- December 2, 2017
- Bob Quinn
David McWilliams is in favour of taxing land. He sees it as a way to end the housing crisis.
His argument is that land owners hoard land because there is no penalty for doing so. They simply sit on it until its value increases, then sell it without having improved the asset or made society better.
In fact society is worse off because the (usual) increase in land prices over time is passed on to those who need to buy or rent a place to live.
By keeping the supply of development land low, landowners make sure it becomes more valuable and therefore more expensive. Let’s call them the market makers.
Taxing the land, on the other hand, makes it less attractive to hang on to and more likely to be put to productive use.
By taxing land, both public and private owners are encouraged to trade land, making it available for development.
McWilliams also makes the point that the more tax we take on land the less we have to raise from income, which will in turn incentivise people to work.
It sounds like a plan with some merit. It sounds like a plan a certain kind of new government might like. So what if a hefty tax was slapped on ‘hoarded’ land? What would that do to your tax bill?
If a lot of your wealth is invested in land it could have a searing effect.
Let’s say you’re farming, or are the son or daughter of a farmer and have inherited some land.
Need to Grow your Pension Fund?
Get top tips, best practices and advice on how to avoid the pitfalls
Many small farmers are barely getting by.
So in those circumstances, or in the event of a recession, a land tax could annihilate your net worth, just like that.
It’s a simple question of asset allocation. I’ve talked about it before, usually in relation to property.
“Over exposure to any one asset class makes you vulnerable to any macro or micro event that affects that asset class”
The government parties profess to be focussed on solving the housing crisis. It’s not unthinkable that a land tax could be introduced.
Whether it is or not, it’s a good excuse to look at your asset allocation. By the same token, you should be making sure you are not over-exposed to one geographical area such as Britain as Brexit hurtles down the tracks.
So we’re coming to the end of 2017. I’ve published dozens of articles about many different financial matters that I know are important to you. Here’s just a selection:
I hope I’ve answered some questions and provoked a few more. Why not hit me with them?
Don’t let another year go by without getting your financial future in line.
If you want a steer on your upcoming health insurance renewal, take a listen to what I had to say on last Thursday’s Lunchtime Live with Ciara Kelly.