I’m just back from 3 lovely days in Wellington (nice weather for a change!) at the NZ Association of Economists Conference. It had a good vibe and felt like there was a wider range of interesting papers than the last one I attended. The topics of interest for me are listed below (I will post in more detail once the papers have been uploaded to the NZAE website):

- Tax Reform: The perennial favourite, Capital Gains Tax, made some waves as did some more detailed examination of a possible Land Tax. This initially popped up 18 months ago as a floated idea and more recently was discussed at length over at Interest.co.nz.  The session on Tax Reform was sponsored by the Treasury so expect more debate on this in the near future.

- Aid and Development: There were a few papers on corruption and developmental outcomes which were worth following (though I haven’t seen anything to rival Paul Collier’s work). I especially enjoyed a paper on whether aid was helping to achieve the Millenium Development Goals. To me it was clear that whilst aid can make some contribution, targeted p2p actions such as microfinance and giving are more likely to have a lasting impact as they tunnel through the swathe of government and administration on both ends of the aid pipleline. Message to Government: Let people do the giving.

- Business and Innovation: It’s good to see economists looking at this topic since it’s of major importance to NZ. Again lack of capital and R+D incentives for business was a clear problem. We simply can’t compete with countries like Finland or Israel when all our capital is tied up in housing.

- Health: One good paper on “fat” taxes or food “subsidies”. It simply reinforced my position of taking a supply side approach. It’s hard to influence demand through pricing strategies when the underlying commodity (food) is experiencing huge swings in price. As with oil and carbon taxes, the prices movements in food prices will overwhelm any attempt to reduce demand by taking away GST for example (12.5%). Perhaps incentives like gift vouchers/cash in savings accounts will help focus (a bit like the idea to pay girls an annual stipend for each year they don’t get pregnant). We have to get our future health costs down somehow and creative solutions may be required. Time to call in the behavioral psychologists methinks.

- The Financial Crisis: Nice paper looking back at financial collapses over the last 200 years. Yes they happen with regularity…..whoa…yes we know that. The cycle goes back as far as records allow. Even the Bank of England was not immune from overstretching itself… a run on the Central Bank itself. Ooops. So my simple question is: When are we going to change the system?

Overall it was a good conference and a lot came out of it. For next year I can see more focus on the impact of microfinance and p2p activities, more focus on tax reform, more focus on the debt based financial system and hopefully we will have some more ideas to contribute ourselves.

Also good to see someone with a laptop on the go! Surely a first for the NZAE.

Than you to Owen McCaffrey for this new political party for NZ focused on money and land reform. Recently born, it focuses on bringing in a land tax and money reform, issues that have been discussed widely on this blog.

Added to that is a citizens income, disestablishment of welfare, better infrastructure and importantly a compulsory health insurance.

It will be interesting to discuss these issues further. I may invite Owen to expand on them here. The name is a bit of a mouthful but that can be worked on.

It’s a very good start though.

Dave Wetzel, Vice-Chair of Transport for London, writes an interesting paper focusing on the issues of transport infrastructure and increases in surrounding land values. The issue of land and its possible taxation reared its head recently here in NZ but has since had little media interest.

However, its time we really focused on land and its value within the economic system. One of the examples Dave looks at is the building of the Jubilee Line Extension back in the 1990s. It was a marvelous piece of engineering and brought new and convenient transport options to many Londoners.

It also brought wealth to people who owned land and property in and around the areas where new stations were sited. He quotes Don Riley, a London property developer, who calculated,

“..these land values alone, have increased by a staggering STG13bln when the construction of the line itself was only STG3.5bln.”

So this wealth has been gained for no effort (well there is always effort in speculation) and represents a windfall gain. So why shouldn’t some of that have been used to actually fund the line itself.  Dave uses this example to develop an argument for a Land Value Tax as a way of funding public infrastructure.

We don’t need PPPs when projects can be funded out of future wealth gains. This is a subject which gets little attention but deserves much more.

Yesterday Arthur Grimes, the Reserve Bank Chairman, raised the possibility of a Land Tax to help lower Income Tax as well as a rise on GST.

I’m stunned. It’s rare that proposals like these ever see the light of day and even then receive due merit and attention. It’s a fabulous idea as those who have been advocating this for many years an attest to. It’s good to see it has been picked up on some local blogs.

The concept of taxing resources and consumption as opposed to labour is extremely sound and progressive. This approach has major benefits in several areas: social, economic and environmental.

It does not penalise work, it promotes it.

It is easy to collect and probably easier to monitor.

It focuses attention on consumption and management of resources which we know will be a challenge in the future.

It promotes the efficient allocation of land. A common tactic in many cities has been to sit on vacant land in order to drive rents higher. A Land Tax may deter this type of hoarding.

Whilst it is unlikely to make much headway now it is hopefully the start of a bigger debate on how we should raise revenue for the government.

Sooner or later people may realise that the government can simply raise revenue by issuing interest free money but that’s probably for another day

Any land tax reformers out there please make yourself known.