HomeMy WebLinkAbout2016/06/21 Item 8 - Public Comments � 8-��(�� CpVvlryle+'�e )
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New Path for Affordable Housing: � `
Public Revenue from Land Values � ��
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by Fred E. Foldvary Liberr� lustice Pro;p�riq
1 . The U.S. tax system needs reform.
The U.S. tax system is too complex, too intrusive, and too demanding of workers' paychecks. The
problem is not just the excessive amount of taacation, but what is being ta�ced: goods, .labor and enterprise.
The best ta�c policy would not stifle enterprise, reduce work eY�ort, shrink savings and investing, nor im�ade
privacy. Ta�ces on sales, wages, business profiu, value added, capital gains, and buildings all fail these criteria.
The U.S. income tax now wastes 6 billion hours each year, the equivalent of two million people working full
time. Sales and income taxes require government to invade the privacy of households and businesses.
If the goal is to minimize the damage done by the tax system, there is one tax that does the job: public revenue
from land values.
2. What is land value taxation?
Levies on land value aze based on the mazket value of land, excluding the value of buildings, gardens, and other
improvements. Unlike fabor and goods, the supply of land is fixed, immobile, and inherendy visible. When land
value is ta�ced, the land will not flee, shrink, or hide.
Land value taxation (LVT) does not add to the cost of labor or goods. The ta�c dces not affect the market rent,
and instead of raising the purchase price, a ta�c on land value lowers the price, as land has no cost of production.
LVT is easier to collect than other ta�ces, as landowners do not need to keep records or fill out
forms, and there is no invasion of privacy.
2. Land value taxation compares favorably to other taxes
Land is inherently visible, and a tax on land value does not depend on an event such as a purchase or a rental.
Taxes on labor and goods generate evasion in an underground economy, which then induces intrusive law
enforcement. Income taxes require tax audits, bank account seizures, and feaz-inspiring letters from the IRS.
Such threats to liberty would disappeaz under a land value tax.
3. Land value taxation is not a new idea
The Bible declares that "the proht of the Earth is for all" (Ecclesiastes �:9). The French economists of the 1700s,
who gave us the term "laissez faire," wro[e that the best [ax is the surplus that is land rent. Adam Smith wrote,
"Ground-rents, and the ordinazy rent of land, are, thereYore, perhaps, the species of revenue which can best bear
to have a particulaz tax imposed upon them."
The 19`"-century American economist Henry George made people awaze of LVT in his book Progress und
Poverty. The world-famous free-mazket economist Milton Friedman agreed: '�he least bad ta�c is the property ta�c
on the unimproved value of land, the Henry George azgument of many, many years ago.°
4. Land value taxation works in practice
Signiticant land value taxation has been adopted in several countries such as Ausvalia, New Lcaland. 7 aiwan
and the happiest country in the world, Denmark. Also f f ung Kong, and Singapore became major commercial
centers in large part because much ot�their public linance has been based on taxing land values or leasing
government-owned land. The Pon of San Diego, CA also very successfully collects ground rent to tinance all of
its operations. Cities in Pennsylvania such as Scrantun and f larrisbur� tax land values at a rate higher than
improvements. This is a boon tu develupment and has caused othrr citics to consider it.
6. Land value taxation discourages withholding land & makes housing more affordable
Land value taxation makes housing more affordable. With a shift from taxes on improvements (houses and
buildings) to land values, the cost of housing goes down. Also cities would have more revenues and would not
have to depend so much on sales taxes and expensive building permits. This also reduces the cost of building
and subsequently the cost of housing.
It has also been the experience of Pittsburgh and other Pennsylvania cities that the average home owner pays less
with a shift away form improvements and onto land. Ideally taxes on incomes could be reduced in California
giving residents more money to spend on housing. (States with no state income taxes such as FL, TX, NH, NV,
SD, WA and WY recently appeared on a list of states with lower unemployment!) Alaska has a reverse income
tax paying citizens from oil and natural resource revenues. California can and should move in this direction.
Land value [axation has been introduced into many countries and localities with positive results. Sydney,
Australia for example has much lower housing costs than San Diego and a much lower rate of'homelessness even
though Sydney is a larger metro area and also has a milJ climate. Land value taxation has su many benetits that
it should be seriously considered when looking at new ways to generate public revenues. Whilc Prop. 13 is a
big impediment to implementing this, it can also be seen as an improvement on Prop. 13 by reducing or
eliminating taxes on buildings and improvements and shifting the property tax more toward land values.
7. Conclusion:
When tax reformers promote a local or national sales tax, a Flat-rate income tax or value-added tax, they
overlook the better option of shifting taxes to land value. Land value taacation is the ultimate supply-side policy
and the ultimate tax reform. We should lower taxes to the ground and eliminate audits, evasion, excess burdens,
and loss of privacy. Tax the land, not sales, goods or labor!
Fred Foldvary teaches economics at San Jose State University. This essay is derived trom Foldvary's booklet, The
U!limule Tux Reform: Public Revenue,Jrom Lnnd Ren�, published by the Civil Society Institute, Santa Clara
University, provided here, with permission by the Foundation for Economic Justice, Juhn D. Spreckels Masonic
Center, 3858 Front Street, San Diego, CA 92103-1020 (858) 883-7314 and Common Ground. CA, a chapter of
Common Ground, USA, Ted Gwartney, (657) 208-1494 �gwartnev.�aol.com