"There’s a natural source for government revenue, fellas! Try publicly-generated land rent!"

Not that I want to give any encouragement for the idea that government should have more sources of revenue, but supposing publicly-generated land rent were to be used as a source of revenue for government, how might it work?

Your point that it should not be just another tax is well made, Peter. The public capture of publicly-generated annual land values should be an ALTERNATIVE to taxation, and should only be employed to replace existing taxes. Although cynics will claim that 'a tax is a tax', strictly speaking a 'tax' on land values is in the nature of a rent and behaves quite differently from taxes.

How would it work? It would function much as municipal rates (on site value) and state land taxes do, except if ratcheted up sufficiently, it could be used to keep a lid on bubbles forming in our land market in future. In this respect, it would be a more selective tool than RBA interest rate policy. Hopefully, it would also be at a single rate in the dollar, without all the exemptions, thresholds and aggregation provisions that characterise state land taxes.

While Joe Hockey has been calling on the government to release Ken Henry's recommendations (believed to recommend a land tax of some sort), I see the coalition hasn't released Henry Ergas' year-old taxation review that also apparently recommended a land tax. Ergas rightly recommended including the family home, as the land 'tax' base becomes horribly distorted if the imputed land rental of family homes is excluded.

Although the principle is a sound one, it won't come easy to those people who fail to see the GFC as a direct result of taxing production, thrift and exchange while we undertax land. We captured to the public purse only $40 bn of the $325 bn land rent generated in 2007 (estimated by the Land Values Research Group). This allowed some $285 billion to be privately capitalised into the Australian bubble, the world's greatest.

It is very odd that our taxation system seems to punish most those who work for a living and reward those who do nothing. Wages are taxed at the highest rate, speculating with money is taxed at a lower rate while inheritance (essentially sitting back and doing nothing) isn't taxed at all.

It is also very odd that as a society we seem to believe that higher and higher house prices are a good thing, despite the fact that very few people actually benefit from this. Those benefiting are people who have enough money to be able to invest in multiple properties, or those with rich parents who die and leave them the proceeds, while the rest of us end up just paying more in interest to the banks and more of our income to cover housing costs.

Taxing land value (including the family home) would mean that people would have to stay in the job market longer to pay either their land tax or rent. Wayne Swan would be happy with that but I'm not sure many older people would be.

Eventually, of course, everything would even out, but there would be a very painful transition.

You are correct that the transition would be the most problematical point, Cazza. The director of The Land Values Research Group, Dr Gavin Putland, has actually developed several most interesting proposals to introduce a land value 'tax', including a 'no losers' plan, and one in which it would be optional to remain under the present tax regime. The latter might sound incredible, but what's wrong with offering options, to opt into the tax system of your choice, if it can be shown to be both fair and to raise the same gross revenue?

Of course, those who own more properties and the more valuable properties would be likely even to resist an optional system. The poor widow would undoubtedly be upfront and central to their campaign, as usual. Although her special circumstances can be accommodated easily, that this is a most selective empathy (for the poor widow) can be shown by her disappearance at the time of the introduction of the GST.

Deck chair floor plan alterations anyone?

Any philosophy that doesn't *Fully* consider the human element first('good and bad') and subsequently relies on ad hoc myopic fixes(like this one) is merely protracting the inevitable, failure. All these ad ons simply make the structure more complex and therefore less predictable.

The GFC had many causes depending on which myopic is speaking at the time. That is the comfortable thing about economics it is an interpretational and non-predictive discipline.

The Rudd Government's economic policies are the same as any other socialist government's. Don't be fooled by Rudd's claim to be a Social Democrat. Only the socialist pary is right; there is little democracy.

Well, the land tax proponents have been out in force at OLO recently.
I didn't expect this topic (by its header) to be another example.
As such, while I agree completely with the original thrust (ie governments paternalistic approach to extracting money from the flock - oops, electorate) I have reservations about the application of land taxes.
That said I wanted to give an example of my concerns that originally attracted me to this topic.
I read recently that my local council had debated whether they would give $5,000 or $10,000 to assist the bushfire victims in Toodyay.
Of course this is a worthy cause and one that I would encourage anyone to donate to - but do I think it is appropriate for people to be compelled to give money to a third party (who extract that money under penalty and ostensibly receive that money for an entirely different purpose) who then pass the money on to the bushfire victims (and thereby denies the benefit of atax deduction they might have received)? I don't think I do...
Money that is paid by way of rates to local councils is given (I believe) for a purpose and is thereby impressed with a form of trust - it must be used for the purposes of the council in providing services to that local government area. Anything else would be a breach of that trust.
Perhaps I am just crazy...

Seriously, not this pseudo-intellectual garbage again. You are now taking a shot at the Torrens system? Find a new issue.

David Jennings

Amen anything but to face the real problem ....the system.

Leigh,
Tell me what's the difference between a 'socialist' government and a 'Social Democratic' one and how does your comment relate to the topic?

Bryan,

Just curious, what has Wakefield's personal problems got to do with your topic?
As a crisis counselor I dealt with all manner of people but that doesn't mean I suffer from their problems.
Even sociopaths have good ideas.

BTW Show me any major Corporation who doesn't behave like a sociopath?

"BTW Show me any major Corporation who doesn't behave like a sociopath?"
Including government; as it has a legal monopoly of force and fraud, it behaves more sociopathicallly than other corporations who are subject to competition and to laws against deceptive conduct.

David, I was hoping you would be able to propound an <argument>, but once again I just find mere rhetoric. By “pseudo-intellectual garbage” I assume you mean the fact that 1/3 of one’s wages go to pay the rent or the mortgage (rather than being spent on investment, savings, schools, old age retirement, healthcare); urban sprawl, real estate boom and busts, collateral constraints, 40 000 vacant homes in Syd. and Melb. While there are 40 000 homeless people (including children) etc.

Leigh, indeed,please explain your random comment. Curiously, William Buckley (arch-conservative himself), along with Winston Churchill, J.S. Mill, Adam Smith, Locke all supported LVT.

Peter,
Thankfully we have the Fairhope Single Tax Corporation, which builds local improvements and extracts the revenue from local rents. I suppose it is less likely to act as a sociopath.

Seriously, why do I have to propound an argument? We went through this stuff a few weeks back and it got ripped apart. This guy is peddling a land tax idea - it has massive flaws in terms of proof, logic etc. The "carrot" is lower land prices if his land tax gets introduced and much less income tax. But thats not guaranteed.

I think I've almost articulated his argument better than he has! This article is a bit strange - for some reason theres a diatribe about an obscure English land-owner. You can almost imagine the people in Treasury reading a policy submission along these lines, chuckling, and then pinning it to the noticeboard.

In relation to your comment - how does an alleged 40,000 vacant homes correspond to 40,000 homeless in Sydney. Are you suggesting that we just put the "homeless" in other people's homes? We pay out enough money on welfare and mental health services.

David, I have challenged you to cite academic papers that show that LVT, compared to the status quo, is less equitable, immoral or efficient. I have done so here:

http://forum.onlineopinion.com.au/thread.asp?article=9913&page=7

Your alleged arguments perplexs me, actually. Your new counterargument is reduction of income tax is “But thats not guaranteed”. Of course not. HENCE, Bryan’s purpose was to educate us, inspire us, to prompt us to understand why it should be the case and to act on that. Moreover, Bryan’s key point is that the boom bust cycle in property will eliminate credit/tax-distorted inflated land prices (which you concede), increase economic growth and reduce inequality (and increase real wages, wages diverted into saving and consumption, not debt repayment). I find these premises sound. Please identify which other parts (as you endorse premise-1) you disagree with, and explain why they are wrong. Indeed, Bryan advocates not "much less", but no income in the long run. You have shifted away from debating the pros and cons of LVT, and instead questioning whether income tax will be removed.

The reference to an English landowner ( an important chartacter in Australian/economic history: http://en.wikipedia.org/wiki/Edward_Gibbon_Wakefield) meshes with Bryan's allusion to J.S. Mill (who gave an exact example, curiously, of the same person in question) – I imagine the treasury officials, myself included, (I and my colleagues are generally well-versed on economic history), instantly recall Mill’s “[psychotic] landowners grow rich in their sleep” quote. I hope this historical information helps you understand Bryan’s charming sense of irony; Bryan’s only fault is assuming his audience know history/philosophy.

http://www.teara.govt.nz/en/1966/wakefield-edward-gibbon/1

Again, this seems back from Locke and Mill who adopted a ‘use it, or lose it’ approach to property rights (particularly, in items which are inelastic/fixed).Thus, there are efficiency and equity grounds (land is withdrawn for the sole purpose of waiting for a capital gain, at the expense of cheap housing, increasing sprawl and infrastructure taxpayers much pay for). I agree- we spend too much money for such services. Hence, LVT ensures the rich stop dictating space and the poor being trapped in it.

PS On vacant housing:
http://www.debtdeflation.com/blogs/2009/04/06/steve-keens-debtwatch-no-33-april-2009-lies-damned-lies-and-housing-statistics/

I read the first article on this land tax issue - and it almost convinced me. It was pretty cogent and generally well argued.

But from an advocacy perspective this one leaves me a bit cold. Its too strident and too harsh at times and I didnt really get the relevance of the Wakefield story.

Yes, it was a slightly visceral rant, Lucy, but hopefully it was nonetheless fact-based. It was taken from my blog which is my cleanse, my only catharsis from the sociopathic neo-classical economics in which we’re hopelessly enmeshed. (See? I’m at it again.)

David Jennings is able to draw the curious conclusion that I am against the Torrens title system (which I didn’t mention at all), yet neither he nor ‘Examinator’ seem to want to acknowledge that Wakefield’s policy for colonisation, i.e. keeping a class of people in subjugation, is both entirely in keeping with his other sociopathic behaviours and also with current day policy-making.
I would have thought that changing a tax regime that slaughters wage and salary earners, yet rewards mindless speculation, amounts to changing “the system”, ‘Examinator’? And a soundly-based economics is indeed predictive. Refer http://lvrg.org.au/files/coming-kondratieff-crash-2001.pdf

IMHO, your father shouldn’t have stolen so much of EG Wakefield’s dad’s valuable time, ‘JS Mill’, because he let young Eddie Gibbon become impossibly wanton. I agree with you, however, that municipalities have strayed into areas they shouldn’t. That they often invest ratepayers’ funds where they oughtn’t will probably come to light in a year or so, too.

Thanks for introducing some measure into my argument ‘AustralianWhig89’. I can only say that the Wakefield resume to which you refer is one of the more generous I’ve read. Wakefield even voted against one of his own motions in the New Zealand parliament because the Governor had expressed an opinion to someone else before he expressed it to him; defaulted on paying his labourers working on his private company’s subdivisions in NZ, but managed to get them paid out of the colony’s funds, etc. He’d match the worst of our rogue politicians, and then some. Yet a few of our older history books treat the unfortunate madman as a god. Why? New Zealanders should thank his foil, Sir George Grey, for having had the courage to stand up to Wakefield’s brigandry

Well Bryan for my 2 cents: I think you may have a point on land tax but the only way to get it across is to do it with as much moderation and civility as possible. Think of it as an exercise in convincing a sceptical audience. The more balanced and reasonable you seem, the more likely you are to win people over.

Could we attack government wastage first? Identify increases in public sector efficiency, then look to reduce taxation of all kinds as well as look for more efficient taxes.

the inmates are out in force this week i see.