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LAND RENTAL CAPTURE IN THE UNITED KINGDOM

LAND RENTAL CAPTURE IN THE UNITED KINGDOM. Ted Gwartney tgwartney@aol.com. LAND RENT IS THE BEST SOURCE OF PUBLIC REVENUE. Land is a free gift of nature Land rental value is an economic surplus that belongs to everyone Adequate to fund public needs.

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LAND RENTAL CAPTURE IN THE UNITED KINGDOM

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  1. LAND RENTAL CAPTURE IN THE UNITED KINGDOM Ted Gwartney tgwartney@aol.com

  2. LAND RENT IS THE BEST SOURCE OF PUBLIC REVENUE Land is a free gift of nature Land rental value is an economicsurplus that belongs to everyone Adequate to fund public needs

  3. ONLY A SMALL AMOUNT OF LAND RENT IS CURRENTLY CAPTURED DIRECTLY FOR PUBLIC PURPOSES

  4. UNITED KINGDOM It is possible to estimate therental value of all land in the United Kingdom quickly, accurately and at a reasonable cost.

  5. In 1975, I was Appointed as the Assessment Commissioner and Chief Executive Officer of British Columbia Assessment, from 1975 until 1986.

  6. The existing records of all of the United Kingdom assessment agencies can be used as a basis (such as the Valuation Office Agency (VOA), the Business Rate Tax and the Eurostat‑OECD compilation guide on land estimation).

  7. BRITISH COLUMBIA CANADAThe area of BC is 944 735 km² United Kingdom Area 242,500 km² BC is 3.9 times largerNumber BC properties 2,044,482In British Columbia we had 180 cities and rural districts to assess.

  8. British Columbia is 3.9 times larger in size than the United Kingdom

  9. The BC government wanted to improve the property tax and capture a greater proportion of revenue from land and natural resources. Assessments had been frozen for 30 years (like the Council Tax). • In 1973, I was hired as a consultant to make recommendations for improving the assessment methods in the Province.

  10. An all-party committee of the Legislature conducted a comprehensive study of assessment and taxation. • I recommended a province-wide Assessment Authority that was independent of the taxing function. • Annual reassessment of landand improvements separately would be made at market valueto achieve equity in real property taxation.

  11. New Systems were developed for data processing, mapping, assessment roll production, statutory reports, appraisal and office systems. Success was achieved by simplifying the handling of property transfers, expanding training programs, creating appraisalmanuals, expanding technical support and developing a mass land and property valuation system.

  12. PROPOSAL OBJECTIVE Capture Land Rent aPlentiful Source Of Public Revenue Reduce Taxes On Buildings, Workers, Homeowners, Producers And Merchants Enhance The Wealth Of All People

  13. BRITISH COLUMBIA TODAY Today, British Columbia Assessment has been in business for 44 years. BCA set the standard for updating assessed values annually. It is considered the most efficient assessment organization in the world.

  14. 2017, $7.90 billion in property tax revenue, $4 billion from land, was generated for communities to provide benefits for British Columbians. • Population 2018 as per estimated data is BC 4.75 Million, England 55.8 Million • Land Assessed Value for All parcels • Assessed Value for Improvements • Total Value of all real estate: $1.86 trillion

  15. METHODS USED TO VALUE THE LAND RENTAL VALUES • 1 – Develop Land Database • 2 – Study Comparable Rentals • 3 – Develop Valuation Models • 4 – Apply Valuation Models

  16. TECHNIQUES USED IN APPRAISING LAND RENTAL VALUE Land Rental Comparison with Adjustments Proportional Land Rental Relationships Value Allocation with Land Ratios Developmental Analysis Land Residuals Subdivision Development of Land

  17. LAND RENTAL COMPARISON Ground rent leased land Tear down sales Land residual sales Sale price times cap rate = land rental value

  18. LAND RENTAL ADJUSTMENT GRID ADJUSTMENTS MADE FOR DIFFERENCES RENTAL PER SQUARE METER

  19. LAND VALUE MAP

  20. IS LAND RENT ADEQUATE TO FUND PUBLIC PURPOSES? California, Australia, Harrisburg and England

  21. CALIFORNIA USA The opportunity to test the claim that land rentprovided sufficient revenue to pay for all public expenditure came with a political initiative to correct a lack of revenue in my home state of California.

  22. California is 1.75 times larger in size than the United Kingdom

  23. UNITED KINGDOM AND CALIFORNIA • United Kingdom Land Area (242,500 km²) • California (424,083km²) is 1.75 times larger in size than United Kingdom • California population 39.8 Million • United Kingdom population 55.8 Million • Estimated Total value of real estate: $8.36 trillion, more than 50% is land value

  24. For the 2011 election year, an Initiative was proposed to replace all existing taxes in California with the capture of land rent. The plan was to eliminate taxes on sales, income and buildings and replace the lost revenue with a charge of 75% of annual land rental values.

  25. Being a former assessor in the state of California, I was invited to review the Comprehensive Tax Reform Initiative. I estimated that sufficient revenue could be raised from land rent to replace the revenue that then flowed to all state and local governments. To arrive at this conclusion, I had to evaluate existing data and make adjustments and assumptions to fill the data void.

  26. Had the Comprehensive Tax Reform Initiative become law in 2011 based upon collecting 75% of land rental values, the State of California could have replaced all of the existing revenue sources (sales taxes, income taxes and building taxes)$159 billion in annual revenue and raised additional revenue of $43 billion over current revenue.

  27. The California Legislative Analyst’s Office approved my fiscal analysis of the initiative. • Unfortunately, an initiative required signatures on petitions from 8% of the registered voters and the cost of securing these signatures was prohibitive, so the initiative did not get on the ballot.

  28. Australia has some of the best records available on land rental values. Studies by Terry Dwyer and Bryan Kavanagh concluded land rent represented more than 25% of gross annual domestic product. Australia’s land rent is adequate to eliminate taxes on buildings, wages, production, commerce and investment and fund all government services. AUSTRALIA

  29. LAND RENT RATES

  30. HARRISBURG TWO TAX RATES Land Tax Rate 6 X Building Rate Land Tax Rate 30.97 Building Tax Rate 5.16 Increased Land Tax Rates Over 20 Year Period

  31. RESULTS IN HARRISBURG New investment $3.1 billion New businesses 4,000 Vacant properties cut by 85% Crime rate reduced 54% Fire rate dropped 76% Unemployment cut in half

  32. ECONOMIC RESULTS LandCost Less RentsDecreased New Businesses Started Investment InNew Production New Jobs Created WagesIncreased Benefited All IncludingPoorest

  33. GREAT BRITIAN The Total Potential Land Rent Is Over One-Half Trillion Pounds This is the value measurable in the markets today Abolish The Council Tax, Business Rates and Stamp Duty

  34. THE 1 PERCENT’S PROBLEM Joseph Stiglitz, Nobel Memorial Prize in Economics, 2001.Vanity Fair. (May 31, 2012): Much of the inequality in our economy has been the result of rent seeking, because, to a significant degree, rent seeking re-distributes money from those at the bottom to those at the top…. rent seeking distorts resource allocations and makes the economy weaker.

  35. THANK YOU Ted Gwartney tgwartney@aol.com

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