Tax me, please

Another problem is that the development lobby will argue that such a tax will send them broke because they have already committed to a number of projects without factoring in these increased costs. From the perspective of the public, that is perfectly fine - if they go broke their land holdings will make it to the market in a hurry. But I see no reason that a progressive increase in land taxes over a number of years should tip many big developers over the edge.

As a final comment I want to note why land taxes run counter to intuitive logic. As a rule of thumb, if you increase taxes on a good, you get less of it. If you increase subsidies, you get more of it. This was demonstrated recently by Andrew Leigh, where he showed that higher stamp duties decrease the number of sales of homes. Tax selling, and you get less selling.

But a land tax is a holding tax. To avoid this tax you get less land holding. Which would encourage selling land to others who may use it more productively. As the table above shows, the incentive to produce homes and buildings will not deteriorate.

I would appreciate any thoughts.