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.
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 study of Earth’s economic worth, of the money we spend on the nature we use, trillions of dollars each year. We spend most to be with our own kind; land value follows population density. Besides nearness to downtowns, we also pay for proximity to good schools, lovely views, soil fertility, etc. These advantages, sellers did not create. So we pay the wrong people for land. Instead, we should pay our neighbors. They generate land’s value and deserve compensation for keeping off ours, as they’d pay us for keeping off theirs. It’s mutual compensation: we’d replace taxes with land dues – a bit like Hong Kong does – and replace subsidies with “rent” dividends to area residents – a bit like Alaska does with oil revenue. Both taxes and subsidies – however fair or not – are costly and distort the prices of the goods taxed and the services subsidized. By replacing them and letting prices become precise, we reveal the real costs of output, the real values of consumers. Then, just by following the bottom line, people can choose to conserve and prosper automatically. A community could start by shifting its property tax off buildings, onto land – a bit like a score of towns in Pennsylvania do; every place that has done it has benefited.
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.
a discipline that, compared to economics, is as obscure as Warren Buffett’s investment strategy, compared to conventional investment theory, about which Buffett said, “You couldn’t advance in a finance department in this country unless you taught that the world was flat.” (The New York Times, Oct 29). The writer wondered, “But why? If it works, why don’t more investors use it?”
Good question. Geonomics works, too. Every place that has used it has prospered while conserving resources. Yet it remains off the radar of many wanna-be reformers. Gradually, tho’, that’s changing. More are becoming aware of what geonomics studies – all the money we spend on the nature we use. Geonomics (1) as an alternative worldview to the anthropocentric, sees human economies as part of the embracing ecosystem with natural feedback loops seeking balance in both systems. (2) As an alternative to worker vs. investor, it sees our need for sites and resources making those who own land into landlords. (3)As an alternative to economics, it tracks the trillions of “rent” as it drives the “housing” bubble and all other indicators. And (4) as an alternative to left or right, it suggests we not tax ourselves then subsidize our favorites but recover and share society’s surplus, paying in land dues and getting back “rent” dividends, a la Alaska’s oil dividend. Letting rent go to the wrong pockets wreaks havoc, while redirecting it to everyone would solve our economic ills and the ills downstream from them.
People must learn to stop whining so much and feel enough self-esteem to demand a fair share of rent, society’s surplus, the commonwealth.
an answer for Jonathan of the Green Party (Nov 7): “What does ‘share our surplus’ mean?”
Our surplus is the values that society generates synergistically. It’s the money we spend on the nature we use: on land sites, natural resources, EM spectrum, ecosystem services (assimilating pollutants). It’s also the money we pay to holders of government-granted privileges like corporate charters. We could share it by paying for the nature we use and privileges we hold to the public treasury then getting back a fair share of the recovered revenue. Used to be, owners did owe rent (“own” and “owe” used to be one word). And presently, some lucky residents do get back periodic dividends: Alaska’s oil dividend and Aspen Colorado’s housing assistance. Doing that, instead of subsidizing bads while taxing goods, is the essence of geonomics.
Jonathan: “Is local currency what you mean?”
Editor: It’s not. Community currency is a good reform, but every good reform pushes up site values. That makes land an even more tempting object of speculation. Now, any good will eventually do bad by widening the income gap – until you share land values.
suitable for framing by Green Parties. When Greens began in Germany two decades ago, they defined themselves as neither left nor right but in front. Geonomics fits that description. The Green Parties have their Four Pillars; geonomists have four ways to apply them:
Ecological Wisdom. Want people to use the eco-system wisely? Charge them Rent and, to end corporate license, add surcharges. To minimize these costs, people will use less Earth.
Nonviolence. Want people to settle disputes nonviolently? Set a good example; don’t levy taxes, which rely on the threat of incarceration, to take people’s money. Try quid pro quo fees and dues.
Social Responsibility. Want people to be responsible for their actions? Don’t make basic choices for them by subsidizing services, addicting them to a caretaker state. Let people spend shares of social surplus.
Grassroots Democracy. Better have grassroots prosperity. Remember, political power follows economic. Pay people a Citizens Dividend; to keep it, they’ll show up at the polls, public hearings, and conventions.
a neologism for sharing “rent” or “social surplus” – the money we spend on the nature we use. When we buy land, such as the land beneath a home, we typically pay the wrong person – the homeowner. Instead, since land cost us nothing to make and is the common heritage of us all, rather than pay the owner, we should pay ourselves, our neighbors, our community. That is, we should all pay land dues to the public treasury, then our government would pay us land dividends from this collected revenue. It’s similar to the Alaska oil dividend, almost $2,000 last year. Indeed, the annual rental value of land, oil, all other natural resources, including the broadcast spectrum and other government-granted permits such as corporate charters, totals several trillion dollars each year. It’s so much that some could be spent on basic social services, the rest parceled out as a dividend, as Tom Paine suggested, and taxes (except any on natural rents) could be abolished, as Thomas Jefferson suggested. Were we sharing Earth by sharing her worth, territorial disputes would be fewer, less intense, and more resolvable.
the annoying habit of seeing the hand of land in almost all transactions. In geonomics we maintain the distinction between the items bearing exchange value that come into being via human effort — wealth — and those that don’t — land. Keeping this distinction in the forefront makes it obvious that speculating in land drives sprawl, that hoarding land retards Third World development, that borrowing to buy land plus buildings engorges banks, that much so-called “interest” is quasi-rent, that the cost of land inflates faster than the price of produced goods and services, that over half of corporate profit is from real estate (Urban Land Institute, 1999). Summing up these analyses, geonomists offer a Grand Unifying Theory, that the flow of rent pulls all other indicators in its wake. Geonomics differs from economics as chemistry from alchemy, as astronomy from astrology.
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.
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.