I have previously discussed Hong Kong’s land tenure system, under which the land is publicly owned, but improvement owners have security of tenure in exchange for paying significant land rent. One result is that most working people don’t have to pay any sales or income taxes. Another is that land is efficiently used.
But there are a couple of concerns:
- Since Hong Kong doesn’t collect all the economic rent, speculation can still drive up the cost of housing as well as any activity which uses land (and they all do).
- Wealthy mainland residents are moving to Hong Kong to take advantage of the increased liberties which HK residents get, further driving up costs for local people.
Now we read that every HK has declared a sort of citizens’ dividend, every permanent resident will get HK$6,000 (US$773, currently). Bloomberg calls it a “handout,” but I think “share of economic rent” might be more appropriate. Opponents of the move say it will be inflationary, and certainly it could lead to higher economic rent, with speculation driving land costs even higher. Of course, if people expected the government to collect all the economic rent, speculation would not occur. While the cost of living might still increase, giving an equal dividend to every resident would tend to flatten the income distribution, helping the poor much more than the wealthy.