This Economist article is an informative piece on the virtues and problems with the land value taxation system that we propose in our discussion on fixing the supply shortage in our key housing markets.
On the political problems with the proposal however, the Initative disagrees with the Economist: it sadly dismisses them as insurmountable, however we view the policy as feasible in New Zealand’s political environment.
Land value taxation is so beloved of economists because, in theory, it does not distort decision making. Suppose a land value tax of one per cent on land value is introduced tomorrow. There can be no supply response: there would still be as much land as there is today. Neither would consumers’ preferences change, as land would be no more useful, either.