AN INEQUITABLE SYSTEM

Nelson Evening Mail, Volume LXI, 8 August 1928, Page 7

AN INEQUITABLE SYSTEM

RATING ON UNIMPROVED VALUES EXPERIENCE OF ITS EFFECTS COMMENT ON RECENT POLLS (By Harry Atmore, M.P.) The merits of the systems of Rating on Unimproved Values and Rating on Annual Values were freely discussed, both on platform and in press for some days prior to the taking of the poll on Thursday, 28th June, at Wanganui, and it is significant that after a very keen campaign, conducted by P. J. O’Regan on behalf of the former system, and by the Member for Nelson on behalf of the latter, the poll of 1925, which wat carried with a majority ' of 484 votes in favour of Rating on Unimproved, was reversed with a majority of 489 in favour of a return to the Rating on Annual Values; and it is satisfactory to note that after the result was known Mr P. J. O’Regan said: “That the majority was greater than that recorded anywhere else in the Dominion where the old system had been reverted to.” The great political economist, practically the Father of modern Political Economy, Adam Smith, placed in the forefront of his maxims regarding taxation the one running as follows: “Tho , subjects of every State ought to contribute towards the support of the Government as nearly as possible in proportion to their respective abilities; that is in proportion to the revenue which they respectively enjoy under the protection of the State,” and later, when dealing with the subject of a tax on house rent, he wrote : “The proportion -of the, expense of house rent to the whole expense of living is different in the different degrees of fortune. It is perhaps highest in the highest degree, and it diminishes gradually through the inferior degree, so as in. general to .be lowest in the lowest degree. A tax upon rents, therefore, would in general fall heaviest upon tho riefi; and in this sort of inequality there Would not perhaps be anything veiy unreasonable.* It is not very unreasonable that tho rich should contribute to the public expense not only in proportion to their revenue but something more than in that proportion.” This statement clearly indicates that the opinion of Adam Smith was in favour of taxation .according to ability to pay which appears to be the only sound basis for any system of local rating or general taxation. , MERITS COMPARED An' admirable report was prepared by the Town Clerk of Dunedin . on the merits of the two systems of rating, and, quoting from a report supplied in 1921 by two responsible officers of the Wellington City Corporation, he said : “The subject of the basis of rating for municipal purposes has always aroused interest. Looking at the Unimproved Values Rating in this city, it must be said that whatever merit there may he in the system, it has wrought injury to the city. The crowding of dwellings, the unsatisfactory class, of dwellings put up by the jerry-builder, the lack of open spaces, the absence of private gardens to beautify the city, the small sections / for the homes, causing children to make a playground of the streets, must be charged against tKe system of Rating on Unimproved Values. The introduction of Unimproved Value Rating did not have the effect expected of forcing the land into the market.. The Rating on Unimproved Values is in many cases quite inequitable. Before the system was in force people would build * houses of gop(l size, all of one storey, which occupied a large amount of land, and in many cases the house would be placed in the middle of the section. Unless the owner sold the land immediately adjoining his house, he was treated where he had, say, a 60ft frontage as if he had three disposal sections of, say, 20ft each without a building.” . Quoting from the same report, it is said: “Auckland and Dunedin have all along retained the Annual Value System and have on that account been, so far as municipal finances are concerned, in a mvfch better position than Wellington-; their income is very much more nearly to their requirements.” The Town Clerk of Dunedin paid a visit to Christchurch and Dunedin and enquired from the civic authorities their opinion of the working of the system of ?f|Rating on Unimproved in their cities respectively. With one exception, I found the whole of the officials with whom I discussed the' matter opposed to the system. >, , | . The Town Clerk of Sydney said: “It is claimed that the incidence of the rate has been the means of buildings being carried high in the air to avoid a. fair share of the taxation. The bulk of the rates received in the city of Sydney comes from the three main commercial wards of ‘ necessity; but the revenue from the individual properties, it is considered, is unfairly distributed. The unpretentious class of building, up to, say, four storeys, is the most heavily taxed; those which tower above that height go practically free of municipal rates for all the floors above.” BASED ON DOCTRINE OF SINGLE TAX It should be remembered that the system of Rating on Unimproved Values is based on the doctrine of the Single Tax, which in turn is one of the weapons of the advocates of Land Nationalisation; by -“taxing out” the value of the land, it is sought to pavo the way to its resumption by the State. It would appear from a scrutiny of tho polls on this question that almost invariably, when the system of Rating on Unimproved Values has been carried, it has been on an insignificant vote, and therefore quite unrepresentative, as the following illustrations show:— For Against Christchurch, 1902 596 512 About 16,000 ratepayers on roll. Wellington, 1901 1261 591 About same number of ratepayers as Christchurch. Wanganui, 1925 2280 1733 In Nelson, where a poll was taken oil 3rd December, 1924, owing to public meetings being held, and a large amount of newspaper correspondenceappearing, considerable interest was shown; and when the poll was taken, out of a total roll number of 2800 ratepayers 1150 voted against Rating on Unimproved and 420 voted for it. Compare the Nelson poll witli that of Christchurch, and it will be seen that there were more ratepayers in Nelson voting against Rating on Unimproved than there were in Christchurch in the total number of votes cast. During' the recent Wanganui campaign attention was directed to the falsification of the predictions made, by Mr O’Regan during the course of his speeches in 1925. He stated then “that opponents said that tradespeople in the Avenue would have their rates doubled, and this would come back on the worker.” Tho speaker claimed that “no one in the Avenue would have his rates doubled except the man who had a vacant section.” PR ED ICTIONS FA LSIFIED Notwithstanding the assurance thus given by Mr O’Regan, rates of- trades-

men’s premises in the Avenue wero doubled in many instances, and trebled in others, as shown by tho following:— Increased

He also predicted that. Rating on Unimproved Values would , stimulate building. It is obvious that buildings, whether for residential or business purposes, are only erected when there is a 'demand ; but as Mr O’Ragan predicted increased'building activity under Uniiilpioved Rating, if is interesting to note how this prediction also was falsified by the experience of Wanganui under that, form of Rating. BUILDING PERMITS

Under Rating on Unimproved. Immediately the Unimproved Values Rating was carried the owners of 1,500 acres petitioned to bo severed from the city, and were successful. This qnado the burden heavier for those remaining. Tho third prediction which Mr O’Rcgan made, and which has been falsified by tho experience of Wanganui, is that contained in the following words:— “The . small minority whose rates will he increased are the richest men in the community. ” Tho actual results' show that, whilst wealthy concerns had had their rates reduced," in one easo by £25 per.week and in another by £l4 per week, some of tho humbler and less fortunate ratepayers suffered under very heavy percentage increases. Here are some instances of the former: — Annual Rating Value on Unimproved Reduced to - under £ £ Imlay Freezing Works 1712 600 Loan & Merc. Wool Stores 66 o 5 Levin & Co. Wool Stores 200 -5 Dalgety & Co. W’l Stores 69 15 Kempthorne, Prosser and C 0.., another wealthy firm, would have paid under rental value about £Bl2 per annum, but under Rating on Unimproved they pay only £92.

EFFECT ON LESS AFFLUENT It will bo interesting to compare the relief given to wealthy firms, as shown in the foregoing instances, with the increases forced, on ratepayers in less affluent circumstances. I have the names of the occupiers; of the properties . to which I shall now refer, but the indication as to street situation will suffice for the purposes of illustration: — Mahoney street, occupant, widow of returned soldier; poor circumstances; 4 children, old system' £9 13s 4d, new system £ls. Totara street, occjupant poultry-far-mer, hardworking returned soldier, £l9 6s 8d and £3B 6s Bd. Bell street, occupant elderly widow of Crimean veteran; poor circumstances; 50 years’ residence; small cottage, £7 14s 8d and £25. Wilson street, occupant; dressmaker, £lO 17s 6d and £l6 13s 4d. Ingestre street., occupant dressmaker, £lO 17s 6d and £2O Is Bd. St. Johns street, ocfiupant, wages man with small garden, £l7 19s 8d and £3l ss.

■ Brunswick road, occupant, market gar-7 dener, £l4 10s 4d and £27 9s 2d. Somme Parade, occupant, tram-driver, £8 9s 2d, ai|d £2O 16s Bd. / Virginia road, occupant, hardworking man with large family; nurseryman, £2O 10s lOd and £SO 7s 6d. Pitt street, occupant, old-age pensioner, £5 lOs and £l2 10s. f Many similar instances could be quoted, but these will suffice as a contrast with the huge relief given to the wealthiest firms. .

Another prediction of tho advocates of "Rating on Unimproved, namely that industries would spring up as. a result, has been falsified at Wanganui; for not a single new industry was established there during tho period sined that, system came into operation, whilst, one or two have passed out. Wanganui is one of the most heavily rated towhs. in New Zealand, and under Rating on. Unimproved Values I can see no h6pe of there being any reduction. It appears to be almost impossible for any town to reduce its rates under that/system. Tho marvellous progress . of Auckland, which has prospered at a more rapid rate than probably any other town in the Empire during tho last 30 years, is an answer to those who ussert that rating on improvements is a fatal bar to progress. Auckland’s population shows a gain over that of Wellington during the last 30 years of over 57,000 persons and under her more rational and equitable system of rating it was possible to reduce the general rate by Id several years ago. < An extract front “The Municipal Record.” a, booklet published by the Auckland City Council, . makes' interesting reading on this question :

ANNUAL RATES “It will he noted that this year the Council has an Annual Rating Valuation of £1,841,564. Wero it not for the annual increase in valuations, which has been returned for some years, the amount of rates in tho £ must have been substantially increased fo meet, all tho demands; but that has to a. large degree been avoided by . tho increased valuations which provide the Council with increased annual sums in all accounts, which are necessary iiu view of tho changed economic conditions during the last nine years, and the expansion of the city services. Notwithstanding these claims, the Council is able to make a reduction in the General Rate and also in the Water Account.” I The average section in Auckland is larger than that of Wellington, and it. is obvious that where the basis for rating is founded on. the superficial area of the section, there must inevitably he ;i, tendency to decrease the size of section, and thus avoid a portion of the rating. It also results, as the Town Clerk of Sydney has pointed out, in the erection of buildings high in the air, so as to get the largest possible rent incomo from the smallest rating area. The tendency To build the sky-scraper type of building where Rating on Unimproved Values is in force has been summed up in the words that “the horizontal pressure makes vertical expansion.” This inevitably results in all gardens being forced out of town areas, except in the case of those held by wealthy people who can afford to pay tho heavy rates imposed on gardens and open spaces. Most people believe in the elevating effects of beautiful environment, such as arc obtained by the presence of flower gardens, but this influence is denied to the wage man’s family, as he cannot afford to pay the high rates which ensue.

A startling illustration of the effect of Rating on Unimproved Values oh a tennis court at Wanganui East is shown in tho figures given below. Under Rating on Annual Letting Values (he rales were £4 5s per annum. Under Rating on Unimproved they- were increased to

£46 15s, and, on appeal to tho Commissioner of Taxes af, Wellington, were reduced to £25 per 1 annum, which is still an increase of over 500 per cent. Open spaces and gardens are necessary, not‘only for the purposes of physical development and beautification, but they have a definite . value from a hygienic and health-giving point of view. George Cadbury, the founder ol tho Garden City of Rounivillo, laid it down that not more than 12 residences per acre should be allowed, and that 10 to tho acre are really sufficient, if due allowance is made for health and aesthetic considerations. New Zealand’s infantile mortality ■ rate is the lowest in the world, being 3.5 per 1,000 babies under 12 months old ; and with this splendid record, gained years ago and stili. maintained, it behoves us to watch that no overcrowding shall creep in as a result oi this pernicious and inequitable system of rating. During tin*, recent campaign against Rating on Unimproved Values in Wanganui I made a special plea, for the right of every working roan, his wife and family, to have a. sectjpn sufficiently largo to enable him not. only to grow the vegetables- necessary for the household, but, also to have the bcautifiul effects of a, flower garden ; and in this connection I quoted from Lord Bacon, who is described by Pope as being the wisest and brightest of mankind, who said: “God Almighty first planted a garden; and indeed it is the purest of human plea-' sures, it is the greatest refreshment of tho spirits of men. without which buildings and palaces are gross handiworks.”

INEQUITA BLEN ESS EXEMPLIFIED IN MANY WAYS

Tho inequitable nature of the Rating on Unimproved system may be exemplified in many. wavs. . The Government of New Zealand e>Khct contributions from the citizens of this country, according, to their ability to pay, through the medium of the Graduated Income Tax. Tho insurance companies chargo according to tho value of the .goods insured. The grocer, tho butcher and the baker and all. .tradesmen also charge according to the value of goods taken away, by tho customer. But • thp contributions towards the cost of municipal services rendered to- the citizens", when exacted under the Unimproved Rating taysteni, arc unequitable in that, they fofftako the principle of the ability to pay and payment according to vaiuo of tho services rondered. The fact that contributions arc based on the Unimproved Value of tho land on which the buildings are sit-

uated, ami to which the municipal ser- ' vices arc rendered, makes possible such ' inequitable examples as those shown in I the comparisons of rates paid in Wan- ■ ganui by the Freezing Works on the one hand, where a reduction of £25 per week was brought about in favour of that wealthy firm, and the other cases of working men and women whoso rates I woro doubled when that system was I brought into force. I A concrete illustration may be given. 'Let us suppose that on .two sections of [ two acres each one man on one section lived with bis family in a three-roomed bouse, making bis living us a marketgardener; while on tbo other two-acre section, of similar value for productive 1 purposes, a £IOO,OOO marble palace is erected. Under the Rating on Unim’- | proved Value System the owners of the 'two sections respectively would pay exactly the same amount of rates.for 1 municipal services rendered, 1 he principle of ability to pay would be forsaken. I have shown that the increased rates paid on new and larger buildings in I Auckland have enabled the City Council to make a reduction in the General Rate, and thus givo relief to the smaller ratepayer. In Wellington under the Rating on Unimproved Value this cannot happen. . Visitors to Wellington will have noticed the recent erection of several large buildings of seven or eight stones ■ in the centre of the city. One building, costing £217,590. was erected on a section which Inis an Unimproved Value of 038,800, and the owners pay . only 01.030 12s fid in rales, although the capital value is £256,390. It is estimated that the owners will receive approximately over £30,000 per annum in rents, and thev would pay under Annual Letting Values the sum of £4,922 approximately as against the £1,030 12s 6d actually paid under Rating on Unimproved. ; The second example shows that on a | section, the unimproved value of which is £22,830, and \ the buildings recently erected cost £BO,OOO, making a Capital Value of £102,830, only £606 8s 5d is paid in rates. -The estimated rental income is £12,339. Under the more equitable system of Rating on Annual Letting Values the owners of this building would pay £1,967 instead of the £606 8s 5d now paid on the Rating on Unimproved Values basis; and in both instances, undev the system of Rating on Annual Letting Values, the contributions of these owners to the cost of running tlip municipal activities of Wellington would be more commonsuratc with the value of

services rendered to them. In the absence of this more 'equitable contribution it is obvious that lesser firms and wage-earners are bearing a share of the cost of supplying the municipal services to thtf wealthy companies and owners referred to. Many other ' illustrations could be given showing the inequitable naturo of

the Rating on Unimproved Values, bfifc tiie foregoing will be considefed ample by your readers, and in view of the;fact that several; other polls will be held in different parts of the-Dominion on this vexed question, it is probable that addi•icnal information will be given to the public during, the campaigns in connec tion with these forthcoming polls.

£ £ Watt Orphanage Trustees 300 978 11. Hcnvell, Bookseller 62 157 N.Z. Trawling Co., Ltd. Williams & Harper, Auc92 311 Lioneers 117 ' 222 C. W. ro uter, Bookseller Wanganui Clothing Go’s. 35 97 premises s ... 42 150 A. Dawson, Clothier Horsley, Ttidgway st. ... 50 114 99 247 Draflin, Maria Place 140 201

1923-24 £187,063 1924-25 £314,181 1925-26 £373,313 Under Annual Rental Values. 1926-27 £297,030 1927-28 £164,465