If you owned all the land and I owned all the money, how much money would you charge me to live on your land?
I was absolutely astonished to see the NZ Reserve Bank Chairman Arthur Grimes floating the idea of a 1% land tax and a cut of tax rates to 0-20%. This is what we in the Green Party call tax shifting and what Frank de Jong Leader of the Ontario Greens was in Auckland speaking about earlier this year.
The solutions the Greens put up at a policy level are all about fundamentally shifting the way we view the role of government policy and the way we implement it. If you peruse through the policy lists you’ll see that most of the actual policy is about shifting focus and priorities, based on the concepts of ecological wisdom, social justice, appropriate decision-making and non-violence and incorporating the Articles of Te Tiriti o Waitangi. All of the policies have fundamental philosophical shifts in them. For example, the justice policy, which is about shifting the Corrections system away from a punitive model and towards a rehabilitative/holistic model.This is why some Green Economists (and I use the word some not all) are strong proponents of a Land Tax or Resource Rental revenue raising system. As Frank says it’s about taxing bads not goods. We all agree that work is a good thing, so why do we tax it? We all agree that pollution is a bad thing, so why don’t we tax that? Where taxes take from production and tend to inhibit employment, natural resource revenues do not. But they do reduce misuse of resources, and allocate them more equitably amongst those who are prepared to pay the title fee and use them responsibly.The biggest resource that we have on this earth that we cannot make any more of is the earth itself. Our current taxation policies not only ignore inefficient use of land but it actually encourages it. Yet you don’t hear politicians talking about land use efficiency ever. You hear debates about lowering income and company taxes. You hear debates about housing affordability crises and young people being unable to afford to buy somewhere to live. But no one’s asking the key questions of why.Because what we don’t see is how much land is not being used efficiently because it is being hoarded by speculators for profit. Why should I go to work to produce goods or provide services which is never going to make me wealthy, when I can sit on my ass and make thousands of dollars overnight? I don’t even have to do anything to the land to make it make money for me. All I have to do is buy land in a cheap area which is growing. Especially if artists live there or the government is planning on building a train station/good road/school or hospital near by. Then all I have to do is wait five years and sell. Free money! Or even better, I can use that land which is doing nothing as collateral to buy more land.
Finance Minister Michael Cullen, also at the meeting, questioned how people would pay the land tax if they owned property that was not earning an income, but he would not comment further.
Maybe the penny dropped? Maybe Cullen just realised that property not earning an income was half the problem?
A land tax combined with lower income tax and higher gst rates is a very appealing package, says former Reserve Bank governor Don Brash. “If the trade-off were a substantial reduction in income tax rates there would be a lot to commend it,” said Dr Brash, the former National Party leader. “It doesn’t surprise me, because Arthur Grimes is a very smart economist.”
Goodness. Mr Brash gets it. And David Farrar and his minions appear to get it. Although he might want to educate himself about the history of Greens and this policy. Jeesus Dave, it was Values Party policy in the 70s!
It’s an obvious policy for those who are looking for sustainable solutions. Although I really don’t understand why he would advocate a rise in GST at the same time. GST is a regressive tax like income tax is so why would he include this in there? Maybe someone out there could explain this to me.
I think I’ve ranted long enough. For those that are interested in this issue and want to read a brilliant piece written by people who’ve been talking about this stuff for WAY longer than I have, check out “A Green Tax Shift Policy Approach To Financing Local-To-Global Public Goods” by the Eaarth Rights Institute.
Finally, I really hope this debate gets a good public thrashing. And I hope Dr Cullen gets some good advice on the topic. It appears from his comments that he either doesn’t get it at all, or he has fallen for lobbying that the powerful interests that oppose this policy thrash politicians with. This is an elegant form of tax policy and one that deserves a really good hearing in Aotearoa as I fear this debate won’t get heard again for a while.
One Comment
Right on. Ontario, too, should start collecting the economic rent from land (land value taxation) to raise gov revenue instead of with income and consumption taxes. Taxing incomes and businesses punishes the productive economy, while taxing nature (land, resources, pollution) does not. Also, collecting the economic rent from land, resources and pollution is collecting money that doesn’t belong to anyone, making it a pain free way of funding gov programs. It’s also perfectly matches the Green Party economic program of taxing bads, not goods.