New Zealand holds a rather special status in that it was notably the first country to introduce a system of land-value taxation for raising revenue.
This essay, by Ian Hopton, traces the fortunes of Land-Value Taxation (LVT) in New Zealand from its beginnings in 1849, some 30 years before Henry George published Progress and Poverty, to its final abandonment in the 1980s. LVT was introduced under the governorship of Sir George Grey, who had an understanding of Ricardo’s Law of Rent. LVT was adopted initially at local level, with the consent of settlers, who were able to exercise their choice through a popular poll. They recognised that under this system they were not penalised for making improvements to their property. The poll sustained the tax for more than 130 years until it was removed in 1988 by government decree.
In the 1870s the government, no longer able to rely on customs and excise duties and the sale of land, turned to property taxes, for which the land-value tax was proposed by the Liberals but opposed by the National party. The ensuing struggle for a national land-value tax lasted from 1878 to 1896, but it was not until 1912 that a full LVT was achieved – at the height of the worldwide Georgist movement. But perhaps this was also the high point of the LVT story in New Zealand for, although initially successful, by 1922 the national land tax yielded only ten percent of the budget. Thereafter it was constantly degraded through deliberate government policies, which reduced the yield over the years to negligible levels before being rescinded in 1991.
On the other hand the local rating system based on land values flourished, being sustained through the democratic choice of the taxpayers. It was an undoubted success. Support for this system increased so that by 1982 land value rating had been adopted by the majority of municipalities.
How was all this lost within a few short years afterwards? The essay goes on to explain the political machinations.
As with the national tax it was also the government that brought the local tax to an end, basically for ideological reasons. The leading figure in the train of events was the new Minister of Finance, Roger Douglas, an erstwhile socialist who became an advocate of the neo-liberal policies of the Reagan-Thatcher era, currently in vogue. Douglas came to power in 1984 when New Zealand was undergoing a severe economic crisis and his extreme solutions created many casualties, including LVT which was dealt a body blow in 1988 when the right of taxpayers to determine their rating system by poll was withdrawn. Thus, in New Zealand, within a few years in the 1980s, 95 years of national LVT and 133 years of local LVT was lost or severely diminished.
According to Meintjes, the land reform in South Africa has largely been regarded as unsuccessful. 90% of the commercial land which was redistributed has now been left unproductive according to government records. The country has high taxes on labour and VAT which cripples industry. There is a large variation in land values and productivity within the country so rural towns are becoming derelict due to high levels of taxation on industrial activity.read more
After the divisions of the referendum, it is time to pull together to make a success of the people’s choice. The future is not without hope, but it does mean appreciating why so many ordinary working people voted Leave and showing that in a United Kingdom there is a way forward where conditions can be improved for everybody.read more
Much of mainstream economic thought is sadly an insult not only to logic and scientific thinking but also to humanity overall due to its utter disregard of treating land—nature—as a separate “factor of production”; instead, the so-called “neoclassical” economic school treats land as a capital good to be exploited for private gain, no different from objects like cars or computers. Most economic models based on this lack of distinction incur flaws that lead to incorrect economic forecasts and faulty economic applications in addressing social issues such as wealth inequality or ecocide.read more
Businesses bring together land, capital and labour to generate profits, so building wealth. Currently after retention for investment and cashflow, this profit is generally allocated to shareholders, but not all the stakeholders. The wealth that we have jointly created could be shared more equitably through encouraging greater corporate responsibility. This can be achieved by changing the way public revenue is raised from business, so that the wealth created can benefit all, not just the few.read more
“You can become wealthy by creating wealth or by appropriating the wealth created by other people. When the appropriation of the wealth is illegal it is called theft or fraud. When it is legal economists call it rent-seeking”
John Kay, Financial Times 27th Dec 2009
“If a free society cannot help the many who are poor, they cannot save the few who are rich.”
John F Kennedy, Inaugural Speech, Jan 1961
“If science is defined by its ability to forecast the future, the failure of much of the economics profession to see the crisis coming should be a cause for great concern”
“Today we live in a world that is divided. A world in which we have made great progress and advances in science and technology. But it is also a world where millions of children die because they have no access to medicines… It is a world of great promise and hope. It is also a world of despair, disease and hunger”
Rent Unmasked explores the new economic paradigm that policy-makers need to solve global problems in the post-2008 era. With conventional economic theories discredited, the new model must equip governments with tools to re-stabilise societies in a dangerous world. Rent Unmasked explains why one paradigm only qualifies to serve this purpose: the dynamic model that reinstates time and space in economic theorising.
ISBN 9780856835117 | Price: £19.95