Public policies on land use

Public policy affecting the four factors of production (land, labour, capital and enterprise) pays little attention to the importance of land for economic activity. For instance, we tax labour, capital, and enterprise, but we have neglected to tax land (to any meaningful extent). The public policy approach to land is to restrict use and decide what is permitted and is not permitted through different types of zoning. We put less focus on how land is actually used by people.

Because of this, we get negative externalities associated with land use, with large costs to society, such as derelict buildings and sites, low density sprawl, congestion and car dependency. If national and local governments embraced land taxes and congestion charges, they would turn these problems on their head. Taxes change the behaviour that imposes a cost on all of us.

I have previously written for RTÉ Brainstorm about the need for a land value tax. We need to incentivise people not to leave land idle or buildings derelict and ensure that their land is used efficiently for the benefit of all in society. Remember it is because of the community that the land is valuable in the first place, so there is a public rationale for intervention. Furthermore, because we have predominantly focused our tax interventions on labour, capital and enterprise, people reallocate money away from productive activities to store wealth in unproductive ones, such as houses and land. This does not necessarily mean we should tax more, just that we need to readjust our tax model and widen the tax base.

Collecting taxes at the local level will be for the betterment of local societies and will also help fund vital services at the local level. But we clearly lack leaders in this area. Paschal Donohoe has ruled out a significant increase in property tax and has signalled de-pegging it from market values. Such a step, I would argue, is not in the public interest. Even at the more local political level, politicians are crying out for more funds and argue about their local allocations from government. However, they fail to take responsibility for raising taxes and instead ensure the lowest rate of property tax is applied in their areas. This is just councillors talking out of both sides of their mouth. Unfortunately, it signals that local governments are currently not capable of assuming the responsibility that greater autonomy might bring. They need to step up.