An excellent article systematically spelling out the most important reform for our times. With the looming Keynesian failure on the horizon, it is time for policy makers to seriously consider land value capture as the policy platform for the Next Economy. This is particularly so with the increased mobility of capital and the scarcity rents natural resources of all kinds deliver.

The debt bubble, the global infrastructure deficit, the dominance of urban sprawl forever policies, the peril that carbon based decadence has placed future generations in, the list goes on.....leave little room for the leakages that today's 2 dimensional economics permits.

Ok I get the point there’s a lot of would be economics students out there all wanting to be heard, but has anyone got any explanation for the bailout packages to the finance and industrial sector that the governments of all nations are proposing. I say proposing because they really haven’t done a lot but propose except that this for America. Which brings me to the purpose of the promise not the validity of it?
It would appear that everyone wants to jump on the poor old USA as a scapegoat for the cause of this bust-boom-bust cycle that’s now developed into an uncontrollable deflationary spiral.
The invasion of Iraq and the subsequent oil boom (unrivalled speculation here) triggered off this crash. Don’t see the UK or Australia (the only agreeing countries into G Bushes WOMD argument) accepting any blame he here.

Wattle. Pittsburgh-has-very-little-exemptions. Thus, in-comparison, NSW-is-not-a-good-model-for-LVT. I-can-own-8-properties-and-pay-no-LVT. Why? Because-it’s-a-state tax. Also, you-can-be-exempt-if-you-use-the property-for-commercial-use, give-over the property to-your wife-or-kids or live-overseas. Given LVT is only-1.3%, prices rise to ridiculously-high levels as negative-gearing can offset LVT as does the demand from foreign investment into real estate cannot be managed by a tax that SMALL (billions-are –poured-into-Australia-for-“investment”-in real-estate, particularly-by-the Japanese-and-Americans)–indeed-LVT could increase the price because it forces small landowners to sell it to the big ones, cementing-monopoly power-even-further. NSW-only-has-the-tax to-get-revenue, not-stop-speculation. However, New-Hampshire-and-Louisiana-has-the-least-number-of homes with negative equity and-it-has-the-US’s-highest-land tax-to-stop-speculation. On the other hand, California-has its notorious Proposition-13 keeping-a-lid-on-property-tax (it has the lowest land tax in the country) and-has-the-worse-mortgage debt: http://www.nytimes.com/interactive/2008/11/10/business/20081111_MORTGAGES.html Pittsburgh-only-has-6% of homes-with negative-equity while California-has 27%. Clearly, LVT-signals to-people-to-investment-in-businesses-not-dirt. So-the-solution-is-simple: over time, increase the tax to make it unprofitable to keep properties idle or for capital gains and invest instead in *building up properties (e.g. renovations)* (a-property-developers-DREAM)-or-*creating-actual-businesses* while-phasing-out-all-other-taxes.

As-for-your-sacred-sites-point, due to their-historical-value, they-could in-and-of themselves generate windfalls-to adjacent sites (e.g. the-Opera-House, Botanical-gardens). It’s-a-public policy-issue-what-you-do with-them. My point is whether you keep the sites LVT can help keep-the-site- in condition, refurbishing it OR build-over-it-as “money is funnelled not into land, but onto land” to-build-high-rise-buildings. LVT is flexible. Also, you say: “This is a great policy if you are looking to purchase a house but the renters have to go elsewhere” – sorry, this sounds like a contradiction. *If* families go-and-buy-their-*own*-home (Pittsburgh home ownership is 90%-lowering prices) this generates less demand in the renting sector (an-increase in demand for housing only mildly raises prices as idle sites are sold on the market). Less-demand-in-the-renting-sector means-lower-rents. Sorry, I don’t get why renters have to look elsewhere. LVT does-nothing-to-those–who-are-NOT-willing-to commit to their own home as the tax cannot be passed onto tenants and could even encourage the landlord to sell the property – allowing him to take necessary steps to sell the land, if the landlord anticipates a *gradual* increase of LVT overtime, making more people landowners themselves (i.e. why rent for the *rest of your life*, when you can own).

Ps Under my model, if-you-are-over-55-you-pay-NO-taxes (unless you own more than three properties) and-PAYE-can-take-place-if-you-have-problems. Also-remember-LVT-would-also-increase-your-purchasing-power-by-40%.

Leigh: there-is-*plenty*-of-room-for-immigrants.LVT-funnels-the-increase-in-property-values-due-to-immigrants-into--public-coffers (its-part-of-the-“unearned increment”). This could fund the building of new houses for them in run down areas of the city! Luckily, in fact, there is PLENTY of room for them: as the “I want to live here” report found there-ARE-thousands-of-idle-homes-and-vacant, non-built up-areas-in-the-city-which-could-provide-housing. Hence, when speculative sites are included, the vacancy rate is more like 8%, enough to house an immigrant family of three. My point is that LVT-stops-*artificial*-scarcity-and-makes-more-EFFICIENT-use-of-land-*within*-the-city.

As for climate change, on the public sector front, would it not be better to being spending money less on welfare (as more people are employed) and a bureaucratic tax system with needs the size of the Amazon to administer (1 tax v 216 taxes like stamp duty and income taxes) and-*instead*-spend this money on climate change research? Scuffling-paper-costs-so-much! Imagine all the trees killed to administer our tax system! Moreover, trillions-of-dollars-are-poured into-speculation-in-real-estate, by locals-and-foreign-governments–this-is-a-*misallocation*-of resources. In 1992-the-government’s-own-reports-concede-this: “Australians-funnel-too-much money into real estate and-not-enough-into-genuine-and-long-term-business-investment”. With all other taxes abolished, Australians are richer as it increases their buying power and lowering their rents – with this extra cash around, this would also cut dependence on the state to fund things like Medicare, inducing a greater role of the private sector, and allowing money to be funnelled into scientific research. I also implied that a budget surplus, generated by building efficient, environmentally friendly infrastructure is-self-funded as the windfall-generated-by-the-project-is greater than the cost of-building-the project-in-question. This-surplus-be-*scooped*-off-into-climate-change-research-and-would-allow-for-increases-grants-into-scientific-research. On the private sector front, the 3 trillion losses in subprime and the 100 trillion dollar debt in mortgages worlwide-could have been better invested in-researching-climate-change-or-energy-efficient-businesses! LVT-also-halts-urban-sprawl, which-increases-the-demand-for-coal-fired-energy-due-to-longer-distances-travelled, emitting-even-more-carbon dioxide-intothe-atmosphere-and-bulldozing-the-natural-environment-as-speculators-buy-at-the-edges-of-cities-waiting-for-the-city-to-grow. Leigh, environmentalism-and-economic-growth-are-by-no-means-mutually-exclusive-forces,under-a-LVT-tax system, which-encourages-research-and-innovation-over-speculation-and-idleness.

Thomas, oil-did-NOT-cause-this-bust. What-caused-it-was-TRILLIONS-of-dollars-of-“malinvestments” into-housing-and-poor-monetary-policy-which-built-up-housing-debt-to-160%-of-GDP (look up the ‘greater-fool’-principle). Interest-rates-went from 1%-to-6%, which added to defaults, popping demand for housing. In-the-US, the-Fed-interest-rate and bank-interest-rates, however, rarely-match; they-are-often-higher-than-the-official-rate. The-purpose-of-the-packages-is-to-stop-deflation-banks-do-not-want-to-lend-as-they-have-lost-money (lower-real-estate-collateral-value-means tighter credit conditions-which-means-less-investment), reducing the demand–so government-steps-in-to-supplement-the-lowered-demand. Housing-wealth also–generates-a wealth effect which spurred on consumption, but that too is gone, something which oil stocks do (less people invest in oil-and-stocks increase consumption by 3 cents for every dollar, housing increases consumption by 4-8 cents for every dollar increase in your house, and houses-go-up-100000-more-dollars-than-stocks-do).

If-any-of-you-have-any-more-questions-email-me-at u4398412@anu.edu.au.

Dear whig98
I didn’t say caused, I said triggered. It would appear to me that the nations of America and Australia have similar problems and as such should suffer similar fates.
I agree that real estate was the biggest sufferer in this (now acute deflationary crisis) due to number of features, the prime factor being the reliance of the market system to be underpinned by the real estate market. The same thing happened in the great depression of 1930 and it’s the only time in history that this has reoccurred.
However that not what I asked or even implied.
I would like to know where the money is coming from to pay for the solution. Governments are bandying around monetary values that the ordinary person in the street can’t contemplate.
I don’t believe the government does either.
Also I don’t believe they have the money to begin with, let alone the policy to change it.
I might be inclined to think they had the potential to achieve what must be massive borrowing at a governmental level in 2004 at the peak of the boom and the peak of the treasury receipt s , however the period has changed and all governments are either broke or In deficit.
So what I want to know is where the money is coming from?

I found it unclear what you mean by betterment levy. You seem to be saying, correct me if I'm wrong, that's it's the increase in the value of land owing to government expenditure on infrastructure. How would you distinguish the tax on betterment from the capital gains tax?

By the way, there's another way to cure budget deficits: stop spending so much! Why is there this assumption that expenditure must be justified, and other people must be taxed to pay for it, for no other reason than that politicians decide to spend other people's money?