2. (2013 April) Opinion: Giving Consideration to a Just Tax

Giving consideration to a just tax
Why is it so hard to understand the justice and benefits of capturing the community created value of land for the community?
By John Fisher


1 thought on “2. (2013 April) Opinion: Giving Consideration to a Just Tax

  1. I think the reason may be that people need concrete examples or precedents they can examine. I have appended part of an article I wrote for “Progress” magazine to show that my understanding was not just the first course in Georgist philosophy, but a long journey of enquiry. I was helped by coming to a new country where I saw I saw the benefits of land tax in operation, even though the local body rates on land value were a small part compared with the Government’s tax take.

    I arrived in New Zealand in 1963 after a four-month trip overland through the Middle East and India and was married the following year. My wife unwittingly gave me my introduction to Henry George in 1976. I had been declaiming against the wage and price freeze brought in by New Zealand Prime Minister Robert Muldoon to try to curtail inflation and the falling New Zealand dollar. She was reading a newspaper at the time and said, “Why don’t you make sure of what you’re talking about? Here’s an ad for a course in economics. Why don’t you try it?”

    Betty Noble, a life-long Georgist and friend of Rolland O’Regan and Bob Keall, ran the course. (Rolland and Bob had been instrumental in running rate-payer referenda throughout New Zealand to have local bodies funded by land values.) The course book was Freedom the Only End by F. McEachran. Betty introduced us to the fundamentals of Land, Labour and Capital in the formation of Wealth.

    My first steps in understanding were at the local body level, as the New Zealand capital, Wellington, was rated on land value at that time. I could appreciate that, when I renovated our house, I was not penalised for doing so. Also, I had the example of my wife’s parent’s cottage in England. In 1968, they bought a farm labourer’s cottage in Birmingham’s green belt as a retirement home and had it renovated before they moved in. Before the renovations, the rates were £14 a year, but were £90 after completion. In those days, the English rated everything on annual rental value – the imputed rent one would receive if one rented the property. This explains why a developer built a huge high rise building on the edge of Hyde Park in London and kept it empty of tenants. As it was a non-performing asset, he paid no rates and possibly was able to offset his other taxes.

    For me, the 1980s were a time of consolidating the path that Betty Noble had set me on. I read Henry George’s Progress and Poverty, the journal Progress and the British magazine Land and Liberty.

    For New Zealand, it was the time of Rogernomics, our version of Reaganism and Thatcherism, when most of the country’s assets were sold to overseas buyers.
    New Zealand Rail was sold to the two merchant bankers who had advised the government on its sale and an American who ran a single freight line through the state of Wisconsin. The land and tracks in New Zealand were leased to the consortium for $1 a year. A share float brought in small investors and the share value reached $9. The consortium then took most of their equity out and bought into Britain’s South Eastern railway. After this, the share price dropped to 90 cents and some of the tracks were so bad that trains were running at very low speeds. Finally, in 2004, Toll Holdings of Australia bought Tranz Rail and the New Zealand government undertook to maintain the track at a cost of $1 billion dollars to the taxpayer over the first three years. The network had been sold for $440 million, which included three roll-on Cook Strait ferries. I mention the above to show the effect of a monopoly situation, and because Australian readers may not be aware of it.

    The Treasury neo-classical economists also tried to change the predominantly land value rating in New Zealand. As Rolland O’Reagan writes in the addendum of his Rating in New Zealand, “It seems that during 1987, government let it be known that it favoured Capital Value Rating, so that somewhat devious reversions to Capital Value in Dunedin, Christchurch and Wellington went unquestioned or were even encouraged.”

    Until 1988, the country still retained a land tax of two per cent on commercial land over a value of about $180,000. Revenue was $600 million. However, lobbying by the Business Round Table saw this removed over the next four years at half a per cent a year. Interestingly, because the government needed to balance its budget, a $600 million cut was made to beneficiaries’ incomes. Combined with high unemployment, the benefit cuts caused a great deal of hardship, not only to beneficiaries, but also to the retailers with whom they spent their money.

    Aware of the hardship, church leaders in Wellington convened a public meeting and, among others, invited the executive director of the Business Round Table. During the meeting, I asked him how unemployment could be reduced when a derelict site of several acres, owned by Dominion Breweries and not far from parliament buildings, was inaccessible to anyone who wanted to work. He replied, “It is just an asset of the company.” Since the site had had the two per cent land tax removed and was rated on Capital value, it remained derelict for the next eight years till it was sold for a capital gain to a supermarket chain. As it would have been a non-performing asset set off against company taxes, it would actually have been performing very satisfactorily for the brewery.

    Recently, Bob Keall, the director of the Resource Rentals for Revenue Association in New Zealand, has given me copies of Henry George’s The Science of Political Economy and The Life of Henry George by Henry George Junior. The latter I found particularly instructive as it showed the path whereby George came to his logical conclusions. A feature film or documentary should be made on George’s life as it contains drama enough.

    The Science of Political Economy gave me an understanding of the function of money as exchange for human exertion. This is completely subverted when used by the banking system, with its easily created credit for real-estate transactions.

    There was no one moment when I ‘saw the cat’, just a gradual realisation that Georgism is the science of political economy that encompasses all the facets of human experience. This can be just down the road from me where a farm that was bought four years ago for NZ$2.1 million has recently been sold again, the owner expecting to double this price. The landlord employed a manager and has made a capital gain for no exertion on his own part.
    Or it can be in Queenstown in the South Island of New Zealand where an American bought several acres of land two years ago on the understanding by the Overseas Investment Commission that he employ someone to plant trees. He did not comply with this, resold for a million dollars profit, and is now being sued in America. A resource rental with continual valuations would have obviated the need for the commission and ensured that anyone securing the title would be there because they needed to use the site.
    Or it can be a village in India where World Vision built a well. Because of this improvement the landlord felt justified in increasing the villagers’ rents. The villagers beseeched their benefactors to remove the well.
    It can be the time I was in England in 1997 when I saw an item about fishing quota on the television news that prompted me to write to the British Prime Minister and the Minister for Agriculture and Fisheries. The news flash was about British fishermen who were tying their boats up at the wharf and leasing their quota to Spanish fishermen. My question to the government was “Why couldn’t they assume sovereignty over the quota by claiming a resource rental for the Crown? Then, if over-fishing occurred, they could lower the quota and at the same time lower the rent so that the fishermen would perceive this as a fair exchange.” The reply was that the quota was set by Brussels on the performance of past catches and was attached to the boat licences. There was nothing the British government could do about it.
    So the British fishermen were claiming rent from a natural resource, while the Spanish were depleting it in an attempt to meet their quota.

    During my travels with Henry George, I have corresponded with members of parliament, written letters to the editor, and made submissions to local councils on rating matters. I also tend to bring his ideas to the attention of people that I meet. It is the sort of compulsion that I know other Georgists will understand; in fact, it’s a way of life.

    Footnote: Betty Noble died in Wellington in October 2005 and will be remembered by many for her intelligence and deep sense of ethics.

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