Hickey on land tax

May 3rd, 2016 at 10:00 am by David Farrar

Bernard Hickey writes:

The benefits of a 1 per cent land tax on that engorged base of land values shouldn’t be sneezed at either. It would generate $6.7 billion of tax revenues that would allow either income taxes to be cut across the board or for the GST rate to be cut back to 10 per cent.

Key could engineer a massive new tax cut switch that would help address the housing affordability crisis and reset the incentives for business investment in one swoop.

This is key. A land tax that increases overall tax revenue for the Government should be resisted. A land tax which allows other taxes to be cut (especially income taxes) is a different proposition.

A 1% land tax would allow the top tax rate to go from 33% to 27%, the third rate from 30% to 24%, the second rate from 17.5% to 12% and the bottom rate from 10.5% to 5%.

The politics of it would be awkward, but not insurmountable. It would be progressive tax (ie, it hurts more as wealth levels rise) that falls more heavily on some more than others, in particular richer and older people, and especially those on New Zealand Superannuation.

However superannuation is calculated on average after tax income, so they would get a big boost.

The benefits are obvious. It would finally send the right signals to investors, that capital gains are not completely tax free, that more productive and intensive use of land makes sense, that land banking does not make sense, and that investing in equipment, research and development would be as sensible as gearing up to buy land.

Most taxes reduce whatever is taxed – income taxes reduce labour, capital taxes reduce investment, consumption taxes reduce consumption. A land tax can’t reduce land – instead it incentivises better economic use of land.

Land tax vs stamp duty

April 28th, 2016 at 7:00 am by David Farrar

The Herald reports:

A top New Zealand property expert opposes a land tax and says a stamp duty is a far better option.

Dean Humphries, a national hotel broker and a former Auckland University lecturer, was responding to PM John Key talking of a land tax and said that would not resolve the issues around foreign buyers purchasing houses here.

“Stamp duty is a no-brainer and could bring in tens of millions of dollars annually. Land tax is the most draconian thing I’ve ever heard of. Where does the Government get their advice from? Stamp duty is so easy because you pay up front at the time of purchase and just a percentage of what you’re paying. It’s just the easiest thing to do and the tax can be used for a multitude of things,” Humphries said.

Key is threatening to apply a land tax to foreign-based house buyers if there is evidence they are pushing up New Zealand house prices – and it could also apply to Kiwis abroad.

Actually a land tax is better, in my opinion (and that of Tax Working Group).

A stamp duty can be avoided by having a trust purchase the land, and then just changing the trustees. Also stamp duty would encourage people to never sell their properties, while a land tax encourages people to use their properties (not land bank them).

However this is all premature. The Government has said that IF the data shows there is a high proportion of foreign buyers, then a land tax is the best option.   The data may show that relatively few buyers are non-residents.

A land tax on foreign based land owners?

April 26th, 2016 at 10:00 am by David Farrar

The Herald reports:

In a dramatic shift in position, John Key is threatening to apply a land tax to foreign-based house buyers if there is evidence they are pushing up New Zealand house prices – and it could apply to Kiwis abroad.

I think a land tax on all land owners is a good idea economically. However only if other taxes are reduced so that NZers are not taxed more overall.

The evidence on foreign buyers could be just two weeks away.

A land tax to dampen demand by foreign-based buyers would be a complete flip in the Government’s insistence that overseas speculation has not been a problem in the heated property market, and a switch from its focus on increasing supply.

The Prime Minister told the Herald any land tax could also apply to Kiwis abroad with property in New Zealand after an exemption period of perhaps three years away.

But such an exemption could potentially contravene New Zealand tax treaties with other countries.

If it did, the tax would apply at the same time to all foreign-based buyers who are tax residents elsewhere, including Kiwis abroad.

“Subject to our capacity to do so, New Zealanders living abroad would be exempt but you could do it for a period of three years at which point if they retained the property, they might have to start paying [the tax].”

Quite a novel approach – actually gather evidence to see how big a problem there is, and then decide based on the evidence.


Hickey on Land Tax

April 29th, 2015 at 2:00 pm by David Farrar

Bernard Hickey writes:

With Capital Gains Tax off the table, what’s the next idea boffins and politicians will turn to in the attempt to reduce tax incentives for rental property investors?

The 2010 Tax Working Group looked at a land tax. Arthur Grimes, a former Reserve Bank chairman, proposed it.

It is simple, clean, and he estimated a 1 per cent tax on the value of land would raise $460 million a year and cut land prices by 17 per cent if it was introduced up front.

And the price of land is the major driver behind house price increases.

It would prompt more intense development of land and also encourage land bankers to build, something the Reserve Bank and the Government say they want.

Farmers and iwi would not be thrilled, but it would be the sort of broad-based and low rate tax that works best.

So long as income and company tax rates were reduced to compensate, I support a land tax.

The case for taxing land

April 14th, 2015 at 12:00 pm by David Farrar

The Economist reports:

BUY land, advised Mark Twain; they’re not making it any more.


In fact, land is not really scarce: the entire population of America could fit into Texas with more than an acre for each household to enjoy. What drives prices skyward is a collision between rampant demand and limited supply in the great metropolises like London, Mumbai and New York. In the past ten years real prices in Hong Kong have risen by 150%. Residential property in Mayfair, in central London, can go for as much as £55,000 ($82,000) per square metre. A square mile of Manhattan residential property costs $16.5 billion.

That’s over $6,000 a square metre.

Incidentally that suggests the value of Central Park in Manhattan is over $21 billion!

Even in these great cities the scarcity is artificial. Regulatory limits on the height and density of buildings constrain supply and inflate prices. A recent analysis by academics at the London School of Economics estimates that land-use regulations in the West End of London inflate the price of office space by about 800%; in Milan and Paris the rules push up prices by around 300%.

Let them build up and out.

Zoning codes were conceived as a way to balance the social good of a growing, productive city and the private costs that growth sometimes imposes. But land-use rules have evolved into something more pernicious: a mechanism through which landowners are handed both unwarranted windfalls and the means to prevent others from exercising control over their property. Even small steps to restore a healthier balance between private and public good would yield handsome returns.

We see this in Auckland especially.

Second, governments should impose higher taxes on the value of land. In most rich countries, land-value taxes account for a small share of total revenues. Land taxes are efficient. They are difficult to dodge; you cannot stuff land into a bank-vault in Luxembourg. Whereas a high tax on property can discourage investment, a high tax on land creates an incentive to develop unused sites. Land-value taxes can also help cater for newcomers. New infrastructure raises the value of nearby land, automatically feeding through into revenues—which helps to pay for the improvements.

I’m a supporter of a land tax – so long as other taxes are reduced so that it does not increase the overall tax revenue. The best tax systems are road base and low rate.


The case for land tax

July 16th, 2013 at 1:00 pm by David Farrar

The Economist states:

new study by John Norregaard of the International Monetary Fund suggests that the average rich country, including all levels of government, raises under 5% of total tax revenue from annual levies on land or the buildings on it. The norm in middle-income emerging economies is lower still, at around 2% of all tax revenue (see right-hand chart). Including property-transaction taxes like stamp duty raises the total a bit but not by much. …

But, overall, property taxation plays a relatively small role.

That’s a pity. Taxing land and property is one of the most efficient and least distorting ways for governments to raise money. A pure land tax, one without regard to how land is used or what is built on it, is the best sort. Since the amount of land is fixed, taxing it cannot distort supply in the way that taxing work or saving might discourage effort or thrift. Instead a land tax encourages efficient land use.

That’s why I support a land tax – it is the least distorting tax. Taxes on income discourage work. Taxes on capital discourage investment. Taxes on goods and services discourages consumption. But what does a tax on land do?

Property developers, for instance, would be less inclined to hoard undeveloped land if they had to pay an annual levy on it. Property taxes that include the value of buildings on land are less efficient, since they are, in effect, a tax on the investment in that property. Even so, they are less likely to affect people’s behaviour than income or employment taxes. A study by the OECD suggests that taxes on immovable property are the most growth-friendly of all major taxes. That is even truer of urbanising emerging economies with large informal sectors.

I only support a land tax, if other taxes were reduced so that the overall level of taxation doesn’t increase. As The Economist states, a land tax is one of the growth-friendly forms of tax – far more than income taxes.

Land profits

June 1st, 2013 at 3:00 pm by David Farrar

The Herald reports:

A land banking business with a big piece of residentially zoned real estate on Auckland’s outskirts has made more than $6 million a year for almost two decades – doing nothing.

QV records shows Yi Huang Trading Company owns 39 Flat Bush School Rd, which it bought in 1995 for $890,000.

Now, this 29ha block is listed on the market for $112.6 million, promoted as “the land of opportunity, vacant but close to Barry Curtis Park”. …

Developers say Auckland Council officials have blamed them for building high-priced houses but they say land speculators took a bigger toll because they were inactive and reaped rich rewards for locking land away from being put to productive purposes. If it achieves the full asking price, then each year the company has held the land it made $6.2 million, they said, for doing nothing.

There are two solutions for this.

The first is free up the land supply. Because there are so few areas that can be used for residential development, it has produced massive profits for those land bankers. By not freeing up land supply, you encourage them to land bank.

The other solution is a land tax. That will encourage land to be used for productive reasons, not just be banked up for future use.

Shewan on taxes

June 30th, 2012 at 9:41 am by David Farrar

James Weir at Stuff reports:

New Zealand should move to a low-level land tax and cut personal tax rates, retiring PricewaterhouseCoopers chairman John Shewan says.

He also says the “elephant” of rising national superannuation costs means a rise in the GST rate to 17.5 per cent in coming years was “almost inevitable”.

Shewan had his last day as PwC chairman yesterday. PwC partner Jonathan Freeman has been elected the new chairman.

Shewan said a land tax rate should be low, perhaps 0.5 per cent of land value each year, and be assessed like a city council rate, with an offsetting fall in the personal tax rate of a few percentage points.

“I still think that is the right thing to do,” he said. That idea was rejected by the Government when proposed by the Tax Working Group, which Shewan was part of. “I regret that,” he said.

High taxes on personal incomes were the most damaging to the economy for growth and jobs. The most efficient taxes were those people could not avoid, such as tax on spending like GST or tax on land “because you can’t hide it”.

I agree with a land tax, so long as other taxes are reduced to compensate. Land tax is both unavoidable, but also encourages better economic use of land, unlike income taxes which actually discourage labour.

New Zealand’s tax system was a “complete wreck” in 1984, but was now one of the strongest and most robust in the world.

The basket cases of Europe, such as Greece, Italy, Spain and Portugal, shared a common thread of poor tax systems, with high levels of tax evasion and fraud. “They regard paying tax as voluntary,” he said.

In contrast, in New Zealand most felt they should pay their fair share of tax. Shewan said he was “very proud” of the tax system here.

It is one of the better ones around, so long as we resist the stupidities such as GST exemptions for fresh fruit and vegetables.

Hickey on Tax

July 17th, 2011 at 2:23 pm by David Farrar

Bernard Hickey writes in the HoS:

Prime Minister John Key says a capital gains tax is one of the “third rails” of politics in New Zealand – and anyone who touches it will, in political terms, be killed instantly.

This week Labour touched that rail and received only an invigorating tingle rather than the shock of their lives.

That may be a premature call.

The debate is welcome, but Labour could have done much better and should be trumpeting how such a tax would shift investment into more productive export industries and create higher-wage jobs to keep young New Zealanders here.

Instead, it has watered down that message by proposing a capital gains tax that is full of exemptions and then used the revenues to shuffle tax from the very rich to the poorest. …

The exemptions for the family home, for residences in family trusts, for Maori land, collectibles and gambling winnings will be welcomed with open arms by budding tax accountants and lawyers.

These will be high-paid jobs, but they’re not the sort we want.

The exemption for gambling is interesting. If you take a chance by investing in the (initially) unproven company Xero, and make a capital gain you’ll be taxed on it. But if you take a chance at a casino and win the same amount of money, you’re exempt from tax.

A land tax would have been much more efficient, simple and lucrative.

The idea put forward to the Tax Working Group in late 2009 by Motu economist Arthur Grimes for a 0.5 per cent land tax with a $50,000 a hectare tax-free threshold and the ability to defer payment until sale would have raised about $2 billion a year.

I support a land tax, so long as income tax rates are cut to compensate.

Do dairy farmers really only pay 3% tax?

May 18th, 2011 at 2:49 pm by David Farrar

Stuff reports:

Inland Revenue Department figures provided to Labour revenue spokesman Stuart Nash show that, in the latest full year for which figures were available, the average tax paid by dairy farms was $1506 a year, despite an average Fonterra payout understood to be well over $500,000.

The 17,244 registered as being in the sector, including companies, trusts and individuals, paid only $26 million in tax.

This is such a bullshit story, I don’t know where to start. Here’s a few vital facts:

  1. The tax data is from 2008/09 and the Fonterra payout figure is from 2011. Epic fail. As I understand it commodity prices in 2008/09 were much lower, and most farmers in that year made a loss.
  2. The $500,000 is a revenue or turnover figure, not a profit figure. This is not comparing apples and oranges. A company can have a $500,000 turnover and a $30,000 profit. Turnover by itself is meaningless for tax purposes.
  3. The $26m in tax paid in 2008/09 only relates to tax entities classified as dairy farmers. Many dairy farmers are in the unclassified category which paid an additional $1.5b in tax.
  4. Labour and the Dom Post divided the $26m by the 17,244 tax entities registered as dairy farming. Many of these are defunct shelf companies etc. The actual number of dairy farms is thought to be around 11,500.

MAF have some data on the average dairy farm. In 2008/09 they found the average farm had $750,000 income, $529,000 expenses, $235,000 interest and depreciation resulting in a loss of $6,300. Their average tax bill was $18,600 so profit after tax was -$25k.

So the story is a total beatup. They commit two cardinal sins. One is comparing revenue from one year against tax of two years earlier. You’d be thrown of of accountancy school for that. Equally bad is comparing turnover to profit. A mistake that only people who have never worked in business would make.

Having said all that, I am a supporter of a land tax (subject to a reduction in income taxes to compensate). A land tax is near impossible to avoid, very simpleto calculate and provides an incentive for land to be out to good economic use.

If Labour are serious about closing tax loopholes, then they should propose a land tax. It would over time boost NZ’s economic growth as it encourages better economic use of land.

Herald Maths

January 30th, 2010 at 12:18 pm by David Farrar

Some weird maths in the Herald:

Aucklanders would be hammered by a proposed land tax, with households facing an annual bill running into thousands of dollars.

According to conservative estimates, owners of the region’s 443,200 homes alone would have to give the Treasury an extra $443 million if they were subject to a 0.5 per cent levy.

Umm, if 443,000 homes will pay $443 million in a 0.5% land tax, then that is an annual bill of $1,000 on average – not “thousands of dollars”.

Remuera households could be paying $6500 each and those on the North Shore $1300-$4000 a year. Financier Mark Hotchin of Hanover could be paying almost $100,000 a year for his three-section block in Paritai Drive, Orakei, and Prime Minister John Key would be up for much the same on his slice of St Stephens Ave in Parnell.

Umm, The Herald itself in 2008 said that the St Stephens Ave house was valued at $6.8 million. Now not all of that will be land, but even if it is that would be $34,000 a year in land tax – not the $100,000 the Herald claims.

Tax Working Group Final Report

January 20th, 2010 at 1:32 pm by David Farrar

The Tax Working Group have released their final report. It is a readable 73 pages.

They first cite three major problems with the current tax system:

  1. New Zealand relies heavily on the taxes most harmful to growth – particularly corporate and personal taxes on capital income.
  2. Differences in tax rates and the treatment of entities provide opportunities to divert income and reduce tax liability. This disparity means investment decisions can be about minimising tax rather than the best business investment.
  3. There are significant risks to the sustainability of the tax revenue base: Compliance is likely to be affected by perceptions that the system is unfair. International competition for capital and labour, especially from Australia, will impact on the sustainability of corporate and personal tax rates.

They have 13 recommendations, in order:

  1. The company, top personal and trust tax rates should be aligned to improve the system’s integrity.
  2. New Zealand’s company tax rate needs to be competitive with other countries’ company tax rates, particularly that in Australia.
  3. The imputation system should be retained.
  4. The top personal tax rates of 38% and 33% should be reduced as part of an alignment strategy and to better position the tax system for growth.
  5. Base-broadening is required to address some of the existing biases in the tax system and to improve its efficiency and sustainability
  6. Most members of the TWG have significant concerns over the practical challenges arising from a comprehensive CGT
  7. The majority of the TWG support detailed consideration of taxing returns from capital invested in residential rental properties on the basis of a deemed notional return calculated using a risk-free rate.
  8. Most members of the TWG support the introduction of a low-rate land tax as a means of funding other tax rate reductions.
  9. The following targeted options for base-broadening should be considered for introduction relatively quickly:
    1. Removing the 20% depreciation loading on new plant and equipment
    2. Removing tax depreciation on buildings (or certain categories of buildings) if empirical evidence shows that they do not depreciate in value
    3. Changing the thin capitalisation rules by lowering the safe harbour threshold to 60% or by reviewing the base for calculating this measure.
  10. GST should continue to apply broadly. There should be no exemptions.
  11. Most members of the Group consider that increasing the GST rate to 15% would have merit on efficiency grounds because it would result in reducing the taxation bias against saving and investment.
  12. There should be a comprehensive review of welfare policy and how it interacts with the tax system, with an objective being to reduce high effective marginal tax rates.
  13. Government should introduce institutional arrangements to ensure there is a stronger focus on achieving and sustaining efficiency, fairness, coherence and integrity of the tax system when tax changes are proposed.

There is little in these recommendations I disagree with, and I hope the Government implements most of them.

The removal of the ability to claim depreciation on buildings as a taxable expense is long overdue, considering almost all buildings actually appreciate in value.

Some of the other recommendations such as a deemed rate of return on investment properties and/or a land tax will help prevent future housing bubbles.

And dropping income tax rates is of course highly desirable.

While I would like to see GST increase, I am not sure that a net revenue gain of just $200 million (after compensating lower income families) from going to 15% makes it worthwhile.

The TWG make clear that they all agree that the status quo is unsustainable and not an option. The Government has pretty much said they agree. So the question is not whether there will be some reform, but how much.

Of course the tax side is half the equation. Maintaining discipline on the spending side is crucial also, and there is more there to be done also.

Is it bye bye to LAQCs?

January 2nd, 2010 at 4:09 pm by David Farrar

James Weir writes in the Dom Post:

The Government has a chance to lift the economy in 2010 with big changes on “crazy” tax breaks for investment property, according to NZX chief executive Mark Weldon.

“Tax is the No1 change,” Weldon said.

The Government has an unprecedented chance to take action and send signals this year.

“That would make meaningful long-term differences to our wealth, growth and standard of living.”

I agree, that some tax reform is much needed.

Investment property should be the target, such as dumping loss attributing qualifying companies (LAQCs) which allowed some wealthy people – including some on the Government’s own Tax Working Group – to pay no tax at all, Weldon said. Weldon is a member of the Tax Working Group.

“There is no difference between a rental property, a share, bond or bank account, so treat them all the same [for tax],” he said. If they were all treated equally for tax purposes, then money would go where it should, rather than chasing tax breaks.

Weldon makes a good point. Far too much property investment is because of the tax breaks. And this means capital is tied up in residential property insteaad of other areas which could grow the economy more.

But capital gains taxes – taxing a house when it was sold at a profit – showed mixed results around the world.

“You are a lot better off with a low-level land tax. It is administratively efficient.”

Such taxes could be imposed at, say, 0.2 per cent of the land value, raising a few hundred dollars a year, which would not upset house values.

Raising such a property tax would allow for personal income tax rates to be brought down and might allow company tax rates to be reduced if Australia dropped their company tax rates further.

I do not support a capital gains tax but do support a land tax, if income tax is reduced to compensate. A land tax would be administratively very simple –  Councils already levy rates on properties, so it would be merely added to that.

If listed companies were the same size as the value of all rental properties in New Zealand, shareholders in listed companies would theoretically pay about $11b in tax.

In stark contrast, investors in rental properties actually got back $150 million from the government from tax breaks.

This is the nub of the problem. Over $100 billion invested in residential property, and the “investment” generates a loss or effective subsidy from taxpayers.

“You look at that imbalance – you are taxing the productive sector and not the unproductive sector,” he said. Weldon questioned the concept of allowing depreciation on rental properties which was supposed to be for things that wore out. There was no depreciation on shares or bonds, which are supposed to go up in value.

That is a change worth considering also – no depreciation on residential property. One can claim 3% a year depreciation off tax, which is a lot of money. Now eventually when you sell, the tax claimed has to be repaid – but you have had the benefit of that money interest-free for possibly a couple of decades.

Has any residential property ever actually decreased in value, such that depreciation makes economic sense? Not over any extended period of time. In fact they constantly appreciate.

Tax Working Group

October 5th, 2009 at 10:00 am by David Farrar

A summary and papers from the third session of the Tax Working Group are online at Vic Uni. Some extracts from the work:

Capital Gains Tax:

  • Treasury estimate a realisation based CGT on residential property excluding owner occupied would bring in $1.5 billion a year. This would allow the top income tax rate and company tax rate t be lowered to 30c.
  • CGT would make tax system more progressive as the wealthier benefit more from it (and the wealthier would benefit most from drop to 30c income tax so overall effect on progressivity might be limited)
  • IRD say an accrual based CGT not viable but an realisation based CGT may reduce economic efficiency as it will distort decisions on land-use decisions
  • Overall IRD say the benefits of a CGT would not outweigh its disadvantages
  • Some worry that as a CGT is so progressive, it might encourage wealthy people to leave NZ. Recommended that if there is a CGT, it apply at same levels as income tax for individuals

Land Tax

  • Very efficient as land is immobile. More efficient than a property tax.We have much lower land and property taxes than most countries.
  • A land tax would lead to a one off decline in value of land, which would increase home ownership rates.
  • The taxable land base is $460 billion so a 0.1% annual tax would raise $460 million a year.If you exclude agricultural land, forestry land and owner occupied land then revenue would be only $160 million a year.
  • Average farm land value is $1 million and average residential land value $200,000 so a 0.1% land tax would cost average farmer $1,000 a year and average home owner $200 a year.
  • Retired persons might be most disadvantaged as they benefit less from reductions in income tax to compensate
  • A land tax will bring foreign owners of land into the tax base, and has high degree of integrity as hard to avoid.

Rental Property

  • The tax revenue from the $200 billion rental property sector is negative and has trended down since the 39% tax rate came in.
  • An option is to remove income tax from rental of land, and also remove deductibility of expenses relating to the investment, replacing both with income tax on a risk free rate of return on the equity of the property.
  • Also discussion on whether rental housing and commercial properties really do depreciate, and should such depreciation be able to be claimed off tax. Depreciation on buildings is worth $1.3 billion a year of foregone income.

I am pleased to see the group backing away from a capital gains tax, but more favourable towards a land tax. I think the land tax (so long as income tax is cut to compensate) has considerable merit. I also think there is merit in concluding most buildings do not depreciate (in fact they appreciate massively) and disallowing depreciation in future. Again this is contingent on the overall level of taxation not increasing.

The website above, has papers which go into great details of the pros and cons. One paper looks at a 0.5% property tax if there is elastic supply. It says:

  • 33% income tax rate could drop to 30%
  • 20% income tax rate to around 18%
  • Average house price drop from $384,500 to $378,000
  • Average rent from $11,850 to $12,700
  • A 1% land tax or a 0.55% property tax would raise $4.6 billion

Hat Tip: Bernard Hickey

Small on Tax

August 21st, 2009 at 9:00 am by David Farrar

Vernon Small writes on tax:

If it does not move, tax it. If it can move, try to tax it less. If Treasury used single syllable words, that is how it might define its view of revenue raising.

That’s a great summary. And if we want to have decent economic growth in future we do want a tax system that drives people and investment offshore.

Put simply, since people can leave or  go elsewhere – and so can investment  dollars – they should be taxed the least.

On the other hand, local consumption – which attracts GST – can by definition only happen here.

Similarly, stuff that is nailed to the ground is relatively immobile, though the investment dollars that build and develop it are slippery.

GST is also a lot harder to avoid than income tax.

Much has been made of ministers “leaving the door open” to a capital gains tax, but that has long been a poisoned chalice. More pertinent is the group’s request for officials to also look at land or property tax.

By coincidence on  the Auckland-Wellington leg of the flight back from Hawaii, I was seated next to a prominent economist and the pros and cons of a land tax was part of the discussion. It is an interesting area to look at (on the proviso that any new tax be matched by reductions in other taxes).

But the economic case for a tax on the unimproved value of land are intriguing – though it would require a big sell to property owners, especially older voters, some farmers and Maori who are asset rich and income poor (with high levels of equity in their properties) and would take the biggest hit from any consequent fall in property prices.

A small land tax could take some of the heat out of the housing bubble, with less need for interest rate hokes in future.

A small tax on land alone could fund a big move in personal tax rates.

A 0.1 per cent tax – $460 million on the $460 billion of privately-held land – would offset the lost revenue from cutting the 38 cent rate to 33 cents.

Starts to get appealing.

It would genuinely broaden the tax base, taxing foreigners who own property in New Zealand, and be likely to push more investment into areas other than property while helping curb a new housing boom.

The inevitable drop in property values would be a two-edged sword. Home ownership would become more affordable, and the extra impost would give owners of bare land an incentive to develop it.

It would arguably be relatively progressive, because wealthier people tend to have more valuable property holdings. And it would provide far more predictable revenue than a capital gains tax.

There is also a ready-made framework in the local-body rating system, to help keep compliance costs down.

I look forward to some of the economist blogs discussing the pros and cons of reducing income tax and instituting a land tax in a fiscally neutral manner. So far the pros seem pretty strong.

Even so, it is hard to make the leap of logic that would see National – the natural home of the landed – slap a new tax on the land beneath their voters’ feet.

It comes back to how seriously you want to close that gap with Australia.