Chairman of South African Constitutional Property Rights Foundation (www.sacprif.org) a voluntary think tank based in Cape Town, focused on the South African constitution which promises access to land to all citizens. Qualifying Innovator of the Year Award for inventing the Meritax CAMA Municipal Valuation and Rating System 2005. Registered Property Valuer; Member - SA Institute of Valuers;
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The late Susan Sontag, a 20th century American author defined miracles as being something unexpected, “it’s as if they open up a gap in which a more intense or creative or daring action can take place.” In this spirit it is possible to conjure an amazing South African economic miracle which relies on a change in the nation’s tax priorities. The trouble began when the 1994 Interim Katz Tax Commission (para 1.5.4.h) carelessly assumed there should be a balance of taxes, “avoiding any attempts to shift the tax burden predominantly onto any single dimension of economic activity.”
But what if not all taxes have the same consequences? For instance, taxes on land can rise to 100% of its rent without affecting its supply. And land prices will fall. Personal taxes on incomes and consumption however reduce the supply of goods whilst the cost of labour, capital, and shopping rises. If these taxes approach 30% they become a disincentive.
Therefore it would surely be prudent and a great boost to the economy if Treasury were to gradually substitute personal taxes for a single tax on land rents? The best examples of ‘low tax, low land price’ regimes are Hong Kong and Singapore where GDP per head is some five times that of South Africa’s, without farm or mining sectors to speak of. They import everything, even water.
In sec 25.5[i] of the constitution citizens are promised equitable access to land. This is shorthand for ensuring that at least each of the five million unemployed are given an opportunity to own (say) a hectare of arable land. Twenty seven million of these are reported to be unused[ii]. But the state’s promise of land to all has not been honoured and the excuse is that expropriation is unaffordable, that the available resources are not available. A change in the tax mix will make land affordable and also herald a genuine South African tax-haven.
There is a reasonable chance of a quick and high-impact result because the Davis Tax Review Committee will surely sanction penalties on ratepayers who are not using land to grow, rear, build or make things but just waiting for the price to go up. Unused residential plot prices have risen fourteen times on average since 1994, whilst CPI rose by four times. This is all the more senseless because land prices are unearned. Also what zoning scheme anywhere permits disuse?
It is common cause that able bodied but jobless citizens, even illiterates and indigents, can learn how to develop a country estate and mansion by shaping the earth’s materials for themselves, as the sketch and texts on page 2 suggest.
The tax-haven option does not rely on one citizen moving to the country because no exodus will mean that wages and conditions in the towns and cities will have improved, satisfactorily.
SACPRIF[iii] a twenty year old Cape Town based PBO think tank is currently preparing a submission for the Davis Tax Review Committee. Our testimony will comply with the Social and Ethics Committee Regulations of the Companies Act[iv]. Our hardback report will be a limited and numbered edition for subscribers only. Our bank details.
Miss Sontag also held that “The only really interesting action in life is a miracle or the failure to perform a miracle.” We should ask how interested will rich and poor be in the latter?
Julius Seizure, AKA Julius Malema, scorns Madiba’s economic legacy (Cape Times, 17 Dec). Yet on the twentieth anniversary of the Nobel Peace Prize award to Nelson Mandela and FW de Klerk they could also have shared the Laureate for Economics (conferred by Sweden’s Riks Bank in memory of Alfred Nobel who left no money for economics or mathematics). This would be in recognition of their astonishing Constitutional property rights pact in Sec 25.5: “the state must take reasonable legislative and other measures, within its available resources, to foster conditions which enable citizens to gain access to land on an equitable basis.”
This is the blue print for digging out poverty, root and branch. In one sentence it ends the landless, proletarian life-style of dependency on wage contracts. Those minimum wage takings have wreaked their wretched toll in South Africa’s rusty corrugated iron suburbs where five million unemployed are denied productive land and the self-employed jobs it will offer. That does not count the six million others who live in dangerous and degrading urban hell-holes, grasping at delivery of this or that service, when in 1994 their leaders were signing off on hectares not lavatories.
And who on earth gave permission for land to stay fallow, for years on end There is not a town planning scheme in the world which does not go on and on about precisely what owners can do to land, never what they cannot.
Mr Malema nevertheless wants to nationalise land without compensation. True to form that is ill-considered because if he would instead promise to gradually nationalise not land, but land rents, and simultaneously privatise wages, salaries, profit, interest, capital gains and consumption by retiring income taxes and vat, South Africa would become a tax haven. Another Mandela and FW de Klerk landed victory which trumps the Freedom Charter.
the policy that the earth’s natural patterns suggests. Use the eco-system’s self-regulating feedback loops as a model. What then needs changing? Basically, the flow of money spent to own or use Earth (both sites and resources) must visit each of us. Our agent, government, exists to collect this natural rent via fees and to disburse the collected revenue via dividends. Doing this, we could forgo taxes on homes and earnings and subsidies of either the needy or the greedy. For more, see our web site, our pamphlet of the title above, or any of our other lit pieces; ask for our literature list.
a manual. The world did not come without a way for people to prosper, and the planet to heal and stay well; that way is geonomics. Economies are part of the ecosystem. Both generate surpluses and follow self-regulating feedback loops. A cycle like the Law of Supply and Demand is one of the economy’s on/off loops. Our spending for land and resources – things that nobody made and everybody needs – constitutes our society’s surplus. Those profits without production (remember, nobody produced Earth) can become our commonwealth. To share it, we could pay land dues in to the public treasury (wouldn’t oil companies love that?) and get rent dividends back, a la Alaska’s oil dividend. Doing so let’s us axe taxes and jettison subsidies. Taxes and subsidies distort price (the DNA of exchange), violate quid pro quo by benefiting the well-connected more than anyone else, reinforce hierarchy of state over citizen, and are costly to administer (you don’t really need so much bureaucracy, do you?). Conversely, land dues motivate people to not waste sites, resources, and the ecosystem while rent dividends motivate people to not waste themselves. Receiving this income supplement – a Citizens Dividend – people can invest in their favorite technology or outgrow being “economan” and shrink their overbearing workweek in order to enjoy more time with family, friends, community, and nature. Then in all that free time, maybe we could figure out just what we are here for.
as unfamiliar as geo-economics. The latter is a course some universities offer that combines geography and economics. A UN newsletter, Go Between (57, Apr/May ’96; thanks, Pat Aller), cited an Asian conference on geopolitics and “geoeconomics”. The abbreviated term ‘geonomics” is the name of an institute on Middlebury College campus and of a show on CNBC. Both entities use the neologism to mean “global economics”, in particular world trade. We use geonomics entirely differently, to refer to the money people spend on the nature they use, how letting this flow collect in a few pockets creates class and poverty and assaults upon the environment, and how, on the other hand, sharing this rental flow creates equality, prosperity, and a people/planet harmony. This flow of natural rent, several trillions dollars in the US each year, shapes society and belongs to society.
in part the Great Green Tax Shift maxed out. Economically, taxing pollution and depletion does reduce pollutants and extracts – and thus the tax base; plus such taxes are regressive, requiring a safety net. On the other hand, collecting site rent is progressive and generates a revenue surplus payable as a dividend to residents, which can serve as the safety net. Environmentally, taxes on waste and extraction do not drive efficient use of land, as does getting site rent.
a scientific look at how we divvy up the work and the wealth, how some of us end up with too much or too little effort or reward. That’s partly due to Ricardo’s Law of Rent, showing how wasteful use of Earth cuts wages. And it’s partly due to how a society’s elite runs government around like water boys, dishing out subsidies and tax breaks. While geonomists look political reality right in the eye, without blinking, conventional economists flinch. When Paul Volcker, ex-chief of the Federal Reserve, moved on to a cushy professorship at Princeton cum book contract, the crush of deadlines bore down. So Volcker asked a junior associate to help with the book. The guy refused, explaining that giving serious consideration to policy would ruin his academic career. The ex-Fed chief couldn’t believe it and asked the department chair if truly that were the case. That head honcho pondered the question then replied no, not if he only does it once. And economics was AKA political economy!
a way to connect the dots. Making the cyber rounds is “The Cavernous Divide” by Scott Klinger, from AlterNet (posted March 21): “As the number of billionaires in the world expands, so does the number of those in poverty.” Duh. The yawning income gap is not news. Nearly every issue of our quarterly digest carries a similar quote. Yet the connection was worked out long ago by one of America’s greatest thinkers, Henry George, who labeled his masterpiece, Progress and Poverty. Techno- and socio-advances always enrich few and impoverish many. Yet progress also pushes up location values – the geonomic insight (is Silicon Valley cheaper now or more expensive?). Instead of taxing income, sales, or buildings, society could collect those values of sites, resources, EM spectrum, and ecosystem services via fees and dues, which would lower the income ceiling, and instead of lavishing corporate welfare, pay out the recovered revenue via dividends, which would jack up the income floor. Dots connected.
a POV that Spain’s president might try. A few blocks from my room in Madrid at a book fair to promote literacy, Sr Zapatero, while giving autographs and high fives to kids, said books are very expensive and he’d see about getting the value added tax on them cut down to zero. (El Pais, June 4; see, politicians can grasp geo-logic.) But why do we raise the cost of any useful product? Why not tax useless products? Even more basic: is being better than a costly tax good enough? Our favorite replacement for any tax is no tax: instead, run government like a business and charge full market value for the permits it issues, such as everything from corporate charters to emission allowances to resource leases. These pieces of paper are immensely valuable, yet now our steward, the state, gives them away for nearly free, absolutely free in some cases. Government is sitting on its own assets and needs merely to cash in by doing what any rational entity in the economy does – negotiate the best deal. Then with this profit, rather than fund more waste, pay the stakeholders, we citizenry, a dividend. Thereby geonomics gets rid of two huge problems. It replaces taxes with full-value fees and replaces subsidies for special interests with a Citizens Dividend for people in general. Neither left nor right, this reform is what both nature lovers and liberty lovers need to promote, right now.
a new policy from a new perspective. Once your worldview shifts — so that vacant city lots are no longer invisible — then epiphany. “Of course! Why didn’t I see it before?” Once you do see the emptiness and what damage it does, how can you ever go back to the old paradigm?
shaped by reality. In the 1980′s, the Swedish government doubled its stock transfer tax. Tax receipts, however, rose only 15%, since traders simply fled to London exchanges. Fearing a further exodus, the Swedish government quickly rescinded the tax altogether. (The New York Times, April 20) That willingness to tax anything leads us astray. Pushing us astray is that unwillingness to pay what we owe: rent for land, our common heritage. Assuming land value is up for grabs, we speculate. We cap the property tax on both land and buildings and the rate at which assessments can go up; while real market values rise quicker, assessments can never catch up. Our stewards, the Bureau of Land Management, routinely sell and lease sites below market value, often to insiders, says the Government Accounting Office. Once we grasp that rent is ours to share, we’ll collect it all, rather than let it enrich a few, and quit taxing earnings, which do belong to the individual earner. That shift is geonomic policy.
one of many words I coined over 20 years ago: geoism, geonomics, geonomy, geocracy, etc – neologisms that later others came up with, too. CNBC once had a Geonomics Show, and Middlebury College has a Geonomics Institute. If “economy” is literally “management of the household”, then geonomy is “management of the planet”. The kind of management I had in mind is not what CNBC was thinking – top-down. My geonomics is not hands-on, interfering, but hands-off, organic. It’d strive to align policy with natural processes, similar to what holistic healing does in medicine, what organic farming does in agriculture. Geonomics attends to two key components: One, the crucial stuff to track is fat – or profit, especially profits without production, such as rent, or all the money we spend on the nature we use. Society’s surplus is the sine qua non for growth, needed to counter death – not merely more, but sustainable development, more from less. Two, the basic process to respect is the feedback loop. These let nature maintain balance automatically and could do the same for markets, if we let them. Letting them would turn our economies, now our masters, into a geonomy, our servant, providing us with prosperity, eco-librium (to coin a term) and leisure, time off – a hostile environment for economan but a cradle for a loving and creative humanity.