Tuesday, 3 November 2015

The Opportunity for Land & Property Taxes in Scotland

Lesley Riddoch was on Michael Greenwell's podcast in October discussing land reform. From around 22 minutes in, they discuss the non-development of vacant and derelict land in cities.

"When developers get their hands on land, they land-bank it, so that they can wait ... until they get permission to build high-end residential flats, because that's where the biggest profits are ... Now generally a lot of these areas are not zoned for that ... Developers are hanging out for what will make the most money for them, and in the meantime they have no penalty on it ... You either have to intervene in statutory ways, or you start to impose taxes on land which does it for you."

As an economist, it's no surprise that I favour imposing taxes rather than what's labelled here as statutory intervention. And I have a new working paper that makes the argument for land and property taxes entirely in keeping with the quote above. The paper will form part of the evidence base for a report by the Commission on Local Tax Reform which should be released in the coming months.

The paper makes the case for land and property taxes promoting economic activity - the release of vacant and derelict land being one of the channels for this. The main results of the paper are that a tax on property values, set at a rate to replace the current council tax revenues, would be progressive (i.e. would reduce net household income inequality) and would result in a large majority of the population being better off - so a council tax to property tax policy change should be a vote winner.

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