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The Forum > Article Comments > Global financial collapse: What’s happening to us? > Comments

Global financial collapse: What’s happening to us? : Comments

By Bryan Kavanagh, published 27/4/2012

The GFC is the inevitable outcome of a pathological tax system.

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This proposal would simply drive up rents and impact most negatively on the poorest most vulnerable members of society; any additional costs would simply be passed on. Moreover, those just able to carry the current burdens imposed by home ownership, rates insurance and mortgage repayments etc/etc; would likely find themselves, with nothing left to sell; and facing the bailiff and forced auctions; and a lifetime struggling with extremely high and quite grossly unfair rents; and or join the ever swelling ranks of the homeless or squatters, who by the way pay neither rent or land tax!
Besides, we already build 160,000 less houses per annum than our population and economy needs. Ideally, we should embark on building these homes on resumed land as very low rent public housing high rise projects hugging already existing urban rail links. The bottom 2 levels could incorporate all manner of commercial enterprise including cottage industry and the rents could progressively rise with levels, or be means tested or both.
This would remove the possibility of these projects simply becoming post code poverty traps or no go lawless ghettoes?
As public projects they would contribute to Inland revenue, but particularly once the capital outlays were recovered; over say the first thirty years. Currently unavailable thirty year bonds, could be created to raise all the necessary capital.
These reinforced concrete towers would last or have a useful life of over 80 years; given concrete reaches its maximum strength in 80 years.
Median house prices used to absorb an average wage for around seven years, now the average is 30. The Authors obsession with a "GREEN" land tax would push it out beyond the average income earners' working lives; increase and widen the gap between the haves and have nots, decrease discretionary spending the domestic economy relies exclusively on,[which by the way is around 70% of our entire economy,] create a recession, which could only ever progressively deepen; and for all those reasons, is quite grossly and inherently unfair!
Conversely, an stand alone expenditure tax, which I've explained at length elsewhere, would do exactly the opposite! Rhrosty.
Posted by Rhrosty, Friday, 27 April 2012 11:02:34 AM
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Someone doesn't understand his benefits of land taxes compared to expenditure taxes. Rates and land tax are already situated in the gross rent paid by a tenant and can't be ‘passed on’ again to the tenant, as indicated here:-

1 Though the landlord is in all cases the real contributor, the tax is commonly advanced by the tenants, to whom the landlord is obliged to allow it in payment of the rent.
- Adam Smith "Wealth of Nations" Book 5, Ch 2

2 A tax on rent falls wholly on the landlord. There are no means by which he can shift the burden upon anyone else... A tax on rent, therefore, has no effect other than the obvious one. It merely takes so much from the landlord and transfers it to the State. - John Stuart Mill (1806-1873) "Principles of Political Economy" Book 5, Ch 3, Sect 2

3 The power of transferring a tax from the person who actually pays it to some other person varies with the object taxed. A tax on rents cannot be transferred. A tax on commodities is always transferred to the consumer. - Professor James E Thorold Rogers "Political Economy" 2nd ed Ch 21, p 285

4 A tax levied in proportion to the rent of land, and varying with every variation of rents... will fall wholly on the landlords.
- Walker's "Political Economy", p 413

5 A tax on rent would affect rent only: it would fall only on landlords and could not be shifted. The landlord could not raise the rent, because he would have unaltered the difference between the produce obtained from the least productive land in cultivation and that obtained from land of every other quality. - David Ricardo "Principles of Political Economy and Taxation" Ch 10, Sect 62
Posted by freddington, Friday, 27 April 2012 12:36:08 PM
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Landlords can't pass on increased charges, rates, insurance, land tax? Ha ha ha ha, oh my aching ribs. Why can't they? Because some academics say so in books! Really? Oh ha ha ha. You mean we should believe academics, which a 20 year study conducted by an ivy league university, demonstrated that their averaged accuracies are no better than a dart throwing monkey. Or are able, it would seem, to routinely set aside the immutable law of cause and effect, hence the endless boom or bust nature of most economies.
Economics is hardly an exact science!
We already have the highest median house prices in the English speaking world, and now rate Sydney as the most expensive city, where rents are higher than NY or London, the previous record holders?
A land tax as proposed would simply further exacerbate affordability issues; and, anyway, onerous stamp duties are already a de facto land tax? We should simply get rid of these charges.
We could replace stamp duties as revenue raising, with a very harsh harsh annual capital gains tax on all undeveloped rezoned land; to virtually cancel out any unearned and therefore undeserved profits.
The world is in the state it is today and the GFC was caused by people accessing unearned profits; that were in no way tied to productive effort or enterprise.
This is what we must get rid of unless we want to almost endlessly repeat the unlearned lessons history provides us, as opposed to the untested untried and implausible intellectual concepts of ivory tower dwelling academics; or indeed, those who seemed to have taken up permanent residence in dream castles in the clouds, replete with strange or unusual echo effects? Rhrosty.
Posted by Rhrosty, Saturday, 28 April 2012 9:30:12 AM
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Bryan,everyone is arguing about the effects of the GFC and not the fundamental causes.

Since 1913 with the Instigation of the US Federal Reserve the West has been consumed by debt,recessions,depressions and war.Prior 1913 the US Govt created the money to equal inflation + growth and did not have to borrow from private banks.Here too in Australia the Commonwealth Bank when instigated in 1911,created from nothing some of the money to eaqul our productivity which helped keep our Govt out of debt.In 1914 the income tax bill was initiated to pay for WW1 war debt.Who financed this war and loaned money to all sides? Yes the bankers of Europe who now have the power of money creation over the USA.Bankers now control Italy and Greece.

With the instigation of the US Fed in 1913,they got their income tax bill in 1914,so we soon followed in 1915.The income tax was needed since Govt in the USA had no longer the power of money creation.This gave private banks the power to own our increases in productivity + inflation and loan it back to us and our Govts as debt.We became their debt slaves since we longer owned our increases in productivity.

By 1922 Billy Hughes had scuttled the power of our Commonwealth Bank to create new money that kept our taxes low.Finally the Commonwealth was buried by Paul Keating.

Private banks should not have absolute power over us by expressing our productivity as debt.Private banks should only be allowed to loan out money that already exists.This is the fundamental cause of the GFC.Bankers have too much power and the free market has not been allowed to operate.
Posted by Arjay, Saturday, 28 April 2012 10:00:47 AM
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Dear Rhrosty,

Landlords hate land tax because they can't pass it on. So they campaign against it - by pretending that they *can* pass it on! If you scoff at the authorities who declared that land tax can't be shifted, see if you can refute the logic at . And here is a mathematical argument (admittedly oversimplified) explaining why land tax reduces the ratio of the annual cost of home ownership to the annual cost of renting: .

Your "expenditure tax" looks suspiciously like a cascading turnover tax, which I debated with its leading proponent at . See also (posted in 2005, but written in 2001 if memory serves). Fortunately, a cascading turnover tax is one of the few tax reforms that has less chance of being implemented than an all-in land tax.
Posted by grputland, Saturday, 28 April 2012 8:11:02 PM
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This whole idea is just too stupid for words. What, treat land, all land, as a national resource (as against private ownership), with rent payable to the state? So, would this be irrespective of usage of the land, or would drug dealers, pimps and madams pay higher land-rent according to profitability? As also would high-tech, highly profitable small business and real estate agents? Or will it be a level playing field, so that a landlord of an average two-bed house in the burbs will cop the same as someone owning and living in that same property?

Pooh-ha-ha. How can any land-rent scheme relate to productivity and profitability as company and private income taxes do under our current system? We have a Carbon Tax and a proposed Mining Resource Rent Tax, aren't these already enough of a nightmare of confusion and division as to implementation and impacts?

Tax land beyond current Council Rates and Land Tax and food will have to become more expensive, and residential and commercial rents, and the costs associated with owning your own home - and could never equate with the GST and tax on profits, at least not without the most convoluted piece of Big Brother oversight, and a helluva lot of pain for all concerned. Give over, gentlemen, someone has their wires very badly crossed.
Posted by Saltpetre, Sunday, 29 April 2012 1:07:21 AM
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