IN THE NEWS: Levying the Land

IN THE NEWS: Levying the Land
July 2, 2013 Alex

The Economist, June 29: “Governments should make more use of property taxes. A pure land tax, one without regard to how land is used or what is built on it, is the best sort.”

Levying the land

Governments should make more use of property taxes

Except:

TAXES on property go back a long way. Ancient civilisations from Greece to China had levies on land. In 11th-century England the Domesday Book, a record of who owned what land, documented William the Conqueror’s tax base. Britain had a window tax in the late 17th century, well before it introduced an income tax. In America local governments have raised money from property taxes since the colonial era; the federal income tax has been in place only since 1913.

But property taxes are much less prominent than they once were. To fund rising government spending, far more cash is raised from other sources, particularly income taxes, payroll taxes and value-added taxes (see left-hand chart). A new study by John Norregaard of the International Monetary Fund suggests that the average rich country, including all levels of government, raises under 5% of total tax revenue from annual levies on land or the buildings on it. The norm in middle-income emerging economies is lower still, at around 2% of all tax revenue (see right-hand chart). Including property-transaction taxes like stamp duty raises the total a bit but not by much.

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