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.
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.
not exactly Georgism, the Single Tax on land value proposed by Henry George. He did, tho’, inspire most of the real-world implementations of the land tax that some jurisdictions enjoy today, and modern thinkers to craft geonomics. While his name and our remedy both begin with “geo” since both words refer to “Earth”, the two have their differences. (a) George pegs land monopoly as the fundamental flaw while geonomics faults Rent retention. (b) To fix the flaw, George was content to use a tax, while geonomics jettisons them in favor of price-like fees. (c) George focused on the taking while geonomics headlines the sharing. George envisioned an enlightened state judiciously spending the collected Rent while geonomics would turn the lion’s share over to the citizens via a dividend. (d) And George, as was everyone in his era, was pro-growth while geonomics sees economies as alive, growing, maturing, and stabilizing. Despite these differences, George should be recognized as great an economist as Euclid was a geometrician.
more transformation than reform; it’s a step ahead. Harvard economics students this year did petition to change the curriculum, in the wake of the English who caught the dissension from across The Channel. French reformers, who fault conventional economics for conjuring mathematical models of little empirical relevance and being closed to critical and reflective thought, reject this “autism” – or detachment from reality – and dub their offering “post-autistic economics”. Not a bad name, but again, academics define themselves by what they’re not, not by what they are, unlike geonomists. We track rent – the money we spend on the nature we use – and watch it pull all the other economic indicators in its wake. We see economies as part and parcel of the ecosystem, similarly following natural patterns and able to self-regulate more so than allowed, once we quit distorting prices. To align people and planet, we’d replace taxes and subsidies with recovering and sharing rents.
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 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.
about the money we spend on the nature we use. It flows torrentially yet invisibly, often submerged in the price of housing, food, fuel, and everything else. Flowing from the many to the few, natural rent distorts prices and rewards unjust and unsustainable choices. Redirected via dues and dividends to flow from each to all, “rent” payments would level the playing field and empower neighbors to shrink their workweek and expand their horizons. Modeled on nature’s feedback loops, earlier proposals to redirect rent found favor with Paine, Tolstoy, and Einstein. Wherever tried, to the degree tried, redirecting rent worked. One of today’s versions, the green tax shift, spreads out of Europe. Another, the Property Tax Shift, activists can win at the local level, building a world that works right for everyone.
close to the policy of the Garden Cities in England. Founded by Ebenezer Howard over a century ago, residents own the land in common and run the town as a business. Letchworth, the oldest of the model towns, serves residents grandly from bucketfuls of collected land rent (as does the Canadian Province of Alberta from oil royalty). A geonomic town would pay the rent to residents, letting them freely choose personalized services, and also ax taxes. Both geonomics and Howard were inspired by American proto-geonomist Henry George. The movement launched by Howard today in the UK advances the shift of taxes from buildings to locations. A recent report from the Town and Country Planning Association proposes this Property Tax Shift and their journal published research in the potential of land value taxation by Tony Vickers (Vol. 69, Part 5, 2000). (Thanks to James Robertson)
the study of the money we spend on the nature we use. When we pay that money to private owners, we reward both speculation and over-extraction. Robert Kiyosaki’s bestseller, Rich Dad’s Prophecy, says, “One of the reasons McDonald’s is such a rich company is not because it sells a lot of burgers but because it owns the land at some of the best intersections in the world. The main reason Kim and I invest in such properties is to own the land at the corner of the intersection. (p 200) My real estate advisor states that the rich either made their money in real estate or hold their money in real estate.” (p 141, via Greg Young) When government recovers the rents for natural advantages for everyone, it can save citizens millions. Ben Sevack, Montreal steel manufacturer, tells us (August 12) that Alberta, by leasing oil & gas fields, recovers enough revenue to be the only province in Canada to get by without a sales tax and to levy a flat provincial income tax. While running for re-election, provincial Premier Ralph Klein proposes to abolish their income tax and promises to eliminate medical insurance premiums and use resource revenue to pay for all medical expense for seniors. After all this planned tax-cutting and greater expense, they still expect a large budget surplus. Even places without oil and gas have high site values in their downtowns, and high values in their utility franchises. Recover the values of locations and privileges, displace the harmful taxes on sales, salaries, and structures, then use the revenue to fund basic government and pay residents a dividend, and you have geonomics in action.
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.
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.