Taiwan To Close Land Tax Loophole
The government’s proposed action is in response to those property developers who, instead of building on undeveloped land to provide much-needed residential properties, leave the real estate idle to profit from its untaxed rise in value, thereby contributing to inflationary property pressures.
Taiwan’s land taxes were a major cause of its economic success. In the 1950s and 1960s, Taiwan was transformed from an impoverished agricultural backwater to a thriving industrial state with one of the world's strongest economies. If the tax is applied to land value rather than the value of the harvest, then the land-value tax is not a burden on farmers, since it reduces the price of farmland, and does not add to the market rent of land.
A major strength of Taiwan's property tax system is its constitutionality. The implementation of the equalization of land rights is stipulated in the Constitution, rather than merely in laws that can be more easily changed or eliminated.
Taiwan, 1940s. Old Formosa was mired in poverty and fast breeding. Hunger afflicted the majority of people who were landless peasants. Less than 20 families monopolized the entire island.
A follower of Sun Yat-sen, the father of modern China and an adherent of Henry George, Chiang knew of the Single Tax. Borrowing a page from George via Sun, the new Nationalist Government of Taiwan instituted its "land to the tiller program" which taxed farmland according to its value. Soon the large plantation owners found themselves paying out about as much in taxes as they were getting back as Rent. Being a middleman was no longer worth the bother, so they sold off their excess to farmers at prices the peasants could afford.
Working their own land with newly marketed fertilizers, new owners worked harder. They produced more,
Taiwan began to set world records with growth rates of 10% per annum in their GDP and 20% in their industry. (Fred Harrison, Power in the Land, 1983)
New York City, 1920s. After World War I, many New Yorkers suffered from lack of housing. To solve the problem, Governor Al Smith borrowed a page from Henry George (who ran for mayor of New York City in 1886, finishing second ahead of Teddy Roosevelt, and again in 1897, dying four days before the election). Smith persuaded the New York legislature to pass a law allowing New York City for the next ten years to tax land but not the buildings on it.
New construction more than tripled while in other big cities it barely doubled. Not only was there more housing, and thus lower cost apartments, there were more jobs and higher wages for construction workers, and more business for merchants who sold goods to the employed workers.
Economic good times in New York came to an end, though, when owners in 1928 began to anticipate the expiration of the tax-shift law. (“How New York Solved Its Housing Crisis”, Charles Johnson Post, 1931?, Schalkenbach Fdn, Mason Gaffney, 2001) Some say that the drastic decline in building starts, not the stock market crash of 1929, was the real trigger of the Great Depression of the 1930s.
Watching land prices inflate in the 80's, followed by farm takeovers and slowed housing starts, land-focused econometricians predicted land prices to hit bottom in about 1990, then next around 2008.