Reader's Letter Of The Day

The FT have published a fine riposte to the bizarre article about the Hong Kong tax system which I covered last week:

Sir, David Pilling is critical of Hong Kong’s land leasing system (“Hong Kong’s land system that time forgot”, Comment, March 10). While there may be room for greater transparency and other improvement, I submit that the fundamental idea is sound. Government should be financed from land rents.

Mr Pilling writes, for example: “By this means, Hong Kong has conjured a cheap and gleaming transport system seemingly out of nothing.” Precisely. A transport system makes land more valuable so, if it is worth building, it can and should be paid for out of the increased land rents it creates.

If “Hemlock” compares Hong Kong’s property tycoons to “feudal lords granted the right to gather tax from the peasants”, their equivalents in New York and London can be called feudal lords collecting tax from the peasants without even having to forward much of their revenue to the sovereign, who must therefore levy other taxes on the peasants.

A classic statement of the case for land value taxation is – instead of paying rent to a landlord and tax to the state, why not pay rent to the state, and no taxes?* Hong Kong comes closer to this ideal than most places.

Nicholas D Rosen, Arlington, VA, US.

Spotter's badge: Derek

* The Faux Libertarians will retort that it is possible to have a system whereby you pay next-to-nothing in publicly collected taxes on income or ground rents to the government (in the narrower sense**), which is quite true of course, but what they overlook is that there is an irreducible minimum of [taxes + ground rents] which will always be collected, so all that happens is that privately collected taxes (ground rents) would go up accordingly, so that would just result in even bigger transfers from the productive economy to land owners; from young people to older people etc.

The irony, as ever, is that about half the population (home owners with jobs in the productive economy) are simultaneously being robbed (via income tax, VAT etc) and being bribed with the Fool's Gold of ever rising house prices, to their overall disbenefit (their kids are priced out of home ownership, if nothing else).

** Quite how they are going to make this popular with pensioners is a mystery to me, as is why people insist that old age pensions can only be paid out of taxes on income and output. There is no earthly reason why they couldn't be funded out of taxes on land values and other government-protected monopolies. And please save yourselves the bother of playing the Poor Widow Bogey for the zillionth time.