The world according to GRP — Friday, February 22, 2008:
Here we go again: Land tax doesn't raise rents
[Posted to www.news.com.au/comments/0,23600,23257069-14327,00.html (cc: Greg Hunt MP).]Land tax REDUCES rents. It is payable regardless of whether the land is built on or let to tenants. So the owner, in order to generate income to cover the land tax, must build a dwelling (if one does not already exist) and offer it to tenants. This increases the supply of rental accommodation and therefore reduces rents.
Investors hate land tax because they can't shift the burden onto tenants. So they campaign against it -- by pretending that they CAN shift the burden onto tenants!
The taxes that can be shifted onto tenants are those that can be avoided by NOT offering properties to tenants. Taxes in this category include income tax on rent, GST on commercial rent, stamp duty and GST on the transactions needed to bring rental properties to market, and annual charges for connection to the network services that make properties habitable -- but NOT land tax, and NOT municipal rates in so far as they are levied on land values alone.
Copyright © Gavin R. Putland except as otherwise attributed. Posted at The world according to GRP under the title Here we go again: Land tax doesn't raise rents. You may republish this item verbatim on your website or blog provided that you include this notice (with hyperlinks).
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