New Zealand - land and property taxation

American Journal of Economics and Sociology, The,  Dec, 2000  by Robert D. Keall

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By this time, Douglas had left Labour to form a party of his own. Disillusionment with his program had set in, engendered by the feeling that the price for its successes was too high. For all is not well in Kiwiland. Wholesale privatization led to the selling off (frequently to foreign investors at bargain basement prices) of much publicly funded infrastructure that, from the standpoint of long-term social benefit, might better have been turned over to private operation rather than ownership. Although inflation was reversed, the national debt greatly increased, as did unemployment. As might be expected, some segments of the population found it difficult to cope with cutbacks (engendered by the unaccustomed regime of austerity) to entitlements and other public services. Finally, at Douglas' initiative, the reforming Labour government of the 1980s had turned against land-value taxation, and managed partly to dismantle it.

This will be discussed in greater detail later. The editor has hazarded the suggestion (admittedly conjectural) that Douglas, who had once been a member of the New Zealand Land-Value Rating Association, came, perhaps unconsciously, to associate land-value taxation with the discredited Labour Party socialism of his earlier years. If so, this was a tragic and unwarranted mistake. Although land-value taxation had traditionally had the support of Labour, its history in New Zealand long antedates that party, and it is conceptually distinct from (and, in its full Georgist form, antithetical to) socialism and the welfare state.

For over 150 years, land values in New Zealand have been collected for public purposes in three main ways: (1) by the sale and lease of Crown land, (2) from a national land tax, and (3) from land-value rates for local government. This record shows that the tax technique, however commendable in many ways, has significant practical limitations as well as being susceptible locally to administrative problems that, if not successfully addressed, are eagerly used against it; and that the principle and technique of institutionalized leases may be extended to include infrastructural monopolies, and thence more widely to land itself.

Crown Leases

From 1896 until recently, a government Valuation Department independently recorded the market values of the land, the improvements, and the composite or capital value. In 1999, the role of its successor agency was reduced to monitoring valuations done by private valuers under contract to local authorities, and to competing with private valuers for such contracts.

I

UNDER THE TREATY of Waitangi, only the government could buy land from the Maoris. Some of this land the government then resold in order to finance immigration, some it disposed of as grants to individuals in return for services, and some it retained on a perpetual leasehold basis. As local government evolved, some allocations were made on a leasehold basis to statutory bodies such as hospital and education boards to finance their statutory functions. Some coastal cities and harbor boards reclaimed land from the sea and leased it.