Land Tax rears its head at last
November 1st, 2007Yesterday 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.
Tags: grimes, land tax, new zealand, taxation
November 4th, 2007 at 7:55 pm
Do New Zealanders really want to double their disposable incomes and have the fastest-growing economy and lowest unemployment in the world? I don’t think so. Having a lot of spending money and living in a booming economy with high wages and well-funded public services is over-rated.
And organized labour is definitely opposed to taxing land instead of labour. Where would they be if non-union jobs were highly paid, and working people got to keep all the money they earned? Same as if people didn’t get sick, all the doctors would be out of work!
OK, so maybe economists have proved that all the benefit of government spending on services and infrastructure goes to landowners because they can charge everyone else full market value for access to them. So? Just because they get it, that doesn’t mean they should be required to pay for any of it.
Working people just aren’t intelligent enough to have had parents and grandparents who bought land, or took it when it was there for the taking. They can afford to pay the taxes for the people who are smart enough to own land. Face it, most people would not work as hard if they were not kept under financial stress paying high taxes and big mortgages.
- Roy Langston
November 5th, 2007 at 12:00 am
Thanks Roy for your interesting comment.
I guess that begs the question as to the purpose of life? If people eat well and look after themselves then the burden on the health system will be lower and so therefore will taxes and therefore people may not need to work as hard as before.
The point is that we need to keep challenging ourselves and our governments to justify the status quo. Elections are a good example of preserving this as we are presented with tweedle dum and tweedle dee with a few extras thrown in via MMP.
But just like we wouldn’t see turkeys voting for Xmas, we are unlikely to see politicians or bureaucrats voting for more efficient systems of governance or finance.
Keeping peoples’ noses to the grindstone and dangling the carrot of “lotto” in front of them just makes sure people don’t have time to question the whole point of it.
We’ve cracked it! But our old systems prevent us from enjoying the bounty and considering the next stage of our evolution as humans.
November 6th, 2007 at 9:02 am
Congratulations to the Reserve Bank on seing the light of day and of the virtues in this tax reform. There are many complications and difficulties whenever a change of this kind (or eventual magnitude) is introduced.
The land-owners are bound to object for a start and the best approach is to introduce the changes slowly, over a period of perhaps 10 years before they are complete.
One aspect that deserves more attention is the simulation of what happens as the tax burden is gradually transferred from earnings and goods to land rent. As far as I can tell there is nowhere in the world a proper macroeconomic program for the simulation of these changes. The reason is simply that all the existing programmes don’t properly include land value as a separate quantity that is distinct from from capital investment in buildings etc. nor do they recognize the nature of ground-rent.
So I would suggest (and would even like to help the Bank with) the building of such a computer macroeconomic simulation method. I already have done some preliminary work along the lines of structural definition of a general model. I should add that as an engineer who has worked in the subject of simulation of the motion of impacting landing-gears (no pun intended), I have some related qualifications for assisting in this work.
November 6th, 2007 at 10:08 am
Thank you David.
Modeling the potential effects will be important and I’m not sure how far Arthur has gone on this but I will ask him to comment or at least provide us with any further information on the work.
Clearly it’s not something that could be introduced overnight but it at least sparks a debate and something to work on.
November 7th, 2007 at 12:51 am
I thought the best bit was Cullen’s response “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.”
If they own property that’s not earning an income then they are speculating. Property speculation leads to the ridiculous housing prices we are facing today. I wonder if Cullen didn’t comment any further because the penny dropped…
November 7th, 2007 at 8:48 am
That’s a wonderful point. Thank you for spotting that. That’s the whole point about hoarding land which has always been a hallmark of professional speculators and i know was very common in London as a way of driving up rents for commercial premises.
I think there was a question about pensioners who no longer worked. Well they would still be receiving some form of superannuation or universal income. They would also probably be living in a smaller unit rather than a large home and their tax burden would be more manageable.
It’s great to see such interest in this. It’s so hard to get a debate at the political level because it usually gets shot down immediately by one party or another.
Let’s keep the ideas flowing.
November 23rd, 2007 at 1:20 am
[...] 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 [...]
November 28th, 2007 at 9:57 am
[...] it was Arthur Grimes from Motu and now Adolf Stroombergen from Infometrics. Adolf raises the idea of a flat tax and a [...]
January 28th, 2008 at 5:57 am
Hello,
I am an advocate of both land taxes and monetary reform and have started a political party in 2008 to support this idea.
I live in Hamilton and am struggling to get this idea out there but I will do my best. have a read of the website http://www.landtaxandmonetaryreform.weebly.com to see what my policies are.
Cheers
Owen McCaffrey
July 5th, 2009 at 2:23 am
[...] 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 [...]