research Group.

Re "Our Legislators are all Landholders; and they are not yet persuaded that all Taxes are finally paid by the Land...":

I happen to know that Bryan has previously attributed this quote -- correctly -- to Ben Franklin (http://blog.lvrg.org.au/2007/09/220-years-later-we-still-avoid-issue.html). Why did Franklin get confused with John Locke? Maybe because Locke wrote something similar, namely: "It is in vain in a country whose great fund is land to hope to lay the publick charge of the Government on anything else; there at last it will terminate. The merchant (do what you can) will not bear it, the labourer cannot, and therefore the landholder must: and whether he were best to do it by laying it directly where it will at last settle, or by letting it come to him by the sinking of his rents, ... let him consider." So I thought I should set the record straight.

Stev:

Go back to your textbooks: a tax on a commodity in inelastic supply is borne by the supplier. So land tax can't be passed on in rents. So landlords don't like it. So they campaign against it by pretending that it *can* be passed on in rents! But, as Franklin and Locke imply, whatever taxes are imposed in lieu of land tax end up hitting landlords by reducing market rents.

Removing zoning restrictions won't stop developers from hoarding land while waiting for prices to rise. But higher land tax would stop them -- by turning land into a hot potato. Land tax deters speculative hoarding and thereby makes land more affordable for the rest of us.
Posted by grputland, Thursday, 14 January 2010 10:33:51 AM
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I think there are some serious problems with the statistics presented in this article.
Posted by David Jennings, Thursday, 14 January 2010 2:16:50 PM
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