The Property Ladder is a Ladder of Thieves

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I’ve been thinking about stealing. And it’s in relation to our tax system. We usually think of stealing in relation to private property. We could even steal the property of an organisation like an art gallery.

But the problem is that, with our current tax system, all the property owners of New Zealand are stealing from the public purse. And it is not their fault. They are usually oblivious.

House values rise because of the public actions of government and the community not because of you.
The value of your land rises with nearby development.

The value of your land rises if it is near shops and transport and schools

The value of your property goes up because the land value of your property goes up. And the land value rises every time there is development around you. Every time the central government spends money on railways or roads or schools or hospitals near you the property value goes up.

And if the council puts in underground pipes for sewage, waste water and stormwater land value rises. It’s the same with street lighting and community facilities. Not your doing.

And if shops spring up nearby that’s good for your land value too. It also happens if a gym or a club building is built nearby – your land value goes up. Nothing to do with you. You didn’t do it.

The uplift in value in the property ladder belongs to the public

So the uplift in your property value is not your money. It belongs to the public.  When people talk about ‘getting on the property ladder’ they are really talking about getting on a ladder of thieves.

Everybody on the property ladder is stealing from the public purse. The money belongs either to the local government, or the national government, perhaps in the proportion of one to 4 or something like that.

So let’s look at a simple scenario. If I own a hunk of bare land but don’t want to be a farmer I can lease it to someone and charge an annual rent. This is usually in the region of 5 ½% for rural land.

Now, where has all this stealing landed us?

Think of the gap between rich and poor in this country. More than 2 million people earn less than $30,000 The poorest half own 2%. It’s a recipe for crime, poor social cohesion and full prisons. And it will get worse under a National/Act government.

And now we are in the last days of the 2023 election, the Green party have a 2.55% wealth tax for those with wealth of $ 2 million upwards.  This is a tax on the accumulated capital gains, largely from land uplift as described above but also from uplift of resource values. Greens also raise income tax for those on income over $180,000.

Labour has a top income tax rate of 39%.

When it comes to Te Pāti Māori, we see a little more. They have a wealth tax, a foreign companies tax, a land banking tax and a vacant house tax. (They say there are 94,197 of these empty houses)

These last two are really land value taxes. They compensate the public for the ‘owner’ monopolising land sites.

The tax policy of the National Party is going to result in huge urban sprawl. (A hopeless future for our elite soils)

What are the essential elements of a good tax policy?

A tax system should have a clear and logical philosophy. We should tax what we hold or take, but not what we do or make.

You will notice that I am not promoting income tax. After all, how crazy is it to penalise work? I always thought work was good.

Economists are united that a tax policy must be simple, efficient, revenue-sufficient, fair and cheap to administer.

Land value taxes are all of these things. The uplift in land value doesn’t go to the ‘owner’ of the property when the public creates the land value. You can’t avoid it by taking your land overseas. It is cheap to administer and if imposed at the right level, will, along with resource taxes and taxes on other monopolies, provide sufficient revenue for the country.

But will it provide enough tax income? Karl Fitzgerald, an economist who worked for an organisation called Progress Australia in Melbourne, calculated the possible tax income for Australia in 2012. It was sufficient for tax without any income tax at all.. Karl’s Total Resource Rents for Australia: Harnessing the Power of Monopoly.

Land tax brought in over half, with the rest coming from minerals, oil and gas, water rights, taxi licences, airports, utilities, fishing licences, forestry, gambling licences, GMS, Satellite Orbit Rights, Internet infrastructure, Domain Name Registration Licences, banking licence fees, corporate commons fee, patents, parking fees, public transport, liquor licences, carbon taxes, tobacco and alcohol taxes.

If this seems like a long list, it is. Each of the above is part of the public wealth, and those who operate in these fields are monopolising that sector. That’s why they should compensate the public for the privilege.

There would be no need for regressive GST, no company taxes – and certainly no income tax.

2 thoughts on “The Property Ladder is a Ladder of Thieves”

  1. Good argument. Another negative aspect is the inflationary aspect of these gains to “mom&pop” investors in particular, but even downsizers, a large demographic in NZ. When we retire we start selling off those extra properties freeing up cash for bucket list spend, adventure before dementia, private medical attention, flash new stuff we wouldn’t otherwise buy, as the “dying of the light” destiny approaches. This adds demand, pushes up prices, disadvantages working people scraping to get by.

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