rehctub:

Yes, governments waste money. But when you have shrunk the government as far as possible, so that it uses as little revenue as possible, you still need to decide what's the least evil way to raise that minimum revenue.

“In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago.” So said Milton Friedman, interviewed by the Times Herald (Norristown, PA), Dec.1, 1978. I quote him not because he's a hero of mine, but because he's a hero of the small-government brigade, and because, with the Nobel Prize safely under his belt, he could afford to tell the truth.

You say: "In any case, as the cost of owning a rental property increases, we jack the rents up."

You are arguing from a false premise to a foregone conclusion. The all-in land tax proposed by Ken Henry is not a cost of owning a *rental* property. It's a cost of owning land, whether the land is for rent or not, and whether it's actually rented or not. Even the existing State land tax is not a cost of owning a *rental* property. In so far as it applies to residential property, it's a cost of owning any non-owner-occupied property. Seeking or finding a tenant for the property does not add to the cost. But if the cost is sufficiently high, it compels the owner to find a tenant, or sell the property to someone who will. If the property is a vacant lot, this obviously requires building a dwelling. Thus the effect of the land-holding "tax" is to increase the supply of accommodation and increase the availability of the existing supply. This is the exact opposite to the effect of a tax on transactions -- e.g. stamp duty, GST, payroll tax, income tax.

"After all, we are not a charity." The idea is not to turn you into a charity. The idea is to turn you into a value-adding business.

Bryan. Thank you for a constructive and interesting discussion. And thanks particularly for showing up in comments. So many people who put up articles fail to engage in the comments later - often for obvious reasons!

You have gone quite some way in convincing me of the merit of your arguments. Key to tax is having the tax as broad as it can possibly be, and charging economic "rent" for the use of public assets is a very good way to do it.

I do think that your suggested rate of 50% of EBITDA sounds high, but if it is offset by the removal of other taxes and royalties, it may work.

Have you done any modelling to see what tax revenue might be generated under your scheme? I wouldn't mind betting that you would be surprised at how much you would generate at even 25% of EBITDA.

Also, you don't provide much detail of what you think the rate of land tax would be in a "fairer" system.

Of course implementation of these ideas will be a challenge. But with the right leadership....................

grputland, thanks for that, it was a very costructive response and I think I was on the wrong track.

Land tax on vacant land.

One problem I see is if developers, who 'land bank' get taxed.

You see developers 'land bank' so they can afford to develop the land when it becomes a viable project.

Often they will buy large lots, bank it and wait for progress which then drives demand which then makes the project viable.

The 'North Lakes' development at Brisbanes' outer north is a prime example.

The developer purchased this land for a song, in todays values, held it for many years, then developed it in stages.

When they purchased, the average lot was worth say $20,000. Now that is more like $250,000.

If they had been taxed on the 'real value', chances are the project would have never happened.

rehctub:

I invite you to keep thinking along the same lines, and apply the same logic to developers as to everyone else.

"Often they will buy large lots, bank it and wait for progress which then drives demand which then makes the project viable."

True. And their land-banking adds to the overall demand for land, driving up land prices to the detriment of prospective users. But if they pay a holding charge on the value of the land that they hold, they will develop it and resell it as soon as possible, in order to minimize their holding costs. In so doing, they will add to the supply of *developed* land for the benefit of prospective home-buyers.

The same holding cost will make them refrain from buying land until they are ready to develop it. That's not a problem. It's efficiency in the use of a finite resource. (What *is* a problem is that under the present stamp duty regime, developers incur stamp duty whenever they acquire land for development, regardless of how promptly they develop it. But I'm not defending that regime.)

Of course developers will claim that a tax on land-banking discourages development. This claim isn't spin. It's an outright lie. The truth is that a tax on land-banking discourages land-banking. Developers complain about it because land-banking is more lucrative than development. The fact that development is socially useful while land-banking is socially destructive is of no concern to them.

grputland
Do your self a favour and spend a little time with a developer and watch the hoops they have to jump through just to get approvals in place.

Is is more than often that the zonning change is required before the land can be developed, rather than the developer waiting for the price to rise.

True developers work on margins and that it.

If they could buy land today, develop it tommorow and make a decent margin, most land shortages would be gone.

Governments and councils are the one who hold up the process, not developers as a whole.

>>The same holding cost will make them refrain from buying land until they are ready to develop it.

Again, do some homework. Do you have any idear how much the average lot would cost if they could only afford to buy land with DA's in place?

Some approvals take years, even decades. If we go taxing them we all loose.

In fact, some developers had their wings clipped when Anna Lie decided to place this 'urban footprint' on much of the land that was being 'land banked'.

Many developers resorted to 40ac lots just to get rid of their stock.

Remember, councils receive about the same rates for 40 ac as they do for 600M2. Where's the logic in that I ask.

We have developers screeming to develop and governments putting the brakes on, which ultimately means we, the tax payer, get less return on the rates as we would if the lots were fully developed.

The overall shortage of land has very little to do with developers.

For a long time now I’ve promoted that “Australia Day” should be renamed “Low Life Landlord Day” Tell me the government hasn’t got extortion down to a fine art! You are a social parasite in my book! It’s because of people like you , my children can’t get their own home! And why are homes here, twice the price of ones in America and other western countries? No wonder the real-estate industry win the low life industry award each year hands down! It’s ever human’s right to have a roof over their heads and not to be bleed dry by greed driven low life’s like you! When are we likely to see valve for our tax dollar asshole?