Idle land tax vs. real property tax

(Note: this is my article for "People's Brigada News", June 12, 2010)

One of the important debates in government and political philosophy is how to treat productive resources (people, land, buildings, etc.): should they be penalized with high taxes or be rewarded with zero tax.

The dominant thinking in many governments around the world including the Philippine government, is to take the former view, that is, to tax productive resources. One purported objective of this policy is to raise more tax money so that government can subsidize the poor, including the less productive people and resources.

I believe that it should not be the case. That governments should respect the result of hard work, that governments should encourage hard work and productive resources should therefore, be rewarded with minimal if not zero taxes and fees.

In many parts of the country, many areas are idle and underutilized. These lands should be penalized with idle land tax, while productive lands, whether for forestry and various crops, whether residential villages or commercial/industrial projects, should be rewarded with no income tax or no real property tax.

When a land is full of agricultural crops (grains, vegetables, fruits), that means (a) food supply is augmented and increased, resulting in stable and lower food prices, (b) jobs are created, from manual laborers to agricultural researchers and marketing people, and (c) profit and surplus is created and accummulated. These alone create welfare for society so that some welfare programs of governments that are financed by taxes can be reduced if not abolished.

When idle land tax is imposed, owners of idle and underutilized lands will have two options: develop and improve their land to escape paying the tax, or sell their land to other people and investors who can make the land productive. Either way, this will mean more jobs to be created, hence solving the high unemployment and underemployment problem, and more food, housing, schools, shops and other goods will be produced.

There are concerns and questions of "Who decides what is idle and what isn't? What's the difference between a piece of property that is a private nature reserve and idle land?”

It is easy to distinguish idle land from those which are not. A land full of trees (natural or plantation forest), various crops, farm animals, houses and villages malls and industrial zones, is not idle. A land full of cogon and other grasses with no grazing activities is idle; it should be taxed. A land full of shrubs and vines with no parks is idle; it should be taxed.

Real property taxation very oten has one ugly characteristic: land and buildings that create the most number of jobs per square meter of space are also those that are heavily taxed. Like tall buildings, malls and factories. This should be corrected.

Some people think that golf courses are a waste of land, diverting land away from more food production. Hence, these lands should be heavily taxed. That is one side of the coin. The other side is that golf courses and other tourism projects create lots of jobs to people – gardeners, caddies, restaurant and hotel staff, building maintenance staff, and so on. When people have jobs, they can better take care of their households, they can have resources to bring their kids to private schools, etc.

We should encourage industriousness and hard work, discourage idleness and laziness. Taxation is one tool that governments use to influence behavior of the people. Government taxation and regulation therefore, should target the lazy and irresponsible people. Government should also refrain from hiring too many employees because taxation and regulation are not exactly useful and productive work.