You exist without an Act of Parliament. A company doesn't.
Every clause of this architecture follows from one legal fact. Natural persons do not derive their existence from legislation — their labour, savings, and effort are not state-created. A corporation is the opposite: it exists only because statute grants it separate legal personality, limited liability, perpetual succession, transferable ownership, and access to capital markets at scale.
This is the concession theory of corporate taxation, articulated in modern form by Reuven Avi-Yonah and as old as the corporate tax itself — President Taft's 1909 message to Congress described America's original corporate tax as "an excise tax upon the privilege of doing business as an artificial entity and of freedom from a general partnership liability." Texas still calls its franchise tax exactly that: a privilege tax.
Take the distinction seriously and the architecture designs itself:
- Natural persons are never taxed on earned income — wages, dividends, capital gains, improvements: untouched.
- Corporations pay for their state-conferred privileges — a profits charge in exchange for limited liability. Anyone who prefers not to pay it may trade as a sole trader or partnership, with full personal exposure.
- The community collects what the community creates — land rents, plus a broad tax on voluntary consumption.
The core: a tax on the value nobody made
Land is unlike labour and unlike capital: nobody made it, nobody can move it, nobody can hide it. Its site value comes almost entirely from things the owner did not do — public infrastructure, surrounding economic activity, legal order, and the growth of the community itself.
The land value tax (LVT):
- applies only to the unimproved value of the site — the number already printed on every New Zealand rating valuation;
- excludes buildings and improvements entirely, so it never punishes anyone for building, renovating, insulating, or intensifying;
- makes holding good land idle expensive, and using it well penalty-free.
Economists from Adam Smith to Milton Friedman to the Mirrlees Review agree this is the least distortionary tax available; New Zealand's own Motu modelling (Coleman & Grimes) concluded a land tax raises revenue with minimal distortion to effort or investment. Because supply is fixed, the tax cannot be passed on to tenants — it comes out of the land's price, not the rent. This column has a 150-year pedigree — including a New Zealand land tax that predates Henry George's book — set out in the provenance section below.
Tax buildings and you get fewer buildings. Tax incomes and you get less work. Tax land and you get exactly as much land as before — used better.
At today's values, a rate of about 4.4% replaces personal income tax and RWT completely — the data page shows the arithmetic, and its honesty clauses.
GST stays exactly as it is
New Zealand already runs the cleanest consumption tax in the OECD — a broad, single-rate GST with almost no exemptions, scoring 0.96 on the OECD's efficiency ratio against an average of 0.58. The architecture doesn't touch it.
Consumption taxation does not penalise saving or investment, is collected in small pieces along the whole production chain by 671,324 registered businesses, and expands and contracts automatically with the economy. The Mirrlees Review — the most comprehensive tax-design study yet undertaken — recommends precisely this pairing: a broad VAT alongside taxation of land value.
Under this architecture GST becomes the tax you choose to pay, when you choose to spend. Income you save or invest is never touched on the way in, while it grows, or on the way out.
Company tax, rebuilt on an honest foundation
The company tax is retained — and renamed to what it has always really been. It is not a backdoor income tax on shareholders. It is the price of limited liability, separate personality, perpetual succession, and access to capital markets: privileges that exist only by statute and are enforced entirely at public expense. Choosing incorporation means accepting the charge; declining the charge means trading with personal liability, as every sole trader does.
This reframing does real work. It survives the abolition of personal income tax (the charge was never a proxy for shareholders' tax), it explains why the rate is a matter of what the privilege is worth rather than of "fairness" between persons and companies, and it aligns New Zealand with charges that already exist elsewhere — Texas's franchise "privilege tax", Delaware's annual franchise tax on the charter itself.
One incentive fix inside the charge
Today, executive compensation is fully deductible against profits, which quietly subsidises it relative to reinvestment or broader wages — and the empirical record (Rose & Wolfram on §162(m); Luna, Schuchard & Stanley post-TCJA) shows deductibility caps alone don't restrain pay. This architecture proposes:
- full deductibility for ordinary wages and legitimate business expenses;
- no deductibility for executive compensation, defined mechanically — named officers, top thresholds.
No caps, no mandates, no pay tribunals. Boards keep full discretion; they just stop receiving a tax subsidy for one particular use of the company's money.
No tax on earned income. At all.
Under this architecture, natural persons pay no tax on:
- wages and salaries,
- interest and dividends,
- capital gains,
- improvements to their own property,
- offshore investments — the FIF regime, with its deemed 5% return taxed even in a losing year, goes with the rest.
PAYE vanishes from every payslip. The IR3 vanishes from every autumn. RWT vanishes from every savings account. And the foreign investment fund rules — the reason ordinary savers are advised to stop at $50,000 of overseas shares and buy another rental instead — vanish with them, so diversifying into world markets finally competes with land on equal tax terms. The distinction between "income" and "capital gain" — the engine of a century of avoidance schemes — stops mattering, because neither is taxed. Public revenue instead stands on three legs that cannot run away: land (immobile by definition), consumption (collected chain-wide), and statutory privilege (which exists only because Parliament says so).
The state's pay is chained to the country's prosperity
An under-appreciated property of the design: it rewires what the government is paid for. Today the Crown's revenue rises when nominal wages rise — so bracket creep collects new tax from inflation the government itself can engineer, without a vote. Under the architecture there are exactly three ways to a bigger Treasury, and each requires the country to do better first:
- More GST only if people can afford to spend more — so grow the economy.
- More land value tax only if land becomes more valuable — so build the infrastructure, schools and safety that create location value. Public works become self-funding through the values they create.
- More privilege revenue only if companies prosper — so keep New Zealand a place worth incorporating in.
Anything beyond growth requires raising a visible rate and defending it at an election. And visibility runs both ways: where PAYE deducts the cost of the state before anyone sees it, the land value tax arrives like a rates bill — a number, on paper, addressed to a voter. Milton Friedman, who helped invent income-tax withholding at the US Treasury and regretted it for the rest of his life, would have recognised the repair. A tax citizens can read is a government citizens audit.
The load test makes the same point interactively, and the data page shows GST already tracking the economy dollar-for-dollar in Treasury's own series.
Built for the economy that's coming, not the one that's leaving
Income tax assumes a nation of stable salaried jobs. That assumption is dissolving:
- Automation and AI are shifting output from wages to capital — the IMF estimates about 60% of jobs in advanced economies are exposed to AI. A tax system standing mostly on wages is standing on the part of the economy most in motion.
- Platform work is decoupling income from employment.
- Global mobility lets high earners and capital choose their tax residence; New Zealand cannot out-run Singapore or Dubai on income tax rates.
A tax base of land rents, broad consumption, and legal privilege keeps working no matter what happens to the labour market. Land cannot emigrate. Consumption happens where people live. Companies exist where they are registered and operate. When the wage economy transforms, this architecture doesn't need to be redesigned — that is the point of it.
Tax what cannot relocate, what is collected chain-wide, and what exists by legislative grant — and the tax system stops caring what the labour market does next.
The architecture sets the how. Parliament keeps the how much.
This proposal deliberately does not prescribe the size of the state. Rates of LVT, GST, and the privilege charge remain exactly where they belong: with Parliament, contested at every election. What the architecture fixes is the structure — revenue sources that are durable and transparent, trade-offs that are visible to voters, and a tax base chosen on principle rather than historical inertia.
A small-government New Zealand and a big-government New Zealand can both run on these three columns; they just argue about the rates, not the base. That separation is itself a stability feature: the base stops being redesigned every electoral cycle.
The transition, honestly
A serious LVT capitalises into lower land prices — that is partly the point, and it is why the shift must be staged over decades and pre-announced, the way the Australian Capital Territory is currently twenty years into swapping stamp duty for land-value rates. Rates recalibrate as the base responds; deferral as of right protects the asset-rich, income-poor; Māori customary and freehold land under Te Ture Whenua Māori Act is excluded categorically, with the design worked through with Māori from the start. The hard questions get straight answers on the questions page.
Column I is 135 years old. New Zealand built it first.
The land column of this architecture is not a new idea — it is the oldest and most-endorsed idea in tax economics, and it deserves its own entry in the drawing set. In 1890 Henry George compressed it into one sentence: "We propose to abolish all taxes save one single tax levied on the value of land, irrespective of the value of the improvements in or on it." Not a tax on land itself — a tax on its site value, the part no owner created. Build a mansion and your tax doesn't rise a cent; land-bank a prime section for a decade and it doesn't fall by one either.
New Zealand didn't import the idea — we legislated it a year before George's book existed. The Land-Tax Act 1878 taxed land value with all improvements deducted; the Liberal government's graduated land tax from 1891 broke up the great estates and by 1895 raised three-quarters of the country's direct taxation. For most of the twentieth century, most New Zealand councils rated on unimproved land value — roughly 90% of them by the early 1980s — and the machinery they used, the district valuation rolls, is still maintained by law today. The national tax died in 1990 not because the economics failed, but because a century of exemptions — homes out, then farms out — had hollowed it to a token levy raising about 1% of revenue. The lesson isn't "don't tax land"; it's "don't riddle the base with holes."
"In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago."Milton Friedman, 1978
What the modern architecture takes from it
- The base: unimproved site value only — community-created, immobile, already valued three-yearly under the Rating Valuations Act 1998.
- The economics: fixed supply means the tax can't be passed on to renters and doesn't shrink what it taxes — the finding of everyone from Adam Smith to the Mirrlees Review to both of New Zealand's tax working groups.
- The precedents: Denmark and Estonia tax land value today, and Canberra is twenty years into swapping stamp duty for land-value rates.
What it deliberately changes
- Three columns, not one. George wanted the land tax to carry everything — at today's prices that means a rate high enough to substantially deflate its own base. This architecture stops at ~4.4%, replacing only the taxes on earned income, while GST and the privilege charge carry the rest. No single base bears the whole state.
- A corporate theory George never needed. The privilege charge — pricing limited liability and legal personality — answers a question the 1890s didn't ask.
- The failure mode designed out. The 1878–1990 tax died of exemptions. Here the exclusions are few, categorical and principled (Māori freehold land, conservation land) — not a running ledger of political carve-outs.
George's original eight-page pamphlet is still the best short statement of the idea: The Single Tax: What It Is and Why We Urge It (PDF, 1890).
Sources: Henry George, The Single Tax (1890) · Land-Tax Act 1878, ss 3–4 · Te Ara — Taxes · McCluskey, Timmins & Grimes, Property Taxation in New Zealand (Lincoln Institute, 2002) · Land Tax Abolition Act 1990 · A Tax System for New Zealand's Future (2010) · ACT Revenue Office & NHFIC, Stamp Duty Reform (2021).