We realised early on that imposing a land tax alone was politically well nigh impossible, even at half a percent. Raising it to the a full rental level would be harder.
a. The banks would block it. They hold the power because they issue mortgages backed by land.
b. The public wouldn’t like it because the value of their property would decline. This is unacceptable to those with big mortgages.
c. Property owners would argue they already pay rates and a mortgage so why should they have to pay a third time?
We realised early on that reforming the money system by spending money into existence to build infrastructure would result in rising land values for those with land near infrastructure. It would be difficult to control land inflation and hard to halt the march to further inequality.
Funding a full Basic Income is also a very tricky one.
During the summer of 2001-12 Deirdre had had a series of Skype calls with a Cambridge academic, the late Dr Adrian Wrigley. His solution was for The Treasury to cancel the mortgage and for a full land rental to be paid. The property would then have a covenant on it requiring owners to pay land rental to Treasury. No rates would then be payable. If the property was sold, the next owner would still have to pay that rental.
We only wanted the land to be bought/paid for, not the whole mortgage.
We soon learnt that using the preferred “covenant” idea was hard to explain to the public so we dropped it in favour of publicly owned leasehold land. However we started with a centralised model of public ownership and remained with that for almost 2 years. All the time we were a bit uneasy about land being owned by the central government.
Quite early on we decided that any work using only one currency became difficult. For instance, conversations about subsequent land value became convoluted and hard to resolve. So we recommended designing a second parallel (and competing) national currency, and link it from the start to completely new tax laws. Treasury not the Reserve Bank would issue the new currency to buy up land. We adopted Adrian’s excellent idea of having a Land Rental Index for each area and adjusting the rental each year accordingly. Only the land needs assessing not the improvements, so that is easy. And you only need a sample in each area.
Parity with the NZ dollar became a hot topic of debate. After discussion we eventually said “issue it at par, redeem it at par and let it float in between.”
The name of new currency changed many times – Tradeable Tax Credit, Treasury Note, Zeal and finally the Land Dollar. (We also went through a short stage of recommending Rates Vouchers for both Auckland and Christchurch.)
Then, in mid year 2014 we suddenly realised it didn’t have to be issued by Treasury at all. Eureka! It could be issued by Community Boards and flow upwards to central Government. We said ‘turn the funding model upside down, get rid of centralisation and restore local democracy’. We gave power to the local level of government – currency creation power, land buying power (compulsory where applicable), and revenue gathering power.
This would make it so the Community Board or its elected agent “owned” the land – a more politically acceptable solution. The local committee would have on it by right one or two people from the local iwi or hapu grouping, who would have veto power over any decision to buy land. Land would effectively go into a Community Land Trust. Land could be gradually taken out of the market place in this way and the people deciding which land to choose would be answerable to the locals. (Adrian had hoped it could be done voluntarily to avoid legislation and some will no doubt come in voluntarily)
A whole raft of tax laws applying to transactions using the new currency (the Land Dollar) would have to be passed right at the beginning. These would include all taxes on the rights to the use of natural monopolies. Natural monopolies are the rights to land, water, airwaves, minerals, fisheries, patents, domain names, hydro-electric power generation and supply, any public utility such as a port, airport or the monopolistic rights to reticulate wires, pipes, rails, roads and the like: the right to use water, air, land or the biosphere to absorb waste.
So what does the policy say now?
Our party wants to restore the concept of sharing the values of the commons, have a money system that doesn’t build in increasing debt, a growth imperative and competitive behaviour. We want to distribute the rent from use of the commons to all NZ citizens over one year old as a regular Citizens Dividend.
A new national currency the Land Dollar is to be slowly spent into existence at Community Board level to buy up land. No rates would be payable for those whose land is community owned. A local land committee would give local hapu/iwi veto power over decisions as some land may be sensitive even after Treaty settlements. The rent from the land would be shared with other levels of Government and as a Citizens Dividend – using participatory budgeting as there would be many simultaneous claims. Inflation would be controlled by a network of committees at different levels working with Treasury and Reserve Bank.
Transactions using the land dollar would attract no income tax, GST or company tax. But a whole set of different taxes is needed. This is because it must not be spent to plunder the earth, deplete resources, subtract from the social capital or pollute the water, air or biosphere. That means a full carbon tax for example.
For any currency to be effective as a means of exchange there has to be a circulation incentive built in. Adrian Wrigley suggested that rather than having a financial penalty built in for hoarding, to make it easier each note should be issued with an expiry date .
The electronic version when received by Treasury could be redated before issuing it as a Citizens Dividend. All citizens over one year old would receive it. Where there were dependents, the designated carer would receive it, thus changing the economic status of carers. In time this dividend would rise to a basic income, allowing a huge range of inventions and options for people who have been in unsatisfying jobs but have a passion or a hobby they want to pursue.
There are many unresolved issues. The property owner that has land bought with the new currency will have $100,000 plus to spend. Trades with the land dollar will not attract GST, income tax or company tax. We need actual examples, but believe a lot of it will be spent on labour to upgrade their homes or on the development of their small business.
We invite alternative solutions
We acknowledge this policy has been derived by discussing with a range of people at and between meetings and it has been largely driven by Deirdre, who has received feedback from meetings in Christchurch, Otaki, Wellington, Motueka, and two in Auckland at the Living Economies Educational Trust hui. This solution, we emphasise is one solution. If you have another, please present it!!