Victoria to expand vacant residential land tax across state in bid to increase housing supply

What would Henry George Say? 

In a move that caught the local property industry by surprise, Australia’s Treasurer, Tim Pallas, proposed to expand the taxation of vacant land to the entire state of Victoria. A land tax is indeed in effect but only applies to residences in the inner and middle suburbs of Melbourne that have been vacant for six months. These properties are taxed at a rate of 1% of the total value, land and buildings included. The proposed reform would expand the geographical scope of the tax.

The Treasurer argued that the change would help curtail land speculation by forcing those who own land to either develop it or sell it to someone who would. It is hoped that this would put a dent on Australia’s growing housing shortage. Although this is a brilliant policy prescription, Australia could have gone one step further by dropping or reducing taxes on buildings and shift the bulk of the property tax burden on to the land. As Henry George accurately predicted, the land tax would discourage land hoarding, bring more land into the market and drive down prices. However, keeping a tax on buildings may discourage construction and therefore restrict the supply of homes.

The reform is a great step in the right direction, but why stop there?