9. Living
9.5 Land Ownership
Now that we have dealt with the topics of infrastructure and city architecture, all the prerequisites are in place to think sensibly about land ownership. I once again look at Germany as a comparison point, but that has no relevance for the proposed ideas themselves.
Land ownership has to be centrally regulated. After all, land is not something that can be increased at will. Our state has a finite amount of it and should use it as well as possible. Land is also not interchangeable: every plot is unique. And if the state needs a particular piece of land for infrastructure (for example, a rail line), it has to be able to use it. Pure capitalism (land belongs to private individuals, and they can do whatever they want with it) does not fit well with all of that. Even in Germany, the option of expropriation (with compensation) exists when the state needs a specific piece of land for expanding infrastructure.[53]
Beyond these practical problems, private land ownership is also deeply unjust. When someone buys shares in a company, the company receives capital and can grow with it. The buyer shares in the success, but also carries the risk of failure. If you buy land from the state, by contrast, you pay its current value (and the state often sells cheaply in order to settle a new area). If the state and society then invest a great deal of money in that region, the value of that plot rises enormously—but private owners benefit from this increase without having provided anything equivalent in return.
Property tax is a small compensation for this: in Germany, each year a small portion of the property’s value (including development) has to be paid as property tax. Still, the basic point remains: anyone who owns land permanently will become wealthy as long as the state develops well. But the state and society are not helped by this.81
Plots of land being so expensive—and having to negotiate their purchase with the current owners in order to implement a project—holds back the state’s economic growth. It can massively delay, raise the cost of, or completely prevent private projects, and it is one of the reasons why infrastructure projects in Germany often take decades to realize.
My approach to letting the state and society benefit from increases in land value, rather than individuals, and to make it easier for land to end up with those who generate the most economic activity from it, is an old idea: land is leased, not sold.82 If land always belongs to the state—and thus to society as a whole—then it is the state and society that benefit from increases in value.
But this is not meant to be leasing like in the Middle Ages, when any local ruler could decide at will. Instead, I want to bind the state to a rigid set of rules that determines who gets to lease land and how high the lease rate is.
First, land is divided into leasable and non-leasable land. Non-leasable land is either needed by the state itself for infrastructure purposes such as roads and rails (Type I), or is intended to remain largely natural (Type N, for example for forests surrounding cities).
Leasable land, by contrast, is further subdivided according to how well it is developed. Undeveloped land (Type U) is only connected to the power grid (if a route exists) and the road network (if it borders a road), but not to other state infrastructure such as water, internet, and the capsulenet. This will typically be farmland or pastureland.
Attached land (Type A), by contrast, is connected to all state infrastructure, including public transportation. It will be used for commercial and industrial areas, and for villages.
City land (Type C) consists of the 50m × 50m squares of the city on which the high-rises stand, as described in Chapter 9.3. It is therefore connected to the city’s underground transportation network.
The lease costs are not set arbitrarily by the state, but are calculated for each region and each leased land type (U, A, and C) according to the same fixed formula, based on the average revenue generated on such land. This makes the costs predictable, farmland leasable far more cheaply than developed land, the lease cheaper in less developed regions and during an economic crisis, and it lets the state benefit fully from economic growth.
Leasing rather than selling land can generate significantly more economic growth: The level of the lease payments ensures that it is not worthwhile for anyone to hold land without using it effectively. Instead, it ends up in the hands of those who currently have a profitable use for it.
It is possible to found new villages, industrial areas, and cities if one is willing to pay for connecting them to state infrastructure. It is possible to take over undeveloped land leased by someone else in this way (unless that someone has paid to connect land nearby to state infrastructure).
Those who want to know more about what exactly this framework could look like will find a more detailed description in the appendix “Land Lease Framework”.
Effects
With the help of the leasing rules, the state can thus, on the one hand, ensure a good balance between economic growth and the preservation of ecosystems. On the other hand, these rules give citizens a great deal of leeway to carry out their plans as they see fit, given sufficient capital. Because obviously it will never be cheap to build an industrial facility, a village, or even a city.
Because land always remains in state ownership, the state as a whole—and thus all its citizens—benefits from increases in land value, rather than that gain being private. A good portion of the state’s necessary revenue can be raised through lease payments instead of other taxes.
If a state sells its land into private ownership, that is comparable to how selling concert tickets worked until a few years ago: tickets sold out immediately when sales opened, and ordinary concertgoers bought them on the black market at outrageous prices. Today, by contrast, concert tickets are sold quite officially at outrageous prices.
As a concertgoer, you pay the same high sum in both cases. But in the second case, at least that money benefits the artist and the organizer, rather than the black-market reseller.
In our case, the beneficiary of higher lease revenue is the state, which can use this income to replace other taxes and to finance social benefits or other societal systems.
The fact that land speculation does not work in this concept83 will ensure that land can actually be used by those who have a use for it here and now. The rules for possible land use and lease costs are known in advance, so planning is possible. And while money for construction is, of course, still needed, there are no high costs for purchasing the land in order to get a project started. Lowering this investment threshold should go hand in hand with higher economic growth.
Taxes
I do not present a futurity in this book for a new tax system, any more than for a new economic system. Economy and taxes are too broad and too complex for me to present something in a single book chapter that would not be laughably incomplete. But in Chapter 5, I redesigned individual building blocks of the economic system (unconditional basic income, culturepoints) that, in my view, would significantly improve the overall system.
The concept presented in this subchapter—leasing instead of land ownership—is another such building block for a better-functioning economic system. In addition, it also has the potential to massively simplify the tax system. After all, the lease rate is a percentage share of the average revenue generated on such land.
I see good chances that a value-added tax would no longer be necessary with this concept. And that would be extremely helpful. Not only because the state would no longer have to be informed about every transaction, and citizens and companies would therefore have to be monitored less heavily. But also because companies would no longer have to deliberately look for ways to deduct as many expenses as possible from their own value creation in order to reduce their tax payments.
Instead, each company can simply report its booked revenue to the state (assigned to plots). No business category is disadvantaged, because it simply spreads back out as the average lease rate across all land of the same type in the region. And the lease percentage is chosen correspondingly lower, because the base sum is higher than the share of revenue on which companies currently pay value-added tax.
Barter transactions and digital currencies also become far easier to handle, because not everything has to be reported to the state anymore in order to be taxed individually.
Other taxes for companies will still be needed: on corporate profits, wherever the state wants additional steering effects, and wherever a company needs almost no land for its revenue (e.g., software companies or banks). However, the state will certainly welcome it if companies can generate a lot of revenue without needing land for it—that is efficient land use…
If this futurity is refined well enough that it really works, then it has the potential to put a state’s economy and tax system on a more solid foundation. To give the state more structural steering options to optimize economic development over the long term, based on criteria other than momentary profit alone. To let the state partake appropriately in the growth of economic output and corporate profits without triggering strong flight and avoidance efforts by companies. And then to use this revenue to further improve the state’s infrastructure and societal systems and to share the created wealth with citizens.
Beyond all improvements to a state’s economy and taxes, and to fairer distribution of prosperity, this futurity enables other forms of state organization that would be impossible without this more flexible use of land.
But we will save that for the next chapter.
Review of Requirements