Archive for April, 2015

Implementing location taxation

April 1, 2015

• Plots of land given over to a particular land-use will be allotted into discrete locales within which ground rent per square foot is estimated as being approximately equal. Annual land permits specifying land-use and locale, and accounting in aggregate for the total square footage of the plots, will be issued each year via a public auction. In this way each plot can be occupied by a registered permitholder, leaving no land permits unused.
• Ordinary Land Permits (OLP) will be auctioned annually from day one. These cannot be held by individuals in excess of [10%] of a locale in order to prevent market manipulation/extortion of would-be occupiers. OLP will be post-dated to [ten] years after issuance, and so an OLP issued at launch will only permit occupancy in the [11th] year, and so on. OLP can be privately traded at any time on a public exchange, provided ownership remains registered.
• The annual proceeds of the auction of OLP will fetch a sum of rent for the public to be shared equally by the population. This annual citizen’s income is described here as Ground Rental Entitlement (GRE).
• In parallel to the issuance of post-dated OLP, a batch of ten Special Land Permits (SLP) – one for each of the first [ten] years – will be vested with incumbent landowners on day one in order to cover their actual land holdings (disregarding the [10%] limitation by locale). These SLP must always be held by the actual landowner: so if a plot of land is sold in the first ten years, it must be accompanied by contribution of the remaining SLP.
• SLP are designed to cushion incumbent landowners from the loss of their freehold. The net effect of the policy is that incumbents receive ten SLP for the land they occupy, as well as annual GRE; but in return they forfeit the freehold land value, although not the cumulative improvement to the land ie buildings.
• For more sought-after plots, once SLP have run out on the [tenth] anniversary of the launch, the value of subsequent GRE may be insufficient to cover the cost of OLP to the incumbent owner: in this case the first ten years of GRE represent a bonus capable of subsidising the deficit.
• What is notable under this policy framework is that GRE will be collected and distributed to all from day one, and all the while without unfairly expropriating landowners (granted ten years’ incumbency). The universality and immediacy of GRE, along with the care taken not to penalise recent land buyers/upsizers, will both be essential in establishing general support for the policy.
• While being post-dated, OLP present value should be similar to future value: as ground rent tracks growth in output and population, it should therefore show correlation with the rate of interest used in discounting future income. Consequently, the public ought to be able to collect approximately the full value of ground rent over time.