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Property Tax vs Land Tax ...
Land Tax is a tax on the value of the land, not the land itself.

In his 1879 classic, Progress and Poverty, Henry George argued:
"The ownership of land is the great fundamental fact which ultimately determines the social, the political and consequently
the intellectual and moral condition of a people."

This overview on Property vs Land Tax follows an examination of key issues shaping our understanding of "The Commons" and aims to show how "The Law of Rent" theorem can 'manage' "rent seeking" across the F.I.R.E sector (Finance, Insurance, Real Estate). In short, there is a grave need for forensic oversight on this sector's monopolistic exploitation of property mortgages, public services, infrastructure supply and natural resources.

Common sense!
Frank deJong
says that it takes the focus of a Ph.D. researcher to understand the history of economic thought. What he really means, I think, is that application of common sense is needed to see through the confusion in mainstream economics that clouds-over the central causes undermining public health: a misunderstanding of "Laissez Faire" when applied to land and resource speculation.

Is any study simpler than Economics? A child could grasp it! 
– Leon Mclaren, School of Economic Science, London

The current seemingly unsolvable international downward spiral into depression, both in terms of health and economic conditions, follows more than a thousand years of contrived rent seeking, through feudalism, colonialism, imperialism, socialism, capitalism, to Laissez Faire leading to neoclassical, economic rationalist market fundamentalism, aka Thatcherism, Reaganism, neoconservatism, neoliberalism.

As we shall see from the following reports, there is a growing 'movement' favouring one particularly enlightened remedy for efficient and sustainable economic development:

Tax the value of land and resources instead of taxing productivity, and provide a "citizen dividend" safety net for everyone.

The economic rent theorem represents a self-supporting system 'flow'; cycling 'user-fees' or economic/resource rent into the community with equitable shares of surplus which enhances or maintains rather than degrades or destroys society.

Australian National University provides links to a range of institutions with an active interest in tax and transfer policy.

"If you don't tax that value that attaches to land,
arising from the general wealth of the economy,
the banks get it."
 Professor Michael Hudson

 Published on May 17, 2016
Prosper Australia President Catherine Cashmore appears on Channel 10s The Project to discuss the attack-mode campaign by the property lobby on those aiming to reform the capital gains tax discount and negative gearing.

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A tax on rent would affect rent only: it would fall only on landlords and could not be shifted. The landlord could not raise the rent, because he would have unaltered the difference between the produce obtained from the least productive land in cultivation and that obtained from land of every other quality. – David Ricardo, Principles of Political Economy and Taxation (1817), Ch 10, Sect 62 

By putting an ad valorem charge on the use of land, a Georgist economy would tend to preserve the environment. It would put a halt to leapfrogging over lands held speculatively vacant and the unnecessary sprawl into hinterlands. The current regime aids the rape and pillage of the environment by treating land as a commodity and inflating speculative bubbles that burst – with the sort of economic results we're now witnessing.
– Bryan Kavanagh
, Land Valuer (Ret.) Australian Tax Office. 

OECD
2008 paper:
DO TAX STRUCTURES AFFECT AGGREGATE ECONOMIC GROWTH?
EMPIRICAL EVIDENCE FROM A PANEL OF OECD COUNTRIES ECONOMICS DEPARTMENT WORKING PAPERS No. 643 ranks types of taxes on their apparent growth-friendliness, and finds, unsurprisingly, that the worst-to-best order runs
1) corporate income taxes,
2) personal income taxes,
3) consumption taxes,
4) “Property taxes, and particularly recurrent taxes on immovable property."

Empty homes:
The economic reasons behind investors keeping properties vacant

Cameron Murray
April 4, 2017
Domain Media
Excerpt:
Prosper Australia has for years been conducting research into how many of Australia’s 9.8 million homes are left vacant. Its major finding is that of the 1.7 million homes in greater Melbourne alone, about 82,000 are vacant, or 4.8 per cent. That research has been cited by a recent United Nations study on the pernicious effects of the financialisation of the housing sector, and has likely been a key reason for the adoption of a vacant housing tax, and probably in Canada as well. It is timely, therefore, to consider some of the economic and practical realities of vacant housing.

Why keep property vacant?

What gets lost in the hype is this important question. Very few people understand the economic rationality behind leaving homes vacant, as the common sense view is that a vacant home is always costly since it is forgoing rental income for its owner. >>> more

Game of Mates: How Favours Bleed the Nation (2017)
by Cameron Murray and Paul Frijters

Game of Mates Description
James is our most mundane villain. His victim is Bruce, our typical Aussie, who bleeds from the hip pocket because of James’ actions. Game of Mates tells a tale of economic theft across major sectors of Australia’s economy, showing how James and his group of well-connected Mates siphon off billions from the economy to line their own pockets. In property, mining, transport, banking, superannuation, and many more sectors, James and his Mates cooperate to steal huge chunks of the economic pie for themselves. If you want to know how much this costs the nation, how it is done, and what we can do about it, Game of Mates is the book for you.

"While we are distracted by mythical battles in the Game of Thrones, we are being robbed in the real world “Game of Mates” where the well-connected clip the wages and profits of the hard working. Murray and Frijters provide an entertaining and well researched expose of how privilege and rent-seeking dominates the Australian economy, enriching the Mates in the Game while robbing the rest. And they propose how to end the Game. And they name real names too. This is an explosive and essential book for all Australians. Except the Mates."

– Professor Steve Keen, Kingston University



Review
Want to stop land corruption? Take away the honeypot

Review by Michael Pascoe

Excerpt:

One of the great mismatches in our economy is how little property developers are accused of giving to politicians from time to time, and the massive amounts politicians gift to the developers – some $11 billion a year, according to a new book by two Queensland economists. ...

"The best way to reduce conflicts for councillors is to reduce the value of council decisions to private parties by pricing them," Murray submits.
"One of the main areas where local councils give away decisions worth millions is with land rezoning. Instead of giving away new property rights to certain landowners through rezoning, these additional development rights can be sold by councils."

Murray cites the system successfully used by the ACT for nearly half a century – 75 per cent of the value gained from rezoning is paid to the government. Hey presto, the honeypot shrinks to minor significance.
The ACT government collected $183 million from such taxes in the 2014-15 year.  Murray estimates that the same system would yield the Queensland state and local governments $1.7 billion a year.

"Instead, this economic value is able to be given by councillors to their mates though rezoning and planning decisions. It is the massive value of these decisions that is driving the corruption concerns in this inquiry."

Game of Mates
In their book, Game of Mates, Murray and co-author Professor Paul Frijters extend their modelling to the nation to come up with the $11 billion lost from government revenue each year and overwhelmingly gifted to connected developers and speculators.

The chapter on rezoning build upon their 2015 research paper that showed "well-connected" landowners held 75 per cent of the land rezoned in growth areas, compared with only 12 per cent of comparable land immediately outside the rezoning.

It's not so much a matter of anything illegal, but the evolved, protected and self-perpetuating nature of revolving doors for politicians, bureaucrats, lobbyists and developers that result in the majority of the population losing out to the privileged few. ...

If Treasurer Scott Morrison is serious about improving housing affordability and public debt, he could do well to study the ACT system and how the states could be encouraged to adopt it. But he probably already knows all about it - he was the head of policy and research for the Property Council of Australia for six years.  

In Game of Mates, the authors contend land is just the original and perhaps most obvious example of "mates" exploiting their connections to gain massive economic advantage at the expense of ordinary people. 
The book extends the thesis across the major areas of the economy – sometimes at a stretch but always thought-provoking.

A short-hand is employed for the mates of "James" – in honour of James Ruse, the winner of Australia's first private land grant – and "Bruce" for the rest of us. Three examples:

Transportation infrastructure: For every dollar spent on infrastructure, Bruce gets an estimated 68 per cent less economic benefit because James and his Mates maximise their value from owning new roads, not the value of the road network to the population, so we end up with the wrong new roads built to improve the overall transport network.

Superannuation: James gobbles up an estimated 27 per cent of Bruce's superannuation through his exorbitant annual fees, control of defaults funds, and power to invest your superannuation funds on projects with his mates. This adds up to around $17 billion of extra fees a year, not to mention the $28 billion in tax breaks on the wealthiest superannuation funds, which are those of James and his mates.

Mining: In the mining sector, James takes from Bruce around 48 per cent of the profits in the resources sector, that could be shared under a Norwegian tax scheme. That was around $20 billion per year over the past decade. In addition, there is $36 billion of grey gifts in the form of subsidised infrastructure and unfunded environmental damage that Bruce will pay for in the future.

At its heart, Game of Mates attempts to nail the nation's growing inequality, seeing the well-off as using the law, politics and their connections to further their interests at everyone else's expense.
Some of that is complicated, some is not. The solution to the rorting of land rezoning and planning is in the latter category. >>> more

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If you wanted to reduce the unpopularity of the property tax, the way to do it would simply be to provide for an effective method whereby it could be withheld at source, in small payments and that would eliminate a large part of the objection to it.
Milton Friedman

UK Georgists are offering just such a choice via a 'back door'
– an extremely clever choice and very Georgist.

An option to switch from taying taxes on your income to signing a "Covenant" on the value of your land, - a Covenant which remains on the property's title.


Exempted from other taxes
– that's the proposition

Location Value Covenants vs Mortgages
The Systemic Fiscal Reform Group (SFR Group) is a Cambridge-based economics think tank studying existing and alternative tax and welfare structures, their effectiveness and impact on the efficiency and stability of the economy.
>>> more here
and here

Excerpt
:
"With a mortgage, the money is created out of nothing by the banking system. With an LVC, the money is created out of nothing by the government. Swapping out the vast majority of mortgages in the UK is practicable. Location Value Covenants offer better deal than mortgages because:

* much less bank infrastructure to support
* no interest is paid by government on new money created
* more stable payments for home owners
* lower initial payments

In summary: The LVC "cuts out the middleman" of the mortgage system. Banks function of creating new money and collecting land rent off owners through variable interest is deeply damaging to the economic system. Land Value Covenants are a direct "slot-in" replacement for bank mortgages in the existing economy. Land Value Taxes *cannot* serve this transitional role.
Location Value Covenants are the "Prosperity Pill" we've all been looking for!

Selected comments re. the above British proposal from former Australian Tax Office Land Valuer Bryan Kavanagh, via private discussion.

Oh, for a Georgist system that had people wanting to rush headlong into it! You can opt into the proposed system whereby, if you accept a covenant to pay rent on your title--on the locational value of your site (i.e. the rent), and pay less taxation--the payment stays with you, and succeeding purchasers of the title who will pay less for the property and less tax because of the covenant on title.

Being able to avoid other taxes if you opt in is likely to be so popular--except with the banks, of course--that many people would be keen to opt in.
This would act to assist most people and tend to isolate the extremely big rent-seekers. It has two main benefits: it is optional--therefore, those who complain about it don't have to join the system--and it concomitantly reduces the taxes of those who opt in (and the land price payments of future purchasers of the property).

... if there are a number of ways of implementing significant land value capture, LVC (locational value covenants) being optional, but clearly beneficial to the vast majority of people, must surely rank near the top and be worthy of investigation? I'm no expert on LVC, but can't find any holes in it as an implementation alternative. For a while, there'd be two markets, but pretty early down the track when young people are looking for a home, they'd surely be seeking one with an LVC on its title, because of the relatively insignificant land value. Would that not eventually leave those who didn't wish to opt into the system out on a limb?


Critique: Property Tax Vs. Land Tax
In this video lecture, Charles (Chuck) L. Marohn, Jr. PE. AICP explains the difference between property tax and land tax and demonstrates why one makes more sense than the other, but he has neglected to clarify one important point:

Land Tax is a tax on the value of the land, not the land itself.

This demonstration works well enough for adjacent properties, but fuels the erroneous argument that a land value tax would fall heavily on farmers rather than urban and commercial centers.

Excerpt:
The property tax system punishes investments that improve the value of property. The Land Tax system punishes, if we're going to talk about punishment, property that is left idle. In the current era that we're in we need properties to become more and more productive over time. To have a system that punishes that is completely counterproductive. ... we need to switch from a property tax to a land tax so that we don't reward idle low-productive properties and we don't punish people who invest in bettering their community.

Analysis of the 'value' of Land Value Tax (LVT)
By Dan Sullivan
Saving Communities, Pittsburg, PA.

Excerpts
LVT is fundamentally fair

Whether the criterion is ability to pay or reflection of benefits received, LVT is the most fundamentally fair broad-based tax available. The biggest obstacle to adopting LVT is that interest groups try to get benefits for themselves at the expense of others. Under LVT, everyone pays in proportion to the benefits they ultimately receive. As a result, property tax penalizes most home owners, who usually improve and maintain their homes better than absentee owners. The property tax on improvements also discourages construction while it rewards those who milk run-down properties or sit on vacant properties with light taxes.

Privileged interests oppose LVT
The great difficulty in advancing LVT is that it shifts the tax burden onto those who not only have the most ability to pay, but have the most ability to influence political leadership and public opinion. Yet LVT has often been supported by wealthy people who put public interest ahead of their personal enrichment. >>> more
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PASSTAX defined:
Rates and land tax are notionally already in the gross rent paid by a tenant, and cannot be ‘passed on’ again to the tenant:
 

If, as claimed by vested interests, the land value tax can be passed on, why do not these representatives of special privilege pass the measure and allow their friends to pass it on?  The reason is they know that the land values tax cannot be transferred. 
– E.J. Craigie, former South Australian politician, circa 1958.

A.  THE CLASSICISTS:

1  Though the landlord is in all cases the real contributor, the tax is commonly advanced by the tenants, to whom the landlord is obliged to allow it in payment of the rent.
– Adam Smith "Wealth of Nations" Book 5, Ch 2

2  A tax on rent falls wholly on the landlord.  There are no means by which he can shift the burden upon anyone else... A tax on rent, therefore, has no effect other than the obvious one. It merely takes so much from the landlord and transfers it to the State.
– John Stuart Mill (1806-1873) "Principles of Political Economy"  Book 5, Ch 3, Sect 2

3  The power of transferring a tax from the person who actually pays it to some other person varies with the object taxed.  A tax on rents cannot be transferred.  A tax on commodities is always transferred to the consumer. 
Professor James E Thorold Rogers "Political Economy" 2nd ed Ch 21, p 285

4  A tax levied in proportion to the rent of land, and varying with every variation of rents... will fall wholly on the landlords. – Walker's "Political Economy", p 413

5  The incidence of the ground tax, in other words, is on the landlord.  He has no means of shifting it; for, if the tax were to be suddenly abolished, he would nevertheless be able to extort the same rent, since the ground rent is fixed solely by the demand of the occupiers.  The tax simply diminishes his profits.
– ERA Seligman "Incidence of Taxation" pp 244-245

6  A tax on rent would affect rent only: it would fall only on landlords and could not be shifted. The landlord could not raise the rent, because he would have unaltered the difference between the produce obtained from the least productive land in cultivation and that obtained from land of every other quality.
– David Ricardo, Principles of Political Economy and Taxation (1817), Ch 10, Sect 62 
 
7  The way taxes raise prices is by increasing the cost of production and checking supply.  But land is not a thing of human production, and taxes upon rent cannot check supply.  Therefore, though a tax upon rent compels owners to pay more, it gives them no power to obtain more for the use of their land, as it in no way tends to reduce the supply of land.  On the contrary, by compelling those who hold land for speculation to sell or let for what they can get, a tax on land values tends to increase the competition between owners, and thus to reduce the price of land. – Henry George, Progress and Poverty (1879), Book 8, Ch 3   

B.  SOME MODERN ECONOMISTS

1  Pure land rent is in the nature of a "surplus" which can be taxed without affecting production incentives. 
– Paul A Samuelson, Hancock & Wallace, Economics - An Introductory Analysis (Australian Edition) Ch 28 p 595

2  .... the complete inelasticity of the supply of land means that a tax on land rent has no effect on price or output and therefore does not alter resource allocation...This outcome is in contrast to property taxes on buildings.
Jackson & McConnell, Economics, 2nd Aust Ed pp 540-541

3  The (land) tax cannot be passed on to consumers... The failure of the single tax idea does not change the fact that a large increment of value does accrue to the owners of land, particularly in or near urban areas, due to the growth of the economy, without the landlord having to contribute any productive factor services in order to earn it.
– Richard G Lipsey, An Introduction to Positive Economics (3rd ed.)

4  Aside from its compelling appeal to the public's sense of justice, a single tax on land has another advantage over most other forms of taxation - it is neutral in its effects on production incentives and resource allocation.
– Waud, Hocking, Maxwell & Bonnici, "Economics" (Australian Edition)

C.   SO, FOR THE SAKE OF EFFICIENCY AND GREATER HOUSING AFFORDABILITY, WHY NOT PUT MORE REVENUE WHERE IT ULTIMATELY FALLS ANYWAY?


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. 
– John Locke, Some Considerations of the Lowering of Interest (1691).

I have not lost any of the principles of public economy you once knew me possessed of; but to get the bad customs of a country changed, and new ones, though better, introduced, it is necessary first to remove the prejudices of the people, enlighten their ignorance, and convince them that their interest will be promoted by the proposed changes; and this is not the work of a day.  Our legislators are all landholders; and they are not yet persuaded that all taxes are finally paid by the Land.

Benjamin Franklin, Letter to Alexander Small, (September 28, 1787).

The Unplumbed Revenue Potential of Land
Part 3:
ATCOR (All Taxes Come Out of Rents)
by Professor Mason Gaffney
When we lower taxes, the revenue base is not lost, but shifted to land rents and values, which can then yield more taxes.

This is most obvious with taxes on buildings. When we exempt buildings, and raise tax rates on the land under them, we are still taxing the same real estate; we are just taxing it in a different way. We will show that this “different way” actually raises the revenue capacity of real estate by a large factor. There is much recent historical experience with exempting buildings from the property tax, in whole or part. It has shown that builders offer more for land, and sellers demand more, when the new buildings are to be untaxed. The effect on revenue is the same as taxing prospective new buildings before they are even built, even though the new buildings are not to be taxed at all.

Land value is what the bare land would sell for. It is specifically and immediately most sensitive to taxes on new buildings, and on land sales, as well as to new and more stringent building code requirements or zoning that often discriminate against new buildings. Where new buildings are “coded” more severely than old, it enhances the value of the old land/building packages. This premium should be considered part of land value, and taxable as such.

We have numerous historical experiences with exempting buildings leading to land booms: New York City 1922-33, Western Canada, Hong Kong, Taiwan, Australia, South Africa, San Francisco after the fire, Chicago after the fire, California Irrigation Districts, Cleveland 1903-20, Toledo, Detroit, Portland, Seattle, Houston, San Diego.

Familiar Micro Cases >>> more

On the history of land as private property ...
"The equal right of all men to the use of land is as clear as their equal right to breath the air - it is a right proclaimed by the fact of their existence."
– Henry George

The assumption that land had always been treated as private property is not true. On the contrary, the common right to land has always been recognized as the primary right. Private ownership has appeared only as the result of usurpation — that is, being seized by force. The primary and persistent perception of mankind is that everyone has an equal right to land. The opinion that private property in land is necessary to society is a comparatively modern idea, as artificial and as baseless as the divine right of kings. ... Wherever we can trace the early history of society — in Europe, Asia, Africa, America, and Polynesia — land was once considered common property. All members of the community had equal rights to the use and enjoyment of the land of the community. This recognition of the common right to land did not prevent the full recognition of the exclusive right to the products of labor. Nor was it abandoned when the development of agriculture imposed the necessity of recognizing exclusive possession of land — to secure the results of labor expended in cultivating it.
– Henry George,
Progress and Poverty (1879), Ch. 29.

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