Hickey on Land Tax

Bernard Hickey writes:

With Capital Gains Tax off the table, what’s the next idea boffins and politicians will turn to in the attempt to reduce tax incentives for rental property investors?

The 2010 Tax Working Group looked at a land tax. Arthur Grimes, a former Reserve Bank chairman, proposed it.

It is simple, clean, and he estimated a 1 per cent tax on the value of land would raise $460 million a year and cut land prices by 17 per cent if it was introduced up front.

And the price of land is the major driver behind house price increases.

It would prompt more intense development of land and also encourage land bankers to build, something the Reserve Bank and the Government say they want.

Farmers and iwi would not be thrilled, but it would be the sort of broad-based and low rate tax that works best.

So long as income and company tax rates were reduced to compensate, I support a land tax.