Land tax to aid top earners
By VERNON SMALL - The Dominion Post
Last updated 05:00 22/08/2009

A land tax that could cost the average homeowner $214 a year is to be considered by a high-powered committee.

The tax is one of several options in the mix as the Government looks at ways to revamp the tax system to allow lower personal rates.

The Government has said it wants, in time, a top personal rate of 30 cents but will need to raise revenue elsewhere to pay for it.

But even a low-level land tax would be a political hot potato if all the cash raised was used to cut taxes for the well-paid.

The issue will be considered by the committee, chaired by Victoria University professor Bob Buckle, at a meeting next month to consider "base-broadening" measures such as property-based taxes, death duties and capital gains tax.

It has already scoped lifting GST to between 15 per cent and 20 per cent and revamping Working for Families. It will present policy options when it reports back to the Government in December.

Taxing the unimproved value of land excluding buildings and other developments is seen as an effective lever to raise revenue and damp down a resurgence in house prices without creating too many distortions.

A capital gains tax is widely considered too politically charged and a full property tax could act as a disincentive to invest. But a land tax could cause a small one-off drop in values and hit the elderly, Maori and farmers the hardest.

The average residential land value is $214,000. In Wellington City it is $250,000, Lower Hutt $200,000, Christchurch $188,000, Hawke's Bay $100,000 and Manawatu $110,000.

A land tax of 0.1 per cent, cited as a possible rate for discussion by sources close to the tax group, could raise more than $460 million enough to fund a cut from 38 cents to 33 cents in the top personal rate.

A revised version of the paper will be delivered to the tax working group's September meeting.

Reserve Bank chairman Arthur Grimes, who co-authored a draft paper that will be used as the basis for the tax group's work, said he did not advocate a land tax, but was interested in exploring its effects as part of the mix being looked at by the committee.

Finance Minister Bill English said the Government would take "some convincing" to raise GST or bring in a new land-based or capital gains tax but would wait to see the options. Revenue Minister Peter Dunne said land tax was "floating around as an issue".

From here.