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.
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.
an economic policy based on the earth’s natural patterns. Eco-systems self-regulate by using feedback loops to keep balance. Can economies do likewise? Why don’t they now produce efficiently and distribute fairly? The answers lie in the money we spend on the earth we use. To attain people/planet harmony, that financial flow from sites and resources must visit each of us. Our agent, government, must collect this natural rent via fees and disburse the collected revenue via dividends. And, it must forgo taxes on homes and earnings, and quit subsidies of either the needy or the greedy. As our steward, government must also collect Ecology Security Deposits, require Restoration Insurance, and auction off the occasional Emissions Permit. And that’s about it – were nature our model.
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 heri-tage 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 divi-dend, as Tom Paine suggested, and taxes (except any on natural rents) could be abolished, as Thomas Jeffer-son suggested. Were we sharing Earth by sharing her worth, territorial disputes would be fewer, less intense, and more resolvable.
of interest to Dave Lakhani, President Bold Approach (Mar 8) and Matt Ozga (Jan 29): “I write for the Washington Square News, the student run newspaper out of New York University. Geonomics seems like it has great significance, especially in this area. When was geonomics developed, and by whom?”
About 1982 I began. Two years later, Chilean Dr Manfred Max-Neef offered the term geonomics for Earth-friendly economics. In the mid-80s, a millionaire founded a Geonomics Institute on Middlebury College campus in Vermont re global trade. In the 1990s, CNBC cablecast a show, Geonomics, on world trade as it benefits world traders. My version of geonomics draws heavily from the American Henry George who wrote Progress & Poverty (1879) and won the mayoralty of New York but was denied his victory by Tammany Hall (1886). He in turn got lots from Brits David Ricardo, Adam Smith, and the French physiocrats of the 1700s. My version differs by focusing not on taxation but on the flow of rents for sites, resources, sinks, and government-granted privileges. Forgoing these trillions, we instead tax and subsidize, making waste cheap and sustainability expensive. To quit distorting price, replace taxes with “land dues” and replace subsidies with a Citizens Dividend.
Matt: “This idea of sharing rents sounds, if not explicitly socialist, at least at odds with some capitalist values (only the strong survive & prosper, etc). Is it fair to say that geonomics has some basis in socialist theory?”
A closer descriptor would be Christian. Beyond ethics into praxis, Alaska shares oil rent with residents, and they’re more libertarian than socialist. While individuals provide labor and capital, no one provides land while society generates its value. Rent is not private property but public property. Sharing Rent is predistribution, sharing it before an elite or state has a chance to get and misspend it, like a public REIT (Real Estate Investment Trust) paying dividends to its stakeholders – a perfectly capitalist model. What we should leave untaxed are our sales, salaries, and structures, things we do produce.
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?
an alternative to conventional land trusts. Just as it seems some functions should not be left to the market – private courts and cops invite corruption (while private mediation is fine) – just so some land should not be left in the market. That said, sacred sites do not make much of a model for treating the vast acreage of land that we need to use. So the usual trust model, which is anti-use and counter-market, can not apply where it’s needed most. Trust proponents worry about ownership and control – two very human ambitions – but they’re not central. Supposedly, we the people own millions acres – acres that private corporations treat as private fiefdoms – and conversely, the Nature Conservancy owns wilderness the public can some places use as parks. So, the issue is not who owns but who gets the rent – ideally, all of us.
a study of a phenomenon David Ricardo noted going on two centuries ago. When wine grapes rise to $10,000 a ton from the very best land (last year, cabernet sauvignon commanded an average of $4,021 a ton in the Napa Valley), then vineyard prices soar from $18,000 an acre in the 1980′s to $100,000 an acre five years ago and now for a top pedigree up to $300,000 an acre (The New York Times, April 9, via Wyn Achenbaum). Pricey land does not make wine pricey; spendy wine makes land spendy. While vintners make their wine tasty, nature and society in general – not any lone owner – make land desireable. Steve Kerch of CBS’s MarketWatch (April 5) notes that much of what a home sells for on the open market is a reflection of intangible factors such as what school district the house sits in. The price the builder has to pay for the land also tends to be driven by the same intangibles. Because the value of land comes from society, and because one’s use excludes the rest of society, each user owes all others compensation, and is owed compensation by everyone else. Sharing land’s value, instead of taxing one’s efforts, is the policy of geonomics.
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.
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.
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 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.