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Why tax land and the use
of natural resources?
And who has recommended it over the ages?
• The earth is the LORD’s and the fullness thereof,
the world and those who dwell therein
– Psalm 24
• "The earth, in its natural uncultivated state... is the
common property of the human race"
• The annual produce of the land and labour of the
society, the real wealth and revenue of the great body
of the people, might be the same after such a tax as
before. Ground-rents and the ordinary rent of land are,
therefore, perhaps, the species of revenue which can
best bear to have a peculiar tax imposed upon them.
• Adam Smith - Wealth of Nations (1776), Book V, Chap.
John Stuart Mill
• Landlords grow rich in their sleep without working,
risking or economising. The increase in the value of
land, arising as it does from the efforts of an entire
community, should belong to the community and not
to the individual who might hold title.
• John Stuart Mill - Political Economy (1848), Book V,
Chap. 2, Sec. 5
• The tax upon land values is, therefore, the most just
and equal of all taxes. It is the taking by the
community, for the use of the community, of that
value which is the creation of the community.
• Henry George - Progress and Poverty (1879)
• Solving the land question means solving of all social
questions. Possession of land by people who do not
use it is immoral – just like the possession of slaves.
• Roads are made, streets are made, railway services are
improved, ...water is brought from reservoirs a hundred
miles off in the mountains - and all the while the landlord
sits still… To not one of these improvements does the
land monopolist contribute, and yet by every one of them
the value of his land is sensibly enhanced.
• Winston Churchill - Speaking in 1909 for the People's
budget. He called land the “mother of all monopolies”
• “Maori society could have survived land
confiscations but it could not survive the evils a
fundamental change of land tenure were to
bring…Freehold land tenure caused the death of
Maori society as it had been.” -Te Ara Tika 1973
• (Rolland O’Regan was a Wellington surgeon, son of
Mr Justice O’Regan and father of Sir Tipene
• So the question is, which are the least bad taxes? In
my opinion the least bad tax is the property tax on
the unimproved value of land, the Henry George
argument of many, many years ago.
• Milton Friedman - Professor of Economics,
University of Chicago, speaking in 1978
• Land value taxation is a "no-brainer"…It is both fair
and efficient. It should be adopted.
• Martin Wolf - Chief economics commentator at the
• “The term land value tax is a misnomer. It’s not
really a tax. It’s a return to the public of the benefits
we have donated to the landlords. When land rises
in value, the government and the people deliver a
great unearned gift to those who happen to own it.”
• Guardian Jan 21, 2013
• “One way to share Earth is to share her worth. Seems to
work OK in Alaska where every resident receives an oil
dividend. That state also has the narrowest income gap in
• Land does not disappear when it is taxed. Henry George, a
great progressive of the late nineteenth century, argued,
partly on this basis, for a land tax. It is ironic that rather than
following this dictum, the United States has been doing just
the opposite through its preferential treatment of capital
• Joseph Stiglitz
Long term history of land tax
• In 1216 100% of the government revenue was from
• By1483 it was 90%
• By 1653 it was 50%
• By 1760 it was 17%
• By 1842 it was 4%
History of Land Tax in New
• Sir George Grey met Henry George (also John Stuart Mill) and in
1878 introduced a tax on what you owned with improvements
• Liberal Party 1891 The ordinary land tax and their graduated land
tax for large estates were aimed at breaking up the great land
estates, and capturing at least part of the increase in land value.
• Conservative governments usually cut land tax. By 1988 land tax
was only 0.4% tax take, down from 10%. Made illegal in 1991.
• Nowadays tax system is complex, even messy. 80% of tax
revenue comes from income tax, GST and company tax.
Local Authorities in New
• Wellington, Christchurch, Dunedin were all built on site
value (unimproved only) rates
• From 1896 a poll of ratepayers allowed a choice
between capital and unimproved value. It would always
result in the latter. Poll choice stopped in 1988.
• By 1982 80% of all municipalities used land value rating.
• Auckland City Council supercity set up in 2010 by
legislation mandating capital value rating.
Relationship with local
• Now almost all local authorities levy on the capital
value (Auckland City Council by law is capital value)
• Over the last decades Fixed Annual Charges for
sewerage, storm water, water, community facilities
have been introduced. Regressive.
• One almighty hotchpotch now with dubious
Advantages of land value
• Progressive tax – as central suburbs have highest land
• Therefore most ratepayers pay less
• Stops urban sprawl
• Encourages building, (doesn’t penalise improvements).
• Encourages urban renewal
• Stops land speculation
Objections to land value tax
• “An attack on the institution of private property.”
• “Those who can afford more should pay more.”
• “We need a broad base for tax.”
Other taxes on monopoly
use of the commons
• Ocean and freshwater resources
• Oil and gas
• Electromagnetic spectrum
• Use of air, water, soil, biosphere for pollution
• Unusually stable source of public revenue
• The tax base doesn’t shrink
• Land can’t be hidden offshore
• Administration is simple, transparent
• Not a burden on production as it doesn’t penalise
work or entrepreneurship
When rates are on capital
• Disincentive to build because capital value would
rise and then rates would rise.
• Rising rents. If a landlord improves a building she/he
bears the cost of building, plus the extra cost of
rates. Rents go up higher than they need.
• Land belongs to all
• First in first served
• Local government is a government
• Local government is a business
San Francisco, rebuilding
after 1907 quake, bounced
back due to taxing land but
not buildings. Population
grew but not city area
Los Angeles doesn’t
base its local tax on
land but on capital,
leading to urban sprawl
• Had two early Georgist mayors in a row, attracting
industry and people.
• Next mayors changed local tax system, beginning of
decline.GST, income tax etc.
• One even subsidised the holding of land leading to
huge decline in population. This continued.