Debate Needed on Property or Site Value Tax
Author of "Boom Bust: House Prices, Banking and the Depression of 2010" speaks on Site Value Tax
In an interview today on DriveTime on Radio 1 today (~6:30pm), author of "Boom Bust: House Prices, Banking and the Depression of 2010", Fred Harrison was discussing Site Value Tax which is a different form of Property Tax. He was actually speaking later at 7:30 pm in Trinity at a talk: "A FAIR PROPERTY TAX ? – A PUBLIC DEBATE" organised by the 'Smart Taxes Network'.
Harrison says we need to remove the incentives to speculate on land says that is what a Site Value Tax can do. He says the Property Tax in use in the UK and USA doesn't work and that kind of tax leads to boom-bust cycles as it does not cool the market. He says we should place the charge on the site value so that it is based on the location and the services people use. He said Denmark has this and they have the best houses in Europe, compared with UK where they are pretty bad. Property Tax penalizes people for developing or improving their property whereas Denmark site value system doesn't.
When asked about how the scheme might work, he said the starting rate needs to be very low and it would be scaled up from there. The important point is that Ireland needs to re-balance the tax regime so that at the same time that a property tax is introduced that the income tax is reduced so that the overall effect is tax neutral Clearly the government is unlikely to do this and it is thus no wonder why so many people are resisting the household charge as they know too well, it will not be tax neutral and besides the household charge is a flat fee based system and totally at odds with a Site Value Tax system.
Harrison went on to stress that the idea is to raise revenue from Site Value Tax but reduce Income Tax on people's wages to encourage employment and to increase the incentives to employ people. He stressed that the Govt should not copy failed states but copy Denmark or Taiwan who have the Site Value Tax.
When the discussion moved to his opinion on the global financial crisis, (he accurately predicted the sub-prime bust), he said that he sees no sign of recovery occurring in Europe or USA and says the governments don't know what they are doing. All we see is governments piling debt upon debt desperately trying to fend off the inevitable. We are 5 years into depression and there is no recovery in sight. And he continued that we need to restructure something internally in the economy and that is the tax regime. And there is a viable alternative to breakthrough the morass and that is the work of the Fair Tax group
He pointed out that the boom - bust cycle is based or caused by speculating on unearned income from land and the present system encourages people to buy for capital gains rather than productive use. If instead as value of land increase so does the Site Value Tax, and hence via tax revenue to govt, then everyone shares.
It seems the talk this evening (Mon 24th Sept) was in conjunction with the launch of the new book: "The Fair Tax" (see image)
The blurb for the event and the book says:
The tax regime in Ireland, has been very favourable to property owners, but especially to developers who, with their banks, took maximum advantage, says Colm McCarthy in the preface to a new book on Site Value Tax published by the Smart Taxes Network. The system fueled the disastrous development-site debts of a handful of testosterone-charged developers and led directly to the Irish state’s guarantee of the collapsing banks.
The Irish government is belatedly introducing a property tax under pressure from the Troika rather than from a conviction of its merits. Instead of targeting irresponsible developers, speculators and banks, the government is planning to bail them out again by excluding their land hoards and undeveloped sites from the new property tax. Ordinary home owners will pay at least 20% extra tax every year so that speculators can continue to pay nothing. Only a Site Value Tax can make them pay their fair share.
Speakers in this pubic debate will explain how a second massive transfer of wealth from the 99% to the 1% can happen again due to the ignorance of politicians, the hubris of the Department of Finance, and the continuing backroom influence of the developers and bankers. They can explain the real advantages of a Site Value Tax over a conventional property tax and convincingly show how easy it is to assess and implement.
Leaked reports suggest the government believes that the Irish public could not understand a Site Value Tax and so plan to impose a flawed property tax. Do the Irish people deserve this assessment of their intelligence by their leaders? Come along to the debate and make up your own mind.
The Smart Taxes Network is hosted by Feasta which is The Foundation for the Economics of Sustainability