Gradually taking land out of the market place is the only way to solve the two tier housing market in New Zealand. While Auckland house prices rise at 13% a year, in the provinces the real prices have dropped 20%. This solution introduces a treasury created tax credit to pay for land of those who opt in.

1. Solving the Auckland
Housing Crisis
While stabilising land values in the provinces and
gradually taking land out of the market place

2. Banks reign
Banks get the best security – land. They benefit
from rising house prices and row the economy
between easy money and tight money for
maximum profit.
Government has to be content with revenue
coming from less secure sources like labour.
We need to weaken the link between banks and
land and strengthen the link between
Government and land.

3. What should we tax?
“We should tax the things we hold or take, not
what we do or make.”
Bob Keall in Resource Rentals for Revenue paper

4. Each site is given value by...
Site
Government
Local
Businesses
Local
Government Social
Organisations
Nature

5. What are resource rentals?
Property owners hold a monopoly on ‘their’ land.
Since some land is more valuable than others,
those landholders should compensate society for
this privilege. The extra site value of land is
created by the community over time and belongs
to the community.

6. As landowners gain from rising land prices,
wealth is concentrated with landowners and
banks.

7. The tax system should encourage
long term investments
When you don’t tax land or resources, money
goes into bidding up the price of assets not into
real production. When you tax labour and sales
and enterprise everyone’s purchasing power is
diminished. We need to ‘clear the path’ for job
creation by untaxing labour and taxing land.

8. New type of thinking?
“You can’t change things by fighting the existing
reality. To change something, build a new model
that makes the existing model obsolete.”
Buckminster Fuller (engineer, designer and
inventor) e.g. Wikipedia replaces Encyclopedia
Britannica, email is replacing postal mail

9. Currency creation is a
country’s sovereign right
New Zealand should have tino rangitiratanga (or
absolute sovereignty) over its right to design its
own currency system and not let privately owned
banks take charge of this. We should have an
ecosystem of currencies, not a monoculture.

10. Banks Reign while they
control land and money
If interest rates drop a surge of money goes into
housing – a housing bubble. There has to be
something to stop it. A capital gains tax is not
good enough. Even if all money is created by
Government, it doesn’t create jobs because you
haven’t swapped income tax for land rents. You
need to unblock the riverbed so that money flows
into production. Besides, wealth still pools with
landowners.

11. Why not a
Capital Gains Tax?
Capital Gains Tax?
• As proposed by Labour and Greens it is a weak
version. Actually the whole of the capital gain is a
land gain – created by society. So the whole gain
belongs to society.
• Labour and Greens only propose something
similar to Australian CGT where a portion of the
gain is treated as income. Complicated and
expensive to administer and doesn’t work. If
100% then property stays off the market.

12. Introducing land tax alone is
political suicide
You can’t just add a land tax because it is an extra
tax. People already pay for their mortgage and
they pay rates or local taxes. Why should they pay
a third? So it is not politically feasible. The point
of a land tax is that you must untax labour and
sales at the same time and this is tricky to do.
Despite many tax reviews recommending land
tax in New Zealand, no government has
implemented those recommendations.

13. Why a rental not a land
tax?
• A land tax implies people can own land. But
Nature provided it free and it is here when we
die. Land owns us.
• A land tax imposed at 1% will reduce land value
by 16% so next year Government has to raise the
percentage. That is why people don’t trust
governments with land tax.
• It requires constant land valuation and disputes.

14. Step One
Allow Treasury to create Tax Credits. Make them
dated. That means they are acceptable for the
payment of tax until that date. They turn into a
pumpkin at a certain date so naturally people
want to spend them and keep them in the
country. Like Flybuys loyalty points they drop off
if you don’t use them. Also acceptable for student
loan repayment.

15. Step Two
Treasury offers to buy the land of anyone who
volunteers. Treasury uses Tax Credits to pay for
the land. From then on a land fee or rental is
payable for that land but the title remains with
the property owner .

16. Step 3. Use contract law to
set land fee
• Each property owner negotiates with government
to set the land fee.
• They then sign a contract to pay a certain fee
regularly to Government. They negotiate to make
sure they have a financial incentive to opt in so
end up paying less than the sum of their
mortgage and rates. Their title is then burdened
with a covenant to pay.

17. Property owner contracts with Government

18. Step Four
Link the tax credits to a completely new tax
system. Trades in the tax credits will not incur
income tax, sales tax or company tax.
..new currrency,
new rules..Tax Credits No income tax, GST
or company tax, only
resource taxes

19. Step Five
The revenue would be shared by central
Government and the relevant local Government
(in New Zealand we have only central and local
Government). No further rates (local taxes)
would be payable.
Central
Government
Local
Government
share revenue

20. Step Six - create an index
Land rents (or land fees) would not be linked to
inflation but to the site rental value of the land.
A Land Rental Index would be established for
each area by taking a sample. Fees would only
rise if new public infrastructure was built and
would only fall if there was an earthquake or,
say, a rail link was discontinued. They also
change if the permitted use changes. They vary
very little over time otherwise and are not
subject to reviews, only to the index. So there
will be no sudden rises!

21. Step Seven A Citizens
Dividend
Treasury will refresh and redate the Tax Credits
they receive, and from time to time will issue all
men, women and children with a Citizens Dividend
in Tax Credits. Thus the land fees are shared with
the people. It will be digital only. It will be on a dual
currency debit card like Kiwibank’s Loaded card.

22. Step Eight
The homeowner paid in Tax Credits uses them to
repay their mortgage or to make a long term
investment and pay land rents in advance.
Because they are dated this encourages people to
keep them in the country so there is import
substitution manufacturing.

23. Step Ten - productivity
As people spend their Tax Credits on labour
intensive industries, production will flow to the
regions. This encourages regional development.
And the price of houses on land paid for by
Government will halve.

24. But what about Maori land?
• Communal stewardship and sharing of land
values is not a new concept to indigenous people.
• This scheme is voluntary
• A long process of negotiation hapu by hapu
and/or iwi by iwi will be required to clarify any
proposal for a new law.

25. The plan in action
Here are some examples of what might happen.

26. Woman in Auckland
She is a 42 year old solo mother (one child), full
time student who owns her suburban house.
Land worth $200,000. Land fees would be about
TC10,000 a year so she pays two years in advance
leaving TC180,000. She decides to build a second
storey so she can rent it out. No tax or sales tax
on all trades in Tax Credits. No more rates.

27. Young couple buying first
home
• The Government buys the land with Tax Credits
and they buy the house, using an ordinary
mortgage. So the young couple only has to pay
for the house, not the land.
• They negotiate to pay a land fee to government
which would be less than the sum of their land
mortgage plus rates.
• The vendor uses mixed currencies to buy their
next house.

28. Couple on small lifestyle block
In their early sixties. He commutes to the city.
Land worth $340,000. They want to develop the
block to produce an income. They pay land fees
in advance, then pay for labour and for buying
fruit and nut trees. They plant a cash crop (say
pumpkin or garlic) which they sell within New
Zealand. They pay a permaculturist for advice
and for labour to plant a food forest. They
insulate the house and build fences.

29. We have a mortgage
Our land value is worth $90,000 and we are in
our early thirties, a nurse and a mechanic in
Opotiki. We used to pay 5.5% fixed mortgage or
$4950 on our land, plus $2015 in rates a year,
total $6965. So we get the Government to pay for
our land and our contract settles at $5900 a
year, making a saving of $1009 a year.

30. Legislation minimal
• As we are using existing contract law, the only
legislation necessary would be to set guidelines
for negotiations. It has been suggested that for
rural land take the sum of mortgage on land plus
rates and subtract 25%, for outer urban land 15%
and for inner city land 10%.

31. What we have done
• We have invited property owners to opt in to a
scheme whereby Treasury pays for the land in a
new specially designed currency called Tax
Credits.
• We have used contract law so we don’t have to
legislate. Negotiation discovers a land fee,
corrected annually by a land fee index.
• Tax credits have a circulation incentive and bear
no taxes on labour or trade.

32. Things you can do
Visit and join the site of the New Economics Party
http://neweconomics.net.nz. Become a financial
member.
Go to our Facebook page
http://www.facebook.com/NewEconomicsParty.
Discuss the issue with your friends and family and online.
An article on this is on a blog at
http://neweconomics.net.nz/index.php/2013/06/how-
to-build-a-life-supporting-economic-system/
Contact us info@neweconomics.net.nz.