Infrastructure Funding: Land Consumption Tax / Land Value Tax

[SurfRail]

http://www.claytonutz.com/publications/edition/14_april_2016/20160414/the_road_to_commonwealth_infrastructure_funding_paved_with_value_capture.page

Point to note - the flat levy for the Gold Coast (the City Transport Improvement Levy) is of wider application than the article indicates.  Most of it goes into roads, with funds also set aside for footpaths, cycling infrastructure, co-funding bus services with TransLink and funding off-peak seniors' travel by bus on weekdays.

I do agree that it is poorly targeted though.  It should be a differential charge so that owners of commercial properties which put a higher strain on the transport system (Pac Fair / Robina Town Centre / large office building like The Corporate Centre / quarries or other locations with a lot of heavy vehicle movements etc) pay much more than people living in residences or less intensive uses.

Properties in the vicinity of the light rail system should also be paying slightly more regardless of type.

More of it also needs to be ringfenced away from roads.

[ozbob]

The Conversation --> Turnbull should help the states switch stamp duty for land tax

[#Metro]

Four tax policies Australian house prices rest on https://theconversation.com/four-tax-policies-australian-house-prices-rest-on-44778

"Land taxes

There are currently two types of land taxes in all Australian jurisdictions; local government rates and state or territory government land taxes. Both taxes are levied on investment properties but owner-occupied housing is exempt from state and territory land taxes. Land taxes are among the most economically efficient taxes.

A recent report by the Commonwealth Treasury showed that land taxes actually create a net economic benefit whereas all other taxes examined created additional costs in excess of the taxes themselves (referred to as marginal excess burden) with stamp duties being the worst of those examined."



^ As you can see Land Tax is the only tax where imposing it actually makes things better. It encourages efficient use of land. Under this we could expect a more denser city and thus more PT patronage, plus a revenue stream to pay for upgraded PT works.

[ozbob]

FYI

Vancouver Sun --> Mayors, province consider collecting on density for transit

The B.C. government and Metro Vancouver mayors are investigating the potential of charging developers additional fees around transit stations, saying the move could generate more than $1 billion along a major new rapid transit corridor such as Broadway.

Regional mayors pitched the idea of charging developers for increased building density around SkyTrain stations as a way of generating money for transit, following the defeat of a proposed transit tax in last year's plebiscite.

The fees could inject cash into the beleaguered transit system, which has proposed a $7.5-billion, 10-year plan to add more buses and SkyTrain cars, an additional SeaBus and new rapid transit projects in Surrey and Vancouver, but doesn't have the money to pay for them.

Municipalities already collect fees from developers for amenities such as pools, parks and affordable housing, but not transit. Vancouver, for instance, has a "community amenity contributions" policy, which limits the amount of gross profit a developer can generate from a rezoning, with a large part of the resulting increased value, dubbed a "land lift," going to specific city projects.

"It seems to me as you develop the transit corridor, there are benefits that accrues to that corridor and the land around them. Density around transit corridors is what you should be doing," said Peter Fassbender, the minister responsible for TransLink.

Fassbender said details still have to be worked out, such as how municipalities could collect on the higher density, but said preliminary numbers suggest the move could potentially generate $800 million to more than $1 billion "in one area," such as the proposed subway along on the Broadway corridor. But he said fees could also be charged for increasing density around existing SkyTrain stations that are still surrounded by low-density buildings.

"It's an opportunity," he said. "In Vancouver, there's a fairly significant number and there will be opportunities in Surrey as well as the transit system expands there."

The idea, he said, would be to use the fees from developers to help operate the transit system and to match funding from other levels of government to build new projects.  Such fees are already in place in cities like Denver, Col., the U.K. and Europe.

"I really see the development community being open to look at that," he said. "It's a fair formula. With transit comes development opportunities and potential."

Surrey Mayor Linda Hepner, who raised the idea last month during a luncheon at the Greater Vancouver Board of Trade, declined to comment further on the proposal while it was under discussion with the province.

Metro's mayors, which must approve TransLink's funding plan, are also re-pitching proposals to use a regional carbon tax, vehicle levy or increased gasoline tax to generate more funds for the transportation plan.

In 2013, the mayors' council said an annual vehicle registration fee, based on vehicle emissions or engine size, could reap $50 million, while a $5-a-tonne regional carbon tax could potentially generate $90 million a year.

Fassbender insisted Tuesday a carbon tax is off the table, but said the province is open to discussing the controversial vehicle levy — it has been rejected by successive governments — as well as other alternatives. But he noted those are long term, and the regional mayors must come up with some short-term funding immediately if they are to get a share of federal dollars for transportation.

The federal government has said it would fund up to 50 per cent of capital transportation projects in Metro, but the province and TransLink must fund the rest. The mayors, who must approve funding for TransLink, are calling on the province to provide 40 per cent of the capital costs — up from the one-third it typically provides for capital projects, but Fassbender said the province first wants to see what the federal government is promising in its next budget.

Fassbender would not say what the mayors are proposing as a short-term fix. 

"They've indicated what they think they can do in a potential lift in other areas," he said. "I'm not going to presuppose anything here. I'm not going to compromise those suggestions. We understand the urgency," he said. "We have to find a path to move ahead. Everyone should be looking at a formula that is fair."

Burnaby Mayor Derek Corrigan said if the mayors don't get the funding, they will have to "do more with less. We will have to see what the system can deliver with that it has," he said. "It's not as if TransLink doesn't have a big budget now."

[#Metro]

Federal election 2016: House prices to fall, rents to rise under Labor negative gearing policy

"While we take the view that negative gearing reform is a good thing, such reform should be done as part of a wider property tax reform that should include a broad-based land tax and the elimination of stamp duties," he said.

http://www.domain.com.au/news/federal-election-2016-house-prices-to-fall-rents-to-rise-under-labor-negative-gearing-policy-20160621-gpoae4/

[#Metro]

Fascinating report by The Property Council of Australia into land tax.

Assuming a flat land tax is applied to the unimproved value of all currently exempt owner-occupied property in Australia,
it is estimated that recouping the revenue foregone from
stamp duty abolition would require a land tax of 0.58% be imposed on the owner-occupied
land (see Table i). On average across Australia, this implies a land tax payment of $2,360
per owner-occupied dwelling (see table ii).

Of course, the rate is much lower if a progressive LVT is pursued, as it should be.

In the ACT, a tax credit system is used to prevent those who paid stamp duty from paying twice.

Under the conveyance duty credit, any property purchased in the past 10 years would be
exempt (to varying degrees) to rate increases. Effectively, the stamp duty paid acts as a 'tax
credit', exempting an individual for the payment of increased land tax, for up to 10 years
after purchased the property (e.g., if an individual bought property the year prior, they are
entitled to 9 years without paying extra rates).

For Queensland a rate of 0.6% would be required to maintain revenue neutrality with stamp duty revenues.
That's an average payment of $1,841 per year, or $154 per month (about $5-$6 per day).

The revenue raising potential of a broad- based land tax
Property Council of Australia
https://www.propertycouncil.com.au/AsiCommon/Controls/BSA/Downloader.aspx?iDocumentStorageKey=90e43349-f7d7-4bda-856e-6947c34e54c7&iFileTypeCode=PDF&iFileName=Deloitte%20Report%20-%20The%20revenue%20raising%20potential%20of%20land%20tax

[ozbob]

Infrastructure Australia says #tax land not property to capture value, @jennywiggins reports. https://t.co/B58LtDqrnE #ausbiz

— Financial Review (@FinancialReview) December 14, 2016

[#Metro]

Wow, read the article. I had difficulty telling whether I wrote it or Jenny did

The council said it welcomed IA's calls to abolish stamp duty, but said it was unlikely to be "politically feasible" to raise the same amount of money from land taxes.

This is not right. How do I know this? Research commissioned by the Property Council itself!

The revenue raising
potential of a broadbased
land tax
Property Council of
Australia
March 2016

https://www.propertycouncil.com.au/AsiCommon/Controls/BSA/Downloader.aspx?iDocumentStorageKey=90e43349-f7d7-4bda-856e-6947c34e54c7&iFileTypeCode=PDF&iFileName=Deloitte%20Report%20-%20The%20revenue%20raising%20potential%20of%20land%20tax

With data on stamp duties on conveyances revenue and the value of owner-occupied residential land, all that remains is to calculate the land tax rates that could be applied to this land to replace stamp duties revenue. The results of this calculation are presented in Table 3.3, along with the amount of land tax that would have been paid on the average residence in 2015.

Table 3.3: Land tax rates needed on owner occupied residential land to replace stamp duties on conveyances (page 14)

State/Territory    Rate    Average payment for 2015

NSW                0.48 %    $2,492
VIC                  0.65 %    $2,644
QLD                 0.60 %    $1,841
SA                   0.63 %    $1,720
WA                  0.69 %    $2,629
Tas                  0.45 %    $927
ACT                 0.60 %     $2391

Australia           0.58%     $2,360 (simple average of all state/territory land tax rates)

So as you can see, it seems possible to do. The ACT went ahead with the changes. People who had paid stamp duties got credits to use agains the land tax for a set period.

[#Metro]

It's gaining momentum!

Land tax: Parliamentary Budget Office costs plan to kill off stamp duty
http://www.brisbanetimes.com.au/federal-politics/political-news/land-tax-parliamentary-budget-office-costs-plan-to-kill-off-stamp-duty-20170315-guyezb.html

The Parliamentary Budget Office has costed a proposal that would kill stamp duty and replace it with land tax, saving home buyers up to $40,000 in Sydney and $55,000 in Melbourne, while delivering billions of dollars to fund schools and hospitals.

The costing will put land tax back up for debate when Parliament returns next week as the government looks to mark its authority on the housing affordability crisis less than two months out from the federal budget.

[#Metro]

Affordable housing means cutting prices. This is how to do it
http://www.smh.com.au/comment/affordable-housing-means-cutting-prices-this-is-how-to-do-it-20170413-gvkv60

We should also encourage more efficient use of housing stock by encouraging empty nesters to downsize and growing families to move rather than extend. This would mean getting rid of stamp duty. In the past 40 years, stamp duty has gone from a nominal $20 or so to an enormous grab by state governments, discouraging people from moving to more suitable housing. Who wants to hand large amounts to the government for no return?

It could be done at a stroke and be replaced with land tax. There would be no stamp duty on all purchases after budget night, but there would be a land tax imposed on all dwellings bought after budget night.

The Commonwealth would need to tide the states over until the land tax (which it would hand to the states) made up for stamp duty, as it soon would. Land tax is a far more efficient tax than stamp duty so, in the long run, we would all be better off. Incidentally, there was a federal land tax until the 1950s, so the idea is not new.

The constitution gives the Commonwealth power to make laws with respect to taxation, so it could force these measures if the states did not cooperate.

[#Metro]

From Cameron Murray, UQ Economist:

Housing and other great moral hazards at the heart of Victorian budget

So, we've got stamp duties that increase the cost of housing and cause poor use of housing stock, gambling taxes that rely heavily on gambling addiction, payroll taxes that reduce employment and put downward pressure on wages.

Every major review of Australia's taxation system has recommended greater use of land taxes. With a few rare exceptions though, governments won't do it.

http://thenewdaily.com.au/money/finance-news/2017/05/02/victorian-budget-built-bad-taxes/

[#Metro]

Grattan authors criticise Land value capture, advocate for broad-based land tax to fund infrastructure instead.

Value capture: a good idea to fund infrastructure but not easy in practice
https://theconversation.com/value-capture-a-good-idea-to-fund-infrastructure-but-not-easy-in-practice-74545

I don't agree about the Hong Kong case being inapplicable to Australia. Sure, you couldn't do a cut-and-paste job of it, however shopping centres seem to be doing well making money around Toombul, Toowong, Indooroopilly. They currently take this money and pay it out to shareholders.

And while it is true that the HK Government owns all the land and levies a land tax, local governments in Australia don't own the land and still levy local rates based on land value. You don't need to own it to tax it, indeed that is the whole basis of government financing!

So a broad-based land tax has some distinct advantages over a value-capture tax.