Combining resource (including land) taxes, monetary reform and basic income is the political challenge of our time

Posted on February 10, 2015 by Deirdre

My name is Deirdre Kent and I am the co-founder and co-leader of the New Economics Party New Zealand.

We have been working for three years to try and design a new economic system which is going to work for all life on our planet and in our country. We have decided we need to bring together three different movements – the monetary reform movement, (including reforming the national currency and having a whole range of complementary currencies), the tax reform movement to move towards land and other resource taxes and away from income tax and sales tax, and thirdly the movement for a basic income, giving an unconditional, basic income to all people where paid work may not be available for all people.

So – how do we do this? Well you can’t actually do one thing then do another and then do another because everything is interconnected. So we have to think about it as a whole system. A whole system hyperconnected globally. And we are saying that you have to look at the two things which change the system most, where you get the greatest “bang for your buck” by tweaking it just a little bit. We are saying you have to change the money system and the tax system. Those are the two paradigms we have to change. Secondly we have to change the goal of an economy. The goal of an economy is not just ‘to grow’, which is impossible on a finite planet and we all know that. And now we have got climate change because we have been so foolish.

So pulling those three things together we decided we would end up leaving the current system alone. We have got a very bad tax system. Over 80% of our taxes are on labour, enterprise or sales. Nonsense! Those are things we want to encourage as long as the goods are the right sort for a post fossil fuel age. So that is a major change in our tax system.

Secondly we want to change the money system. How on earth do you do that when we are so dependent on banks and banks are so powerful? So we are saying leave the current system alone. It is going to fall over, it is going to decay. It’s unstable, we have got deflation coming, huge debt. Goodness knows what is going to fall over next and what is going to trigger the next Global Financial Crisis.

We are saying you have to start a second national currency in parallel. But this one is designed differently. It is spent into existence at local level to buy land, and then the revenue stream from the land rental (which is quite significant) will be passed to higher levels of government and occasionally it is shared with the all citizens over a year old through a Citizens Dividend.

Right at the very start of this new currency we would pass a raft of new tax laws governing it. A full land tax, a full carbon tax and full mining tax. So it would be ruled by a different set of tax laws.

And this new economy would grow in an entirely different way. It would be a thriving dynamic economy for a post fossil fuel age.

Now we realise this is almost a preposterous proposal. And yet in Germany when they had a crisis in 1923 they set up a new national currency and it was backed by land. Ours is an improvement on theirs because we are putting it into existence without interest. It you allow the banks to create the money as interest bearing debt, then you are always going to have a growth imperative built in. It’s a mathematical certainty that you have to keep growing the money supply, and growing the economy and that causes a growth imperative leading to climate change.

And we have to stop it. We have to design an economy not dependent on a growth imperative and that is for the sake of our children.
So Germany successfully stalled their huge crisis in about a week. The farmers released their food for the towns and social unrest stopped.

Now we went through several stages and you can see that on our site. We went through the stages of covenants on land, we went through various names for the new currency. But on this site you will see plenty to read.

We ask you to join us in thinking and working to design a sustainable economic system.

We are going to have a conference on the last two days in May and the first day of June in New Zealand and we invite you to come. More information on the website soon.

So thank you very much and good luck!

There is no shortage of bedrooms in Auckland but…

Posted on November 18, 2014 by Deirdre

The Q and A programme on TVOne this week started with a debate on housing. Property investor Olly Newland and Hive News Publisher Bernard Hickey were asked by Susan Wood about how to control the housing bubble in Auckland, since the Reserve Banks had this week decided it was not budging and would leave the Loan To Value (LVR) restrictions in place.

Olly Newland seemed to want no restrictions at all so that rents will come down. Bernard Hickey pointed out that if you have first home buyers with 1% deposit you run the risk that the banks will fail and the Reserve Bank can’t take that risk. Olly replied that the banks can look after themselves, which fails to understand that we need a reliable banking system. He said that LVR restricts first home buyers and that is preventing them from getting on the housing ladder. He even used the term “moral aspect” and said he was the first to encourage home buying for first home buyers.

Bernard pointed out that if rents go up the government has a fiscal problem because it pays accommodation supplements. Bernard says if interest rates go up homeowners are in trouble. He reflected on the fact that RBNZ had been considering various ways of controlling lending to investors, including a different rule for those who have five or more properties.

They disagreed on whether interest rates will rise or go down, Olly opting for the latter and saying we are getting deflation starting round the world. He dismissed the RBNZ’s solution to control investment finance as “political claptrap” and said he wanted people to be able to rent property for a lifetime securely. He believes the market would steadily slow down and people were investing for the long term.

Oh well, interesting to have his views.

Then the panellists came on and included Matthew Horton and Laila Harre. Laila said the government doesn’t know whether
they want more people to live in their own houses
they want to control the rental market. They should get a policy on these.

Laila said there was an obsession with the supply issue and a lack of proper statistics. The housing shortage figures vary between 5000 and 30,000! Property investors owning 5-6 homes are often living in large houses themselves when all their children have gone. There isn’t a shortage of bedrooms in Auckland at all.

Matthew then pointed out the anomalies possible in the RBNZ’s other options e.g. does a property owner with five bedsits have a bigger portfolio than those with three huge student houses? Here we go again. If you don’t ask the right questions you don’t get the right answers and you end up with a complicated messy system full of anomalies.

So they managed to have a whole debate without once raising the issue of land prices and how to keep them down.

You know when I was writing my book Healthy Money Healthy Planet – Developing Sustainability through New Money Systems I was arguing that money be created without interest. Some said interest rates need to go up not down. But the strongest reaction I got from the drafts was from Robert Keall of Resource Rentals for Revenue. He basically said “zero interest loans over my dead body” because he knew land prices go up. He said we want higher interest rates not lower interest rates.

Ten years later I know what they all meant. Low interest rates mean a land bubble (people call them housing bubbles but it is really the land that rises in value not the building).

So while I am still of the opinion that money should be never be created as interest bearing debt, I am also acutely aware of the connection between land and money and know that in New Zealand new land tenure systems were introduced by British colonists at the same time as private banks and their money creation powers.

The whole point is that because land is naturally occurring, it belongs to everyone. Colonists brought with them a concept completely alien to Maori, and indeed to the thinking of indigenous people worldwide, – private land ownership. The setttlers, who had largely been tenant farmers in England and Scotland, wanted freehold land. Freehold means land ‘free of rent’. Thousands of years of enclosures of land in Britain had meant that freehold was the new ideal. They had forgotten that land belongs to everyone.

It is a sign of how little distance we have come in our understanding of land as a natural resource that a high profile debate like this QandA debate can go hard at it without mentioning land. One tweeter said ‘The elephant in the room is capital gains’, again without mentioning land.

Oh and they had a debate they had about ‘forcing people out of their homes’. When Laila pointed out that there was no shortage of bedrooms in Auckland, Matthew Hooten said you can’t force people out of their homes. Well a tax system can. That is what tax systems do – they alter behaviour. If a Remuera retired couple is living in a huge home and the only cost to hold their land is the rates, they stay there. If however they had to pay an extra 3% land tax they might reconsider buying a smaller property more suited to their needs.

The next day the Dominion Post carried a short piece making Laila look ridiculous for saying this but she was only pointing out a fact.

A recent Melbourne study has found that a great many property owners are not even renting, they are just sitting on their properties waiting for capital gain. In the commercial area it is a higher percentage and in each suburb it differs. 64,386 properties are likely vacancies during Melbourne’s record-long housing supply crisis – See more at: http://www.prosper.org.au/tag/speculative-vacancies/#sthash.cHtfoINb.dpuf

It is time such a study was done for Auckland.

Economics professor Steve Keen in a recent interview said it is only thing stopping unemployment rising to the levels of Europe is the the housing bubble. The housing bubble keeps money supply up. Goodness, that is a critical point and leads us to understand the interconnections between the money supply, unemployment and how the tax system affect where money is invested. Of course Steve Keen must then argue we need more money in the system as well as a tax system that taxes the monopoly use of the commons and not work. And we have to find a money system that is sufficient. Thank goodness for the citizen effort going on at the moment to start a Christchurch currency. Yes getting this new political economy is a huge challenge for the entire world. http://www.switzer.com.au/video/keen13112014/.

Land enclosures in England took centuries

Posted on November 6, 2014 by Deirdre

Andro Linklater’s book Owning the Earth – the Transforming History of Land Ownership is a fascinating chronicle in the history of civilisation.

If you think that land speculation is something modern contemplate this: Thomas Cromwell, Henry VIII’s lord chancellor was big speculator. Here is Andro Linklater on the topic:
“In three frenzied years, from 1537 to 1539, he bought almost twenty properties in the southeast of England at a cost of £38,000, then sold most of them again for a total profit of more than £4000…..

But the profit to be made from the rising price of land was irresistible. When the mighty abbey of Tewksbury lost its lands near the south coast, a wealthy London cloth merchant, Sir Robert Palmer, bought three of its manors in 1540 for £1255, and immediately cleared off the villeins and cottagers. Then he turned on the tenants, harassing them and even breaking into their homes.”

Jump two centuries forward and the enclosures are well advanced. He writes “The rising price of land triggered a new surge in enclosure. Much of England’s farmland had continued to be cultivated as ‘open fields’ with some common rights of pasturing livestock, and almost a quarter remained communally owned and used. It was a measure of the landowners’ influence in Parliament that more than four thousand ‘Inclosure acts’ were passed between 1700 and 1830, allowing their promoters to hedge and fence in most of this land as private, exclusive property….. Altogether some seven million acres were transferred into private ownership through the enclosure orders, brutal testimony to the political power now wielded by landowners. In many cases compensation was paid, but the total value of enclosed land represented the transfer of about £175million of assets from communal possession to the lawyers, merchants and wealthy landowners who controlled Parliament.”

Why did landowners want to enclose their property? Because they ran sheep and when the sheep were confined to one area bounded by hedges or ditches or stone walls, they manured the soil. The word ‘manure’ also meant ‘improve’. Their land was then more productive.

So let’s go back to 1485 and follow it through.

1485 Henry V11 first year on the throne
1489 The land revolution was well underway. Henry legislated to stop engrossment
1536 Pilgrimage of Grace opposes enclosures
1549 Robert Kett’s rebellion against enclosures. None statutes and 3 government commissions designed to prevent ploughland being turned into pasture and highways being thronged with homeless who were dispossessed of their land.

1517-1537 fines or imprisonment for those who enclosed land including 264 peers, bishops and knights.
1533 Inheritance issue. Struggle was won by the landowners and Henry V111 found that he was short of taxes.

Capital Gains Tax on shares fails to differentiate between land, capital and labour

Posted on September 7, 2014 by Deirdre

Most of us spent some time as children playing Monopoly. The more properties you buy the more rents you collect. “I’ll buy Mayfair, its rents are high. Rent please!” Sooner or later you opponents are out of the game and you win.

I was intrigued to learn on TV3’s The Nation (Sat 6 Sept 2014) that Capital Gains Tax as proposed by Labour includes the gains you make on shares. I thought the whole idea of CGT was to discourage investment in property and encourage investment in the productivity sector. When replying to Lisa Owen on that point, Labour’s David Parker said it was quite fair. “The ordinary worker pays tax on every cent they earn so why not shareholders,” he said.

Well the gains on shares – which are earned and which are merely windfall profits? So I did some looking at the property investment companies listed with NZX and compared them with Xero, a software accounting company which makes its money from its leadership and its labour, and with A2 milk an innovative science based health oriented group.

So thinking about investment and looking at the various types of companies, let’s look at New Zealand’s big property companies – Kiwi Income Property Trust, Goodman Property Trust, Argosy and DNZ. The National Business Review in 2012 said “listed property companies outperformed the NZX50 last year” The listed property companies reported 11.8% growth compared to the NZX50’s 0.4% growth. There are 10 listed property companies in New Zealand and seven of them are listed on the NZX50 and account for 9.7% of the index weight.

If you want to know who owns the most valuable land in the country look no further than the listed property companies owning property in central Auckland and Wellington. Their skyscrapers house tenants as secure as Government departments and all the big names in retail and office. DNZ has warehouses at Wiri and Penrose that dominate the landscape.

Take Precinct Property for example. Their Wellington buildings included HP Tower, 125 The Terrace, State Insurance, Vodafone on the Quay, Pastoral House, No 1 The Terrace, Mayfair, AXA, Deloitte, 3 The Terrace and 29 Willis Street. In Auckland they have the PwC Tower, ANZ Centre, 151 Queen St, 21 Queen Street, and AMP Centre. Tenants include big law firms, big retailers, finance companies, Fonterra, Air NZ. Hewlett Packard and so on.

Argosy has properties in Woolston, Christchurch and the Albany Megacentre. Its tenants include The Warehouse, Briscoes, Mitre Ten, Bunnings, Farmers.

Every major shopping mall in the country seems to be owned by one of these property companies and they report occupancy rates between 96-99%. Tenants in shopping malls are NZ chains, international chains and supermarkets, with only about 10% being independent stores.

What is most intriguing is that they tend to borrow to invest, and Precinct has 37% leverage. (I recall just before the 1987 crash people borrowed to invest in shares and where did that end?) And they all keep acquiring new properties. Every year, their equity rises as properties are revalued higher each year, due to the activity around them.

When I looked at the shareholders of Precinct, (called a PIE or Portfolio Investment Entity for tax purposes) I found something new. Whereas in the 2010 annual report the shareholders didn’t raise an eyebrow, by 2013 report the major shareholder at 20% was National Nominees. Curious, I looked up the directors and found them to be four women, all with Sydney or Melbourne addresses. They each worked in a top managerial role in National Australia Bank.

This means that New Zealand’s most valuable land, our inner city land in Auckland and Wellington, is 20% owned by a Precinct, which is owned by an Australian bank, which in turn is largely owned by a variety of international banks. As someone tweeted back, “Nothing surprises me any more”.

Now what has this got to do with Capital Gains Tax? Well, firstly that property investment firms like Precinct will have most to lose from a even a very mild Capital Gains Tax and will be fighting it tooth and claw behind the scenes.

The point of Capital Gains Tax was, I believe, to get investment money directed to the productive sector not into land speculation.

And why we pray can’t we invest in firms like Xero or A2 milk, both of which are based on entrepreneurship and labour, without being taxed? David Parker says it’s because workers are taxed on every dollar they earn so why shouldn’t investors be taxed. I thought that was what you wanted David? So why tax it? Your logic fails me.

A complete inability to differentiate between land, capital and labour is at the root of the poor thinking on Capital Gains Tax on shares. When men as bright as David Parker and David Cunliffe blunder into this, they should have time off to think. We in the New Economics Party say Government should tax what we hold or take but not what we do or make. Taxing labour is illogical. Taxing the monopoly use of the commons like land and minerals is logical.

Public loses $37 billion to private landowners every year

Posted on August 27, 2014 by Deirdre

We are being robbed. Constantly robbed. And it is the expense of the earners who catch two buses to work early in the morning for a low paid job.

We can work out that the public is losing at least $37 billion a year to private landowners. This should more than replace income tax.

There are 1,771,200 private dwellings in New Zealand (Stats NZ)
The mean house price rose from $395,530 in April 2014 to $466,665 in 1 July 2011 (Quotable Values)

That is in just under three years the mean house price rose $71,135. Almost all of this was privately captured as capital gain.

So let’s multiply these two figures to get the total of privately captured capital gains on those private residences and we get $126 billion.

This is for a period of just under three years, two months short of three years. So yearly the amount of capital gain is now one third of 34/36 of $126b, or one third of $119 billion = $40 billion. A very tiny fraction of it will have been captured by local authorities in rates. Almost none will have been captured by central government.

The rates revenue of all local authorities in 2013 was $4.5 billion. Suppose two thirds of this was land value (a high figure – more like the Auckland ratio), then local authorities revenue due to taxing of land value would be $3 billion. But if the ratio is lower, then it would be as low as $2billion a year.

So $40 billion figure gets reduced by somewhere between $2 and $3 billion and we have lost in public revenue at least $37 billion a year through failing to capture capital gains, or failing to impose full land rentals, which is essentially the same.

To put this in perspective, the GDP of the country is $227billion in the year to March 2014.

The revenue from income tax is $29.8 billion and the total revenue from taxes $72.5 b. Expenses were $73.1 billion in the last budget.

So $37 billion is being pocketed by private property owners every year when the value has been created by the wider public. This money rightfully belongs to the public.

(Compare this: Labour’s Capital Gains Tax would yield only $1b a year “in time” and the Greens Capital Gains Tax would yield $4.5 b/ year “in time”)

On the other hand, the government has confiscated $30b of our earnings through income tax and taken nearly $18 billion from our expenditure in GST, making everything less affordable. No wonder there is poverty in New Zealand. No wonder there is inequality.

But revenue from land rental would not be the government’s only income. We should be charging rent for the monopoly use of all natural resources, not just land. The principle that we should pay for what we hold or take but not for what we do or make means that we should pay taxes on our monopoly use of the rest of the commons. What is the commons? Everything that occurs naturally or is part of the social or cultural capital – water, fish, forests, electromagnetic spectrum, minerals, oil, gas, as well as the monopoly use of the infrastructure. The latter includes taxes on use of airports, hydroelectric power stations, ports, and so on. It also includes use of the commons for emission of pollutions. The biosphere is used for emissions of greenhouse gases and the rivers, lakes, and seas cleanse the pollutants from farms. We already tax tobacco, alcohol and gambling and would continue to do this.

Lifting the tax burden from the productive sector by taking off income taxes, GST, corporate tax and interest revenue taxes would allow productivity but, given the burden of resource taxes, the pattern of productivity would be very different. It would look more like a post fossil fuel economy.

Would the revenue be sufficient to run a country? We currently spend $73.1 billion. (Budget 2014-5). So we would need a further $36 billion. Karl Fitzgerald in his Australian study worked out the other resource tax revenue and managed to match the current revenue. There is no doubt we could too.

I am reminded of a quote from Henry George, author of Progress and Poverty, who said
“For this robbery is not like the robbery of a horse or a sum of money, that ceases with the act. It is a fresh and continuous robbery, that goes on every day and every hour. It is not from the produce of the past that rent is drawn; it is from the produce of the present. It is a toll levied upon labor constantly and continuously. Every blow of the hammer, every stroke of the pick, every thrust of the shuttle, every throb of the steam engine pay it tribute. It levies upon the earnings of the men who, deep underground, risk their lives, and of those who over white surges hang to reeling masts; it claims the just reward of the capitalist and the fruits of the inventor’s patient effort; it takes little children from play and from school, and compels them to work before their bones are hard or their muscles are firm; it robs the shivering of warmth; the hungry, of food; the sick, of medicine; the anxious, of peace. It debases, and embrutes, and embitters.”

Henry George influenced a movement, now reviving

Posted on July 18, 2014 by Deirdre

I have just returned from California where I attended a conference of the Council of Georgist Organisations and delivered a presentation on the Land Dollar.

I was one of four presenters in a session on Land and Money. I was invited by author Alanna Hartzok, (photo above with me) an amazingly vital and wise woman who seemed very well respected in the movement. My presentation offered a wholistic solution to the three issues and was generally well received, though some dismissed the money issue as secondary. We have a money system that leads to rising debt and a growth imperative on a finite planet which threatens to leave it uninhabitable for our grandchildren. Second we have a tax system that treats labour as scarce and land as infinite and this needs to be turned right side up. Otherwise the inequality will continue to get worse as those who seek to “own” land and resources will accumulate more wealth. Third we all need sufficient income for all but we have a welfare system that encourages lying about relationships, even to the point where couples live in different houses to get more benefit money. What sort of society are we aiming for when we disincentive intimacy and love? The slideshow I delivered is now online at http://tinyurl.com/ou9stc6.

First let me tell you about the elevator pitches on Georgism I tried. When asked in the hotel lift what the conference was about I sometimes blundered and sometimes succeeded. “What is Georgism?” was usually the question. “Well it’s a old movement you probably won’t have heard of. It’s based on the writings of a man called Henry George. He was a San Francisco journalist during the Depression of the 1870s and saw a lot of poverty. He believed the value of land rose because of the activities of the public and so the increase really belonged to the public. Basically the idea is for the public to recoup this rise in land value. And he effectively said you should pay for what you hold or take not for what you do or make. No income tax but a land tax. At this stage the person said “Oh he must have been a good thinker. Sounds fair enough” or something like that.

And that is where the elevator usually stopped. That one worked. I was also asked the same question by a woman I befriended on a Los Angeles bus tour but I botched my answer completely. I started off saying we believed the land belonged to everyone and all the minerals, fish, water, trees etc. After that I blundered on and naturally she didn’t light up.

Sometimes people would ask why hasn’t the movement made much progress? And it is sad. So many Georgists have lived and died without seeing change. But, like the monetary reformers who followed Major Douglas, they have continued staunchly on till their eighties, loyal to the end. Their numbers dwindle and they speak more and more to themselves. At this session as will the Social Credit movement during its 60th anniversary in Christchurch next month, we had a time remembering those who had passed on the previous year. (I must say I think I heard one older woman report she had been president of her little society for 50 years, hope I was hearing wrong)

I met many who had taught courses at Henry George Schools for decades. They know that wealth is accumulated by monopolising the land and all its bounties. They weep to see the cheating society we have all become, pocketing the unearned gains from rising land prices. Their knowledge of the money issue varies. Dan Sullivan, the president of the council, attends the Modern Monetary Institute gatherings and was a fellow presenter. Many understand that if we create money as interest bearing debt we add another parasite. As Dan said “If you kill one parasite the other grows larger. You have to tackle them both together”.

One blog post can’t do justice to the variety of competent speakers. We had Peter Barnes, the author of “Who owns the Sky” tackling the twin issues of inequality and climate change. He said “Recycle the rent is a better term than tax the land”, as did other speakers. A giant Rent Recycling Fund should be redistributed as a dividend. He thinks it could be $5000 a year, enough to revive the middle class.

A young women PhD graduate had studied the man who influenced Henry George and gave an excellent talk on the geneology of the ideas.

The older Georgists were all greatly heartened by the infusion and energy of the new young men who have come into the movement. Two came, I believe, from working on reintroducing an inheritance tax, and the others arrived simply through trying to find a solution to inequality and environmental issues. They were self taught from the web and found their own way there. They were obviously struggling financially. I hear five of them shared a room. Karl Fitzgerald, of Prosper Australia and one of only five people worldwide working full time for the movement helped me greatly and seems to be a mentor for the new blood, all of whom are on the Facebook group called LVT.

Of course the group should be called something else but that is for another day… The session on campaigning was speakers from another movement. Hopefully next time there will be better teaching on soundbites, controlling the language, controlling the images, writing media statements, working with bureaucrats and journalists.

Next year the conference will be held in Detroit and for it the Council of Georgist Organisations will combine with the International Union for Land Value Taxation. So let’s make sure we get someone there from New Zealand.

(Second Photo: Peter Barnes with a Canadian Green Party man, Erich Jacoby-Hawkins)

Sharing the rents brings social justice – solution to the Auckland housing crisis

Posted on May 22, 2014 by Deirdre

During Parliament’s question time there are always a lot of questions about house affordability, especially in Auckland. The National government’s solution to rising house prices is just “release more land”. And the Prime Minister usually replies that home affordability was worse when Labour was in government because that included the period leading up to the Global Financial Crisis. Stalemate. Election year biffo. They then go on to questions about poverty, especially child poverty. In New Zealand, ever since Helen Clark introduced an income support scheme called Working for Families anti-poverty groups have rightly pointed out that as it only goes to families in work, children of beneficiaries are the ones that miss out and that is unfair.

Sadly nobody in Parliament ever raises the issue that when “land owners” monopolise land without paying a full rent to the public for the privilege, the rental they should have paid just capitalises into the market value of their homes. Rent is thus privately captured not publicly captured. That capital gain doesn’t belong to them. The very meaning of “freehold” land is land without rent. When settlers came to New Zealand from England in the late 1800s what they wanted was to stand on a piece of land and know that a landlord couldn’t push them off. But the English colonists brought with them their very entrenched legal system of land ownership and imposed on the Maori a strange concept they called “ownership of land”. It was the land tenure system together with the English banking system which was at the very heart of the colonisation process.

Leaving aside the banking system for the moment, let’s concentrate on the land tenure system. When land is held in common, land tenure is about rights to use land. What the settlers really wanted was security of tenure and they wrongly equated this with a freehold land ownership arrangement. Indigenous people share the rights to use the land with others in their iwi or tribe or in their hapu or subtribe through a complicated system different in each iwi or hapu. Colonisation changed the land tenure system and introduced commercial banks.

We are coming up to a general election and the Labour Party, Mana and the Internet Party are all showing concern to engage and enrol the one million non-voters from last election. The Internet Party rightly makes it easy to join a party and participate, through their clever use of smartphone apps and discussion websites.

But what better way to engage young disaffected voters than to share the land rents? Wouldn’t they be delighted it a political party said it was going to charge a full land rental and share it with them by giving them a Citizens Dividend from time to time?

Let’s have a look at the home values in central Auckland suburbs for a start. Parnell, Mission Bay, Mt Eden, Epsom, Herne Bay, Ponsonby and Grey Lynn houses have risen in value by probably an annual rate of exceeding 10% over the last year. In some cases it is 14%, but let’s take the lower value. An article the other day in the Weekend Herald showed a three bedroom home in Grey Lynn for sale at $895,000 and the subsequent text showed it had probably risen at least $103,000 in the last year. What land tax did that owner pay? Rates contain land tax but actually everyone pays on their capital value these days. (by legislation when the supercity was formed, no choice these days like we used to have). So if every home in the inner suburbs has a capital value rise of say an average of $100,000, just think of that accumulated rental which has been privately captured in the inner Auckland suburbs. This rental rightly belongs to the public because it is government both central and local that has paid for the infrastructure, the hospitals, schools and parks and it is the public which has provided the inner city shops and businesses and activities. Suppose there are 100,000 homes in those inner suburbs each rising by $100,000 in a year. That is a capital gain of $10,000,000,000. Yes it is $10 billion which rightly belongs to the public and we haven’t even tried to calculate the rising value of the CBD and Parnell and Newmarket and Ponsonby shops and offices. This total will be far higher.

Dividing this three-way between central and local government and the 4.4m citizens of New Zealand is the next challenge. But for electoral purposes it would make very good sense to give out a citizens dividend straight away. Let’s, for instance, use $4.4 billion of the $10 billion. That is $1000 per citizen. When dependents get it, the money is taken by the designated carer, usually a woman. So a woman with three children would get $4000 a year from this dividend. Nice one. A young solo mother in Northland or Hastings or Greymouth. Since she is on a benefit she doesn’t get Working for Families. She spends it on the basics of food. The next dividend would bring more. When land rents are shared everyone gains. Labour spokesperson on Welfare Jacinda Ardern would not have to think up anything more complicated than this to right the wrong of children in poverty. It would answer the “Feed the Children” plea of The Mana Party.

I have discovered Fred Harrison’s site http://www.sharetherents.org/ where his videos tell a great many stories about the value of sharing the land rent. Fred Harrison is a long time campaigner for sharing land rents.

Labour and the Greens both go into the election advocating a Capital Gains Tax on property that isn’t the family home. Unfortunately the Greens have chosen a 15% Capital Gains Tax. That means when a house is sold (and only then) the Government gets a small fraction of the total rent. The property “owner” gets to keep the 85% that rightly belongs to the public. Well I guess it is a start, but honestly it is an extremely timid policy when you see the whole logic of sharing the rents.

Nobody in this whole debate has raised the issue of how many vacant sections there are in Auckland. If speculators are sitting on sections and not paying much (the council even slashes their rates) then naturally they will continue to speculate. A Capital Gains Tax will only delay the sale even further. You must make people pay for the privilege of “owning” land, or monopolising it. If speculators had to pay a full land rental rather than reduced rates, that would spur them into action. Either they would build or they would sell.

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