Rising Auckland House prices are really a tax issue

Rising Auckland House prices are really a tax issue Media Statement July 30, 2013 Rather than ban the buying of homes by people who pay tax in other countries it would be more sensible to impose on them a full ground rent on all urban and suburban properties, according to the New Economics Party. Spokesperson Deirdre Kent said that while it was heartening to see the Labour Party trying to control house prices, they should be focussing on the fact that homeowners who pay tax overseas are not paying enough tax in our country.  “They are coming to our country and expecting huge untaxable capital gains on their house when they only pay rates here”. “It is New Zealanders who have helped increase the value of the land they have bought so the rise in value should be captured by the public.  The best way to do this is not wait till they sell, but charge them a full ground rent every year. For urban sites it might be five percent or over of unimproved land value, depending on the zoning restrictions. (Ideally it should be by auction as this allows for the overvaluing of land at the moment.) This revenue should then be shared by national and local government and ground rent should replace rates.” She said it was the taxpayers of this country who paid for the schools, roads, parks, railways, street lights, community halls, businesses and organisations that gave the site its value. “It is the same when people paying tax in New Zealand go to Australia and buy a house or when John Key buys a house in Hawaii and expects to receive the capital gain without being a tax resident there. Imposing a charge on holding of land is an important way for countries to retain their integrity.” For further comment phone Deirdre Kent 06 364 7779 or 021 728 852      

Ground rents near Cornwall Park in Auckland

The Weekend Herald, Saturday July 27, has an article entitled “Paying for park users pleasure is a bitter pill”. It outlines the story of their recent ground rent hikes, where one occupant in Maungakieke Road had walked away from her $2.1million home after refusing to pay the $73,700 asked by the Cornwall Park Trust Board as her new annual lease. Her rent used to be $8,300 a year but was reviewedP1200771 in 2011. Another has had her ground rent rise from $3995 to $29,000. These dramatic rent increases reflect the change in land value over the last 21 years, the term of the lease. Well, I did a websearch on this and skimmed through the long legal decision of the Supreme Court (yes, 70 lessees had trooped from the High Court to the Court of Appeal then the Supreme Court challenging the way the trust had valued the land but had failed). Apparently the trust set restrictions on what could be built on the land and charged a ground rent of five to seven percent of the unimproved value. We in the New Economics Party have been talking a bit about how ground rents would be set in our proposed scheme where property owners can opt to have their land bought by Treasury using their tax vouchers, and we did some figures based on five percent for suburban properties. We thought ground rent should be set according to zoning and other restrictions. My first response to this article and to the court judgment is that there appeared to be little understanding either from the court or from the Weekend Herald reporter that the land has gained in value through the actions of the surrounding community and the local and central government not by the Cornwall Park Trust. Sure, these Maungakieke Road residents enjoy the privilege of living next to an amazing park, whose maintenance is paid for by their rents, but they also live in the grammar zone, a great selling point for Auckland houses. In fact an ad for a house on this leasehold land says “Zoned for top schools, Cornwall Park School, EGGs and AGS zones, Remuera Intermediate, near Newmarket, CBD, Remuera, Greenlane Countdown, shops, cafes and restaurants.” The Trademe website also confirmed the press report that there are plenty of houses on the market in the Cornwall Park vicinity. One at 24 Maungakieke Avenue with 5 bedrooms and 3 bathrooms is vacant and the grass looks extremely high. It has 1000 sq m section and is adjacent to Cornwall Park. So there is a big problem with current leasehold land, largely engendered by the fact that a Trust which deals with only one aspect of public life – the care of a city park – is charging five to seven percent of the land value, which is actually the percentage that government would charge if the land were publicly owned. The rising land values should not be privately captured but publicly captured to pay for schools, roads, rail, street lights, libraries, hospitals and parks.  And this revenue should be shared by all levels of government. There is a quite a lot of leasehold land in Auckland. Some is held by Ngati Whatua, Waterfront Auckland (a public body), Dilworth Trust. Many blocks of the Viaduct area, according to the journalist Anne Gibson, are owned privately by businessmen Trevor Farmer and Mark Wyborn. Both these high flyers are into property. The former is listed in the NBR as being worth $400 million in 2012 and the latter $240 million. Perhaps they too are extracting five to seven percent of the unimproved value? Nice if you can get it. Pity about the rest of us missing out. We pay for the infrastructure and that puts up the value of their land and therefore their ground rent!  

A thriving, vibrant economy is possible after fossil fuels – tax reform, currency reform and welfare reform

http://www.slideshare.net/deirdrekent/sustainable-economics-without-fossil-fuels-21 This slideshare show is now updated and made clearer. It is the first time it has been published on this site and represents a lot of feedback from our members. If others have a method of reforming the tax and money system in a way that is politically possible and in a way that doesn't shock the economy, we would love to know. Meanwhile this is a serious proposal. Feedback is welcomed.

Why not do monetary reform then land tax reform?

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What is your solution?

One of the questions we often get asked is why not do monetary reform first and then do other things later.

Positive Money NZ and its parent in UK have done wonderful work in teaching about the dysfunctional money system. There is no doubting that. They are reaching a wide range of people and describing what is wrong with the money system, how it leads to growing debt, wealth disparity and the growth imperative. We really recommend going to their website and seeing all the wonderful youtube videos and articles and links there. It is a great website.

But when we are in a political party we need to aim to get a thriving economy and that means jobs.

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Untaxing labour and sales is like unblocking a currency river

And when we think of where the money flows and why it doesn't flow into job creation if you fix the money system, we also need to think about the tax system.  Our party says it is time to untax labour and sales and to tax land and its resources. When we do this, all sorts of miracles occur.

Imagine having a currency where completely new rules apply. When using this new currency there is no tax on labour, sales or enterprise. No income tax, no GST and no company tax when using this money. Wow! What happens? Well employers realise that workers get 100% of their salary so they have a happy workforce. But that is not the end. When the workers spend their money they won't have to pay GST. This is that they have more purchasing power. Their wages are higher now in relation to the prices of goods. And that is what unions have been crying out for for ages.

So it is like having the river bed carved out for a new currency. The new money flows in the riverbed unimpeded by taxes. So it flows into productive investment and creates jobs.

We have proposed the slow introduction of a parallel national currency created by a new agency (the Treasury) which adheres to these rules. The slideshow for this is now at http://www.slideshare.net/deirdrekent/sustainable-economics-without-fossil-fuels-21

Of course having argued that it is important to treat the global economic system as a living system and that we need to intervene where the effect is greatest, and having argued that the global economy is what Cantabrians would call 'mega-munted' and that you need to start again, people still come back saying Couldn't we just have monetary reform for a start.

Yes I know a lot of people just want us to do the monetary reform and do the rest later. But what happens? Yes money is spent into existence rather than lent into existence so it doesn't bear a debt and it has no interest due either. All good. But where does it go? With GST and income tax and company tax, it will of course go into buying up yet more property and naturally occurring assets, putting pressure on the limited resource of land and raising its price. And as before, the wealth concentrates with land owners.

Q. I thought you wanted to close the gap between rich and poor?

A. Oh yes we will do that now, we will impose a land tax.

Q. Well how are you going to do that?

A. Well we will start at 0.5% land tax and lower income tax a little across the board at the same time. That way we won't shock the economy.

Q. But I am still paying my rates and my mortgage. Why should I pay a third land tax?

A. Oh I don't know.

And there is stops. If there is another way, please would someone tell us about it! In all the time we have had this initiative up and running, nobody has come out with an alternative solution other than by starting again with a second national currency differently designed.

If you can come up with a suggestion which is better than the dual currency, we would be pleased to hear from you.