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The Forum > Article Comments > Gluing economies with economic rent > Comments

Gluing economies with economic rent : Comments

By Bryan Kavanagh, published 22/11/2010

Ken Henry's Georgist tax recommendations will restore the wealth of Australia.

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"Being a surplus in the production process, land rent is properly owed back equally to all Australians."

Why just Australians? Why not everyone in the world? What is the ethical reason for excluding them?
Posted by Peter Hume, Monday, 22 November 2010 9:33:59 AM
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The international ethics of rent is to have each nation collect its own economic rent, Peter, at least in the first instance, to allow it to abolish taxes arbitrarily imposed upon labour and capital.

It's certainly not selfish for each country retains its own land rent. In fact, the benefits that would quickly flow to the first nation to put and end to rent being privatised would be such as to ensure that other countries quickly followed suit.

Even Africa, India and China, like Australia, allow their rents to be monopolised by a rentier class at the moment, so maybe the question that needs to be asked of these countries before we send 'charitable' funds is "To what extent are you allowing your land rents to be privatised?" because most charity is currently expended in a manner that acts to increase landlords' rents.

If capital works, either in developed or undeveloped countries, raise land rents, there seems a pretty good case to me that the rent be publicly, not privately, appropriated.
Posted by Bryan Kavanagh, Monday, 22 November 2010 11:41:03 AM
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Yes, interesting.

So how would the whole tax system ideally work under Georgist principles? I take it that land tax would replace all other tax?
Posted by Peter Hume, Monday, 22 November 2010 12:51:02 PM
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Yes, Peter, ideally a land 'tax' (more properly land rent), plus rents from mining, fishing, foresty, spectrum and aircraft licences would replace income, company taxes, the GST, &c.

Economics texts explain economic rent is a surplus over and above costs and normal profits from production, so why do we wonder how we can fund education, health, education, infrastructure? If we simply do it, the rent will rise. No taxation necessary.

The rentier class don't want it though. That's because they claw back all the taxation they've paid via the increased land values on their properties. Patently, others don't have the ability to do this.

So, it becomes a case of educating people to the enormous benefits for everyone (even property speculators) in abolishing taxation. Many people agree that "It's good in principle, but what about retired peole with no incomes?" (Strangely, this question doesn't get asked of the GST.) If kids don't want to assist their pensioner parents on the basis that they'll someday inherit the property, then let the rent be deferred as a charge on title, to be collected when they die.

Were we to capture all land and resource rents to the public purse (the public, not rent-seekers, having created them), there'd be more than enough for a citizen's dividend to be paid to everybody, anyway. No need for pensions of any description. Is this starting to sound too good to be true, Peter? :)

Australia is excellently placed for the experiment, but we have already seen the quarters from which opposition to the the Henry Review's recommendations in this regard are coming, and it certainly aint the poor and middle class.
Posted by Bryan Kavanagh, Monday, 22 November 2010 1:37:49 PM
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Bryan-
For some time I've been looking for a concise, plain-English exposition of the Henry George idea. Can you point me to one?

I keep tripping over jargon and lack of definition of terms. For example, you say "Economics texts explain economic rent is a surplus over and above costs and normal profits from production". To make sense of this I need to know what are regarded as "normal" profits. There also seems to be a specialist meaning of "rent", distinct from the common meaning of what I pay my landlord.

From what I have garnered, I thought the key distinction is actually between value created by private activity versus value created by community activity. For example, if I set up a grocery shop in a new suburb, it will have a certain value. However if, subsequently, others set up a hardware shop, a doctor's office and a hairdresser next to mine, and the local government runs a new bus route through the area, the value of my grocery shop will rise through no further effort of my own. In fact the value of the group will be greater than the value of each part in isolation. It is this extra "group" value that ought to accrue to the community, rather than to any individual, as I have come to understand it. Does this fit your understanding?

Systems theory gives a concise handle on this phenomenon. The community value is an emergent property, a property that emerges as the community forms, and it does not inhere in any individual component of the community.
Posted by Geoff Davies, Tuesday, 23 November 2010 9:19:00 AM
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Oh, Bryan
Isn't it just too true!! "The world got where it is by allowing the public's rent to be privatised by a few. It can reverse the process by freeing up labour and capital and capturing land rent to the public coffers".
It seems so obvious to those who see, or want to see.
Collect the rent, nothing but the rent.
Lets not worry about profits, super profits, or even tax losses. We know they are all manipulated to 'work' the system. But if its just the rent we're after, there are no complications, except to confirm the valuers are up to the task.
It seems pretty simple for a valuer to determine the value of a plot of land, a licence (taxis, fishing, broadcasting, spectrum, etc) and, relatively, even a mining resource. Mine returns can't be known in advance, but a system that ensures they pay the value of the natural resource back to the community shouldn't be too difficult.
The simple question is: "Who owns the land (or the resource)?" If that's too difficult, try answering "Who owns the sky?" or "Who owns the oceans? or space?"
If they are common assets for the benefit of all mankind, then the people who have access to them should pay rent to the rest of us. That makes perfect sense. In fact, who could argue against that? Oh I remember now, it was Gina Reinhart and twiggy Forrest, wasn't it? If they were acting in the public interest, no-one needs to do anything. On the other hand ........
Posted by foleo, Tuesday, 23 November 2010 10:24:06 PM
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