抄録
Capital gains tax on land performs two functions. Firstly, it is useful to achieve equitable condition of income distribution or tax burden compared with income of other resources. Secondly, it makes a contribution to the supply of land which promotes social efficiency; while the best return to individual may be synonymous with the best return to the society, this is offen not the case.
In this paper, I argue that the reasonable rate of capital gains tax should be dicided on the so called public choice theory in which the above two functions are taken into consideration.
(1) First function; Equity
To discuss reasonable tax rate in the light of equity, I classify capital gains into three categories; (a) capital gains caused by general land price increase, (b) capital gains caused by scarcity or increasing demand of land, and (c) capital gains caused by attributable to externality
(1) Here I define (a) as capital gains caused by general land price increasing rate (g1) performed when returns from land (capital gains plus income gains) are equal to returns from other assets such as time deposit which could be owned by everyone.
The calculation of g1 is shown by the following formula
r=i+g1→ g1=r-i
where r is a returning rate of other assetsi is a rate to land price of income gains (or benefits) which is acquired by land use.
(2) The classification between (b) and (c) is difficult. Because, if the concept of externality is extended as it include pecuniary externality, (c) include the most part of (b), Therefore, I replace (b) and (c) with capital gains caused by attributable to externality and other causes ( (b) ') .
Landowner take more profit by (b) ' than one who owns other assets such as time deposit.
(3) In the light of equity, I propose that the tax rate of (a) should be a rate performed when it's tax burden is equal to that of income of other resourses, and the tax rate of (b') should be higher than the tax rate of (a) .
(2) Second function; Efficiency
An effect of capital gains tax on land is negative to land demand, particulary to speculative demand. Because, the capital gains tax decreases expected returns of land, therefore it decreases land value.
An effect to land supply of capital gains tax is indistinctness. Because, while a decrease of land value by capital gains tax bring about an increase of land supply, the capital gains tax has an effect of supplyfreeze which is due to landowner's action which he seek interests caused by deferring payment taxes through postponning a sale of land.
Consequently, an effect of capital gains tax to land price and land transaction quantity is indistinctness.
(3) Public choice
I propose that a choice of tax rate should be performed according to Fig. 1.
In Fig. 1, an origin is a reasonable tax rate of capital gains on land in the light of equity, a vertical shaft is a degree of bias from the origin (or a degree of inequity) in one tax rate (t) ... ‹y (t) ›, a transversal axis is amount of the increasing land supply caused by changing tax rate from the origin to one tax rate (t) ... ‹x›. A curve AA' is a trade-off curve between y (t) and x. In Fig. 1, y (t*) and x* are choiced, therefore a optimal tax rate is t*.
(4) Conclusion
In Fig. 1, I suppouse that the tradeoff curve AA' is exactly drawn. But the trade-off curve AA' is not exactly drawn because of indistinctness of the effect to land supply of capital gains tax. Therefore, a change of tax rate from the origin is offen brought about only inequity
I conclude that, when the trade-off curve AA' is indistinctness, the reasonable tax rate of capital gains on land in the light of equity (the origin) should be choiced.
