Good analysis "Site-value tax" V "full-value tax" by Ronan Lyons I.T. April 26 2012

Site-value tax easier to implement and better for economy

He makes some interesting points which I had not heard before.

Firstly, there should be no ongoing exemptions from a property tax, only deferrals. For those who are property-wealthy but income-poor (such as older couples) the State can wait until they ultimately sell the property and then take the fair amount.


The problem with income- based exemptions is that they turn a property tax into something suspiciously like an income tax.

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It’s also possible to ease the burden on those who bought at the peak through a transitional arrangement such as tax credits against their property tax bills that must be used by 2020.

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But the main point of the article is advantages of a site-value tax over a full-value tax

Another excellent piece of writing by Ronan. The part that I can not get my head around is whether the person who lives in the house with the big garden should pay twice as much as their neighbour with the smaller garden? Is the value of a one acre site to build one house twice as valuable as a half acre site that would also get permission for one house?

We have a great opportunity to create a fair property tax system. But is seems we will just take the lazy option. It would be comical if it weren't so serious.

Firstly, there should be no ongoing exemptions from a property tax, only deferrals. For those who are property-wealthy but income-poor (such as older couples) the State can wait until they ultimately sell the property and then take the fair amount.
The problem with income- based exemptions is that they turn a property tax into something suspiciously like an income tax.

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Thank God somebody agrees with me on this. It makes no sense to exempt someone from a property (Wealrh) tax on the basis of low income!. Extreme example would be the person living in a large mortgage free property on a relatively low pension. they obviously can't afford to pay the annual wealth tax, but as the tax is levied on the asset rather than the income the amount should accumulate and be repaid when the property is sold or passed on after death/other.

Property Tax

I agree with ontour ... surely the person that has a large back garden has already paid a premium when purchasing there home for the large garden ...how can it now be fair to tax them more ...?

Two houses beside each other one with 100ft garden the other 30ft garden. At time of purchase Buyer A paid 500k (100ft garden) Buyer B 400K (30ft Garden) ... that an extra 100k mortgage on the head of buyer A , and now they want buyer A to pay much higher property tax also ...!!!
This is surely a case of moving the goalpost after the shot is taken.

The value of the site would not necessarily increase pro-rata with size. i.e. a house on a 2 acre site would not be twice the value of a 1 acre site. Value broadly relates to the building footprint & location. larger garden would add value, but not at the same level as actual build element of the site.

Codogly said:

I agree with ontour ... surely the person that has a large back garden has already paid a premium when purchasing there home for the large garden ...how can it now be fair to tax them more ...?

Two houses beside each other one with 100ft garden the other 30ft garden. At time of purchase Buyer A paid 500k (100ft garden) Buyer B 400K (30ft Garden) ... that an extra 100k mortgage on the head of buyer A , and now they want buyer A to pay much higher property tax also ...!!!

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Also Property B (smaller garden ) might have no mortgage or the mortgage paid off whereas Property A ( bigger garden ) might be carrying 200k of negative equity so the liability ( Property A) would be taxed more than the asset ( Property B) !!!!!!!!!!

I think the point from Ronan Lyons is that it is not an income tax or any other type of tax such as a wealth/equity tax. People can do some financial engineering to have mortgage on a property even though they have the funds to pay it off. The amount of a mortgage does not indicate that the person needs to have a mortgage and the same is true of negative equity.

It is still difficult to figure out the big garden problem. One of Ronan Lyons points is to encourage the efficient use of land and therefore smaller gardens. It will also be difficult to have a tax where the level of taxation reduces as the site size increases as this will be pandering to the wealthy.

I really feel sorry for people who bought the ground floor apartments and will have to pay all the site tax - thankfully I opted for the penthouse !

44brendan said:

Thank God somebody agrees with me on this. It makes no sense to exempt someone from a property (Wealrh) tax on the basis of low income!. Extreme example would be the person living in a large mortgage free property on a relatively low pension. they obviously can't afford to pay the annual wealth tax, but as the tax is levied on the asset rather than the income the amount should accumulate and be repaid when the property is sold or passed on after death/other.

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A bit like this proposal (without the low income tax bit )

Low income tax – High inheritance tax

I must be the only person who can't understand the rationale behind property tax.

Let's see...
- one earns and pays tax -in Ireland quite a progressive tax.
- with the money that one doesn't spend on,say, booze,fags, golf,flash cars etc one buys a house.
- one pays all sorts of taxes on this house VAT and until recently quite high stamp duty.

Having done all this many people feel it right that the owner of this property pays a further tax -not only for paying for local services - but as a source of general revenue for a govnt.

Why not then tax people for the money they keep in the bank(not the interest but the capital sum).
Mr ABC has a house worth 500k but must pay a new tax. Mr XYZ keeps it in the bank and pays nothing.
Makes no sense to me, especially as ABC may be paying a 500k loan off his 500k so-called asset.

two reasons, the first is that there is a whole range of services provided by the government that are associated to house like planning, paths, sewage, water etc. Some of this can be charged based on use but others will be in proportion the the size or the site / house. It is about creating a tax that has stable revenues where there is 'some' correlation to a producer / consumer pays principle.

The second is that savings can easily leave the country and find a home in a more tax friendly location, it is tougher to move your house abroad. It would also encourage people to hoard cash which has many negative impacts.

If the first reason was true then the tax should be based on the number of people in that property which would, indeed, mean some correlation between payment and usage of services.

As regards the second part of the second point about "hoarding cash which has many negative impacts"- I would have thought penalising someone spending money on property but not penalising the hoarding the money itself would encourage people to,well, hoard it.

Why buy the best property one can get -only to pay more tax than the guy who decides to buy a smaller place and spend the spare cash on holidays abroad ? Especially when buying a bigger or better property means paying off a larger loan.

oldnick said:

...... but not penalising the hoarding the money itself would encourage people to,well, hoard it.

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I wasn't clear. I was referring to physical cash. If the money in the bank is taxed then people are encouraged to stick it under the mattress or send it abroad. There are lots of reasons to encourage people to spend their savings such as increasing domestic spending. There are also lots of reasons to encourage savings to provide a base for bank lending.

oldnick said:

Why buy the best property one can get -only to pay more tax than the guy who decides to buy a smaller place and spend the spare cash on holidays abroad ? Especially when buying a bigger or better property means paying off a larger loan.

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One of Ronan Lyons points is that it would encourage the most efficient use of land. We should all live in houses that fitted our minimum space requirements. A property tax based on the site/property size will encourage smaller built areas, less sprawling cities etc. What about me getting a garden to grow vegtables though !