Sunday, 28 November 2010

The Laffer Curve, GDP and the rental value of land

Here's the Power Point presentation I've been working on for the past couple of weeks:

My latest blogpost: The Laffer Curve, GDP and the rental value of landTweet this! Posted by Mark Wadsworth at 18:24

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10 comments:

AntiCitizenOne said...

You missed out privately collected taxation.

28 November 2010 at 22:52
AntiCitizenOne said...

sub

28 November 2010 at 22:52
AntiCitizenOne said...

Oops no you didn't.

28 November 2010 at 23:08
Physiocrat said...

How does the Laffer curve apply to a tax on the rental value of land?

29 November 2010 at 00:55
Mark Wadsworth said...

AC1, exactly.

Ph, do you mean "all taxes come out of rent" or do you mean "what happens to site rental values when they are taxed"? The first topic is covered in the presentation and the answer to the second is "nothing much" (so is not covered).

29 November 2010 at 07:45
Physiocrat said...

If site rentals are taxed, then vacant land is brought onto the market and rental values will tend to fall for that reason. On the other hand, if existing taxes are reduced or abolished, site rents will tend to rise, as tenants will have more left over which will be taken in rent. There are two tendencies here, working in opposite directions.

29 November 2010 at 07:56
Mark Wadsworth said...

Ph: "vacant land is brought onto the market and rental values will tend to fall for that reason."

Wrong.

Firstly, the demand for rented land is price elastic, so a 2% increase in amount available only leads to a 1% fall in price. So while the rent payable for one individual site goes down, the total amount of rent collected still goes up.

Secondly, the presence of a vacant/derelict site depresses the rental value of those around it. So conversely, the absence of vacant or derelict sites pushes up the rental value of surrounding sites.

But there are other factors that might go the other way, so the most reasonable assumption is "no particular impact either way".

29 November 2010 at 08:46
AntiCitizenOne said...

Can you add a graph with the private and public tax at the current tax rates?

29 November 2010 at 22:59
James Higham said...

Too intelligent over your way.

29 November 2010 at 23:21
Mark Wadsworth said...

AC1, see slide 13 and 14 for 'privately collected taxes', which are themselves subject to public tax in some cases.

JH, says you!

30 November 2010 at 07:17

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