Contra Piketty: It’s Not A Wealth Tax We Need But A Land Value Tax

Forbes

See the article about Piketty’s world, written by Tim Worstall in Forbes Magazine from March 27, 2015:

Contra Piketty: It’s Not A Wealth Tax We Need But A Land Value Tax

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2 thoughts on “Contra Piketty: It’s Not A Wealth Tax We Need But A Land Value Tax”

  1. The most important point made in the articles linked, is this:

    “…The most important redistribution policy may now be urban land-use policy…”

    Cheshire et al from the LSE have for years been tracking the divergence in urban land prices in UK cities, since the 1947 Town and Country Planning Act, compared to US cities that would be otherwise similar. By 1984 the divergence was a factor of 120 to 320 times! And the upper range of the factor is now 900!

    This difference is mostly explained by the restriction on converting rural land to urban use. The UK actually did have, during the 1930’s, a boom in construction of housing that remained affordable because as this author points out, “the draconian provisions of the 1947 Town and Country Planning Act were still to come.”

    http://www.voxeu.org/article/escaping-liquidity-traps-lessons-uk-s-1930s-escape

    This phenomenon continued in the US and most of the first world for decades following WW2, the UK is the exception that proves the rule. The expansion in mortgage credit in most countries, was related to the population becoming home owners instead of renters, and housing and properties becoming larger and better quality at a lower real cost per square foot of land.

    This is classic economics of consumer surplus versus “rent extraction” – housing in non-growth contained US cities still have prices that represent a median multiple of around 3, for houses and properties that are large and of rising quality on average; while the UK and now increasing numbers of cities in other nations (as urban planners decide the planet needs saving) have median multiples of 6 to 10 for properties that are considerably smaller and tend to be falling in average size and quality; and old housing stock remaining unrenewed.

    The assumption that intensification can provide affordability is as logical as assuming that rationing food to the “right amount to prevent over-consumption”, will result in people spending LESS on food. In fact they will end up paying a LOT more, for less, and the rationing by price will be severe in its social injustice. No median multiple 3 city is dense, and no dense city has a median multiple cycling around a mid-point below 6.

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