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Other Countries

Sometimes, it is easier to consider a new idea, or an idea that is different from how one's own society operates, in the context of one's understanding of another country.


Nic Tideman: Basic Tenets of the Incentive Taxation Philosophy

Applications Abroad as Well as at Home
As important as our ideas are for the justice and efficiency of the American economy, their application is even more important in less developed countries, where often 80% of the land is held by 3% of the population. To give all the citizens of these countries chances to make something of their lives, it is extremely important to equalize access to land, not by redividing the land (which inevitably winds up putting land into the hands of people who cannot use it well) but by requiring any one who uses land to pay according to the unimproved value of the land that he or she uses. To bring this message to the world, we must first apply it to ourselves. ...  Read the whole article

Nic Tideman: The Constitutional Conflict Between Protecting Expectations and Moral Evolution
The Complementary Right of Equal Access to Natural Opportunities
One of the factors that makes the case for secession difficult is the problem of regional inequality in natural resources. When the people who called themselves Biafrans sought to secede from Nigeria in the 1960s, the morality of their claim was undermined by the fact that, if they had succeeded, they would have taken disproportionate oil resources from the rest of Nigerians. The limited support for the efforts of the Chechins to separate from Russia is explained in part by the understanding that, even though the Chechins have been abused by Russians for centuries and have never fully acceded to their incorporation into Russia, if Chechniya were allowed to separate from Russia, that would create a precedent that would make it difficult to oppose an effort by the people of the sparsely populated Yakutsia region of Eastern Siberia, rich in oil and diamonds, to insist that they too have a right to be a separate nation.

Perhaps, a general recognition of a right of secession will need to wait for another component of moral evolution: a recognition that all persons have equal claims on the value of natural opportunities. If this were recognized, then any nation or region with disproportionately great natural resources would be seen to have an obligation to share the value from using those resources with those parts of the world that have less than average resources per capita. This would eliminate the desire to appropriate natural resources as a reason for secession and as a reason for opposing secession. Signs of a recognition of the equal claims of all persons on the use of natural opportunities are slim. One can point to John Locke:

Whether we consider natural Reason, which tells us, the Men, being once born, have a right to their Preservation, and consequently to Meat and Drink, and such other things, as Nature affords for their Subsistence: Or Revelation, which gives us an account of those Grants God made of the World to Adam, and to Noah, and his Sons, 'tis very clear, that God, as King David says, Psal. CXV. xvi. has given the Earth to the Children of Men, given it to Mankind in common.2

Locke goes on to say that every person has a right to himself, and therefore to the things of value that are created by combining his efforts with natural opportunities, "at least where there is as much and as good left in common for others." He then argues that with so much unclaimed land in America, no one can justly complain if all of Europe is privately appropriated. Locke does not address the question of how rights to land should be handled if there is no unclaimed land.

Thomas Jefferson, writing on the subject of patents, said, But while it is a moot question whether the origin of any kind of property is derived from nature at all, it would be singular to admit a natural and even an hereditary right to inventors. It is agreed by those who have seriously considered the subject, that no individual has, of natural right, a separate property in an acre of land, for instance.3

Henry George said,

The equal right of all men to the use of land is as clear as their equal right to breathe the air--it is a right proclaimed by the fact of their existence. For we cannot suppose that some men have the right to be in this world and others no right.

If we are all here by the equal permission of the creator, we are all here with an equal title to the enjoyment of his bounty--with an equal right to the use of all that nature so impartially offers. This is a right which is natural and inalienable; it is a right which vests in every human being as he enters the world, and which during his continuance in the world can be limited only by the equal rights of others.4

General recognition of the equal rights of all to the use of land and other natural opportunities is hard to find. When the powerful nations of the world got together to eject Iraq from Kuwait, very little was heard of the bizarreness of supposing that Emir of Kuwait and his relatives had a right to all the oil that lay under Kuwait. Some recognition of equal rights to the use of natural opportunities can be found in the proposed Law of the Sea Treaty, which would have had all nations benefiting from the granting of franchises to extract minerals from the sea. From an economic perspective, the treaty was flawed by the fact that it would have created an artificial scarcity of seabed mining activities in order to raise revenue, and it was opposed by the U.S. and not implemented. But it did suggest general recognition of global equal rights to at least those natural opportunities that no one has yet begun to use.

One impediment to the recognition of equal rights to the use of natural opportunities is that some system of assessment would be needed to identify the transfers that would compensate for unequal access to natural opportunities. Another impediment is that a system of rewards for those who discover new opportunities would be needed. But if there were a will to address them, these technical difficulties could be solved adequately, as they are in jurisdictions such as Alberta, Canada, that claim all mineral rights for the government...  Read the whole article


Jeff Smith and Kris Nelson: Giving Life to the Property Tax Shift (PTS)
John Muir is right. "Tug on any one thing and find it connected to everything else in the universe." Tug on the property tax and find it connected to urban slums, farmland loss, political favoritism, and unearned equity with disrupted neighborhood tenure. Echoing Thoreau, the more familiar reforms have failed to address this many-headed hydra at its root. To think that the root could be chopped by a mere shift in the property tax base -- from buildings to land -- must seem like the epitome of unfounded faith. Yet the evidence shows that state and local tax activists do have a powerful, if subtle, tool at their disposal. The "stick" spurring efficient use of land is a higher tax rate upon land, up to even the site's full annual value. The "carrot" rewarding efficient use of land is a lower or zero tax rate upon improvements. ...

Several countries have taxed land on the national level. On the other side of the Pacific Rim, Australia, New Zealand, and Taiwan levied a federal land tax for a while. Repeating the success of California, Taiwan was able to redistribute huge plantations into many family-sized farms. Recently, in an attempt to control their skyrocketing location values, both Japan and Korea have begun to tax land, though only at low rates.

Taiwan instituted land taxation during the 1940s to redistribute land and increase food production. Prior to the arrival of the Nationalist Party, most of the island's people were landless peasants and were afflicted with hunger. Less than 20 families monopolized the entire island. So the new Nationalist government implemented its "land to the tiller program," which taxed farm land according to its value. Soon the large plantation owners found themselves paying out about as much in taxes as they were getting back as rent. Being a middleman was no longer worth the bother, so they sold off their excess to farmers at prices the peasants could afford, which, according to the World Bank, lay the foundation for subsequent rapid development. Working on their own land, new owners felt inspired to work harder. They produced more, kept more, and lived better. Twenty years later, Taiwan had growth rates of 10% per annum in their GDP and 20% in their industry, while from 1950 to 1970 population growth dropped 40% and hunger ceased.

Denmark, during the 1950s, tried to move toward a land tax nationwide. In 1957 the tiny Georgist Justice Party won a few seats and was accepted into the ruling coalition. Land speculators feared that the rest of parliament would go along with shifting taxes toward land. So investors shifted their portfolios from speculation to production. One year later, inflation had gone from 5% to below 1% ; bank interest dropped from 6.25% to 5%. By 1960, 100,000 unemployed had found jobs in a country of just five million people. Nevertheless, next election, the landowners spent enough money to sway public opinion and removed the Justice Party from parliament. Speculation was safe again. Inflation quickly climbed back up to 5% and by 1964 reached 8%. From 1960 to 1981, land prices skyrocketed, increasing 19-fold while prices of goods and services increased merely fourfold. ...

Abroad, during the last year or two, a few jurisdictions have turned to taxing land. Estonian officials felt that they had little choice; all other taxes are too difficult to collect. If a government is willing to evict owners who fail to pay, the land tax is easy to collect. Unlike wealth, land can not be moved or hidden and its owner must step forward to retain hers (sic) possession. Colombia, whose cities are swamped by squatters, has granted mayors the power to negotiate a land tax with individual land owners in the hope that a higher charge will stimulate development of underutilized sites, generating more affordable housing.

Cape Town, South Africa, quit the regular property tax in favor of a land levy. Altho' sited on one of the world's major shipping lanes, Cape Town's development had always lagged behind the inland Johannesburg, an abandoned mining town that prospered in part from levying only locations and not any improvements. Not knowing what to expect in the aftermath of apartheid, Cape Town's civic leaders wanted to ease the transition to a sound, integrated economy. ...

Cities with either a phased-in two-rate land-weighted system, as in Pennsylvania, or with a full land tax, as in Australia and New Zealand, have consistently shown that:
  • Taxes on the majority of owner-occupied and rental homes were reduced.
  • The steep escalation of housing prices and rents experienced by most US cities was averted in the two-rate cities as housing supplies increased.
  • Construction and rehabilitation of homes, stores, and offices increased.
  • Central business districts drew more private investment and were renewed.
  • More efficient land use followed putting the city's idle lots and under-used buildings into productive use; reducing the pressure for urban sprawl.
Australia has operated under various forms of site value taxation for nearly a century. Many studies have estimated the improved rates of construction, housing, rise in wages, and even expanded agricultural lands under land value taxation in Australia. Two cities fully exempt buildings. Canberra, the nation's capitol, exists on public land and leases lots. Sydney taxes land, not buildings. Neither one recovers all the land's annual market value and rely on some revenue from the federal government. Yet their lower-income areas appear much more livable than the dilapidated ghettos of many US cities. In the two most populous states, Victoria and New South Wales, revenues from land taxes increased significantly in the eighties. In Victoria revenues nearly doubled and in NSW, they nearly tripled from 1984 to 1990, accounting for inflation.

In 1951 the federal government also taxed land. All states except Victoria still have a land tax in some form. Over the last two decades, the percentage of government revenue collected in land rent at all levels was estimated to drop from 6.3 percent to 3.7 percent. In the recent decade, under influence of wealthy interests most states have diluted the land tax.

Following this trend away from capturing unearned land values, municipal revenue from property rates has fallen to 50 percent of the budget. One city, Hervey Bay, Queensland, now collects only about 20 percent of its revenues from site-values. Fixed charges or fees for particular purposes have gained popularity instead, including a minimum rate for all properties in some instances. Nationwide, all levels of government collected $148 billion in 1993-94. One estimate suggested that the present uncollected annual rental revenue in Australia would be about $40 billion, depending on the capitalization rate used.

Despite this drift away from site rent, especially among municipalities, a two-volume report commissioned by the Brisbane City Council in 1989 found significant advantages to taxing land. Comparing it to taxes on "heads" (the poll tax), sales, income, improved property value, and license fees, the research committee unanimously rated "rating" (the Aussie term for taxing property whether land or building) as best. They stated, "In principle, the unimproved value of land is a logical and appropriate basis for revenue raising irrespective of the level of government." They noted that land taxes are virtually impossible to evade, tap every member of the community, are simple and inexpensive to administer, and its compliance costs for citizens are minimal.

New Zealand's Experience

 Kiwiland has used the land tax for over 100 years, political pressures along with economic swings have whittled it down to 0.4 percent of the federal budget in 1989. That year it became a political football. Since 1896, the federal government had independently recorded the market values of the land, the improvements, and the composite or capital value. In 1989, federal authorities reassessed land during a sharp rise in commercial values, primarily in Auckland (which doesn't collect land rent); but they actually collected the revenues a year later when land values suddenly fell. Genuine inability to pay ensued.

The previous ruling party, the National Party, raised the rate on commercial land as it exempted all rural land. That gave a nice tax cut to 1,300 of the richest people in New Zealand. Where sites were underdeveloped, perhaps due to the ineffective level of the land tax, too few site users could manage to pay the tax. The resulting hardship reinforced the ruling Labour Party's right-wing proposals for abolishing the land tax and replacing it with taxes on goods, services, and users. More recently, since 1991 the land tax as such is considered a dinosaur on a national scale, although some 90 percent of the municipalities employ land-value rating (rates are levied on the rental value a property as assessed by the city council annually). Since Wellington has adopted capital value rating (the regular property tax), its renewal has faltered. Most recently the concept of "resource rental" is floated in national debates as a substitute for taxes on land and capital assets. ...

A big problem needs a big solution which in turn needs a matching shift of our prevailing paradigm. Geonomics -- advocating that we share the social value of sites and natural resources and untax earnings -- does just that. Read the whole article


Recommendations to the former Soviet Union:

Mason Gaffney: Privatizing Land Without Giveaway

An Open Letter to Mikhail Gorbachev (1990), signed by 30 economists

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... because democracy alone hasn't yet led to a society in which all can prosper