EQUITY DIMENSIONS OF A LAND TAX.

Economists view land taxes as having beneficial efficiency properties relative to other forms of taxation. Furthermore, land taxes in New Zealand are administratively easy to implement since all properties are already valued on a regular basis. However, questions remain about the distributional properties of a land tax. Five questions are addressed in this paper: First, what are its vertical equity properties (in relation to household income/wealth)? Second, what are its horizontal equity properties (for people with similar incomes/wealth but with different landholdings)? Third, what are the impacts of the tax on landowners involved in land-extensive primary industries? Fourth, what are the impacts on owners of Māori land? Fifth, what inter-generational equity distributional considerations arise? After addressing these questions, the paper considers broader changes to the tax system accompanied by a central government land tax that incorporates the following features: (1) Māori freehold land that is currently non-rateable under the Local Government (Rating) Act 2002 is exempt from the tax; (2) a tax-free threshold is set based on the per hectare value of the land parcel; (3) a proportionate tax is levied on all land value above the threshold; and (4) an option is provided to accrue the tax liability (with interest) until property sale to alleviate cashflow constraints. The paper concludes that the strong efficiency and administrative properties of a land tax, structured as above to alleviate certain distributional concerns, make land tax a valid option for central and local governments to consider. [ABSTRACT FROM AUTHOR]