Land tax is neither simple nor equitable. It puts Dracula in charge of the blood bank. Who determines the 'value' to be taxed? The only time anything has a monetary value is at the moment of exchange of ownership of goods, services, property or labour. If government prints the money to facilitate commerce, unless the money supply matches the market value of the goods, services, property and labour exchanged, then we have either inflation or deflation. A simple check of the difference between the so-called rateable value of your house compared to the market value of the house exposes this fraud.
Another flaw in the Land Tax argument is that land is 'fixed in supply and completely immobile'. High-rise buildings, land reclamation and release of land from ownership restrictions are some examples to expose this myth. The desert can be renewed or poor farming practices can turn once-fertile fields into a desert.

The most equitable way to fund government is a simple, low, predictable, broad-based charge for the use of money in the exchange of goods, services, property and labour. Ref We support fair tax <http://like2percenttax.com.au/>

I agree, Land taxes don't work.

we have an ongoing argument with the state govt and local council in regards to the value of our property, In 2012 it was valued at $130,ooo (country property), In 2013, a "government" valuer walked around our property and said it was worth $500000!, so naturally rates, levies, and taxes went up four fold. (our property has no sewage or bitumen road)

We protested and paid at our expense an independent valuer who valued the property at $120k. But, no the govt got the valuer general to value the property and they said $140k. So, the minister dismissed the valuation of his own department and said the property should be valued against Sydney prices (the land is on the Yorke Peninsula in South Australia) and said it stays at $500k.

We refused to pay the increase and after 18 months and many legal threats and us getting publicity in the papers and TV and Radio, the Lands Minister decided to drop the value back to $130k.

So, I agree, a land tax would not work as it depends on someone with no knowledge deciding on a value.

Imagine if instead of the GST, Howard government had introduced a broad based land tax: house prices would have risen far more slowly, the cost of living would be lower, the RBA wouldn't have to be so cautious when cutting interest rates, and we wouldn't need those restrictions on foreign ownership of land and housing!

Unlike John's "fair" tax, land tax wouldn't be a drag on the economy. But the valuation process would need to be fair and transparent; the situation kirby483 describes is a disgrace and should never be allowed to happen again.

As long as the people doing the valuation are honest and competent, having a land tax is the fairest possible tax. It's introducing the tax that's the problem. To avoid unduly disadvantaging the people who've already bought property, it would have to be phased in very slowly with plenty of notice. Which effectively requires a bipartisan consensus which would be difficult to get for something so controversial.

BTW John, high rise buildings don't increase the supply of land, though the potential for high rise buildings can increase the value of land. Land reclamation does increase the supply of land, but not significantly as the process is expensive and there are significant technical obstacles.

Risible rubbish from go to whoa!

I know of two brothers raised in exactly the same environment, and inculcated with the same common values.

One fell into bad company and spent most of his life hissing up against a wall; and at the end, became too sick to support himself.

Ending his life as someone lingering on for decades, supported only by the kindness of gullible fools and or the public purse.

The other on the other hand, remained frugal with his income and as and when he could, bought a block of land, and given modest occasional profit; eventually accrued enough to put a down payment on a house, which he then worked dawn to dark in a veritable gut-bust to pay off!

And so arrived at retirement with a home of his own and a modest self supporting nest egg, taken as a proscribed but modest pension.

So, the first one who squandered all his opportunities gets off scot free and entirely reliant on others, is welded to the public purse even for his burial.

Whereas the other brother, who has not asked it for anything; just contributed every day of his life, is hit with repeated land tax, due to the fact; they were his only available stepping stones to true independence.

The Authors take is completely off the wall let alone the (fair and equitable) chart.

People want their own homes for varied reasons, none of which could be described as an obsession; any more than any of the other necessities of life!

And ought to be made more affordable instead of forcing prices even higher; by dint of risible rubbish like this!
Rhrosty

Sorry Aidan, what we don't need is yet another layer of complexity added to the tax act.

What we need instead is a return to simplicity!

And please don't fall for the line that simplicity equates to simplistic!

IT DOES NOT!

A very wealthy S.A. business man I heard addressing a public Audience said this. "true genius resides in solving complex problems with simple solutions". And he made a veritable fortune following his own advice!

Let's face it, the simpler the solution is, the more transparent it becomes, and with far less being able to go wrong with it.

Therefore, a simple expenditure tax taken as the only tax necessary or taken, will still extract some (true market value) money from land sales as and when it changes hands; and given the tax is unavoidable, on each such occasion.

The more you deal the more you pay!

And given the money is collected and transferred electronically overnight; via the banking fraternity and their main frames, in exchange for (a licence to virtually print money)banking licences.

And therefore in a fee free paradigm that could add as much as 40% to the net; given we would have eliminated the 40% or so, which is the current cost of just collecting tax in the first place?

And free from those fees, create a huge new surplus not needing things like a regressive GST, or an even more regressive land tax, just to make good some virtually self imposed shortfall/structural deficit!

Think, some large tax avoiding multinationals have annual budgets larger than many a sovereign nation! And as providers of (now essential)foreign capital, many may have us by the short and curlies, due to that very same (increasingly intolerable) structural deficit!
Rhrosty

As I said, Rhosty, to avoid unduly disadvantaging the people who've already bought property, it would have to be phased in very slowly with plenty of notice.

And rather than distorting the economy to provide one opportunity to make money that the rich can take far more advantage of than the poor can, it would make more sense to give decent benefits to pensioners. If someone refuses to take them that's not our problem; we should not be disadvantaging ourselves just so someone can brag about his true independence!

What we really should be doing of course is ensuring there's ample opportunity for everyone to make a decent amount of money throughout their lives. But that opportunity should be based primarily on the work they do rather than what they choose to buy. They may make good investments, but it would be silly for us to ensure that land remains a lucrative investment.

Rhosty, it is not being simple that makes your tax plan simplistic, it is your ignoring the catastrophic effects it would have on our economy. It would make it far more expensive to do business, and would drive most financial businesses offshore.

The nice thing about trade is that both parties involved end up with something more valuable to them than what they had. Your plan would discourage that. The tax would be on turnover (reducing opportunity) rather than profit, even though it's not insufficient reward that's holding us back. And the government would get no money from land except when it's sold.

And where did you get the crazy idea that the cost of collecting tax was anything like 40%?

I'm not proposing more complexity in the tax act, I'm proposing we move to a situation where land tax replaces all state taxes including GST.

The claim that we have a structural deficit is rather dubious. But at this stage of the economic cycle we shouldn't be trying to "fix" the deficit; we should be running a much bigger deficit to fix the private sector. Once the private sector recovers then we should start moving towards a surplus.

Nobody has us by the short and curlies. If foreigners stopped lending to us our dollar would fall a bit but life would go on almost unchanged.

As for the regressiveness of land tax, it wouldn't actually make land less affordable; land prices would rise much faster without it.

Aidan, you've have just not read anything I have written with actual comprehension have you?

Clearly there is a structural deficit.

I refute almost everything you say, which on my reading would have almost the opposite effect you speculate it would have!

Simply put, you just cannot make anything cheaper by adding yet another layer of complexity and cost to it. At some point complexity always becomes fraud. Quote unquote.

And our record and exponentially growing foreign debt may well be larger than our economy, going to hell in a hand basket, thanks to the most obtuse policies!?

Why, the government trumpets almost daily that they need to borrow more than a million daily from foreigners, just to fund current recurrent spending?

Bragging? How dare you rubbish the other brother like that! What gives you the right?

I didn't say that the current cost of collecting tax costs the tax budget bottom line some 40% of the net, other posters did and just days ago!

And they were my believable source; given the number of hands in the till before a penny reaches the nation's coffers!

However I concede the number could be entirely wrong and only 38.5%?

Simply put, if all the current tax take is just 4% of the GNP, [our total combined spending,] then a 5% expenditure tax on all that total combined spending, would raise significantly more tax.

Maybe as much as 100 billion per?

You do the simple sums! If 4% equates to around 400 billion then 5% would raise around 5 billion!

And while returning the no longer necessary current tax only compliance costs, [around 7% averaged,] to the bottom line of hard pressed Australian business.

And we'd keep far more of it as the net, if it just didn't have any hands on it before it hit the government coffers. And doable!

And it would be immediately available to consolidated revenue!

Think, how much could we reduce Government expenditure, if we no longer need to borrow against expected reconciled revenue, just to fund this or that dept's unavoidable outlays?
Rhrosty.

I always know what to expect, when someone starts talking dinner party conversations. I know I am, listening to a Canberra insider, or an inner city twittering class lefty. With the latter usually a renter, with the skew that puts on their thinking.

Real Ozzies only have bar-b-ques. As all Ozzies know, dinner parties are for slick trendies.

Not only is home ownership the very best superannuation, giving some level of cost of living reduction in old age, but as Rhrosty said, it is available to all. Those who don't own a home by old age are not only "bloody idiots", but almost every one got there by their own stupidity, or lack of effort.

As it is I pay a ridiculously high land tax now. It was lefty governments, advised by Alex & his mates, who unloaded large numbers of services, they had established to buy a few votes, onto local councils. Council staffing & costs went up like an intercontinental ballistic missile.

My rates went from $123.00 a year in 1986 to $2601.00 last year. For those mathematically challenged, as our author obviously is, that is a 2114%, [yes over two thousand percent], increase in my land tax, politely called rates.

Just what do I get for this kings ransom I pay in land tax each year. Well, there is a cast of thousands at the council chambers 60 kilometres away, mostly social workers & clerks doing not very much useful, a truck load of bitumen about 3 times a decade, filling the worst potholes in our narrow little strip of road, & a library truck for 2.5 hours a week, 46 times a year. That road incidentally, was built by the farmer who split off a few hobby farms to pay for his kids education, not by the council.

Continued.

Continued.

Those of us oldies, who have paid our due, & bought our homes, from what was left after paying taxes supporting every bludger, & politician in the country for years, are entitled to a rest from paying for any more.

I suggest you lefties dig into your own pockets for vote buying money, & leave us to fade away in peace. We paid our due, & want dills like you the hell out of our pockets.

All good points Has been,

BTW the 40% quoted to collect tax, is the ATO figures on Income tax,

it is a lot less for GST and other levies. The ATO says it costs them 40 cents in the dollar to pay all staff, rent, auditors, complaints department, fund the ombudsman office, coordinate overseas income tax, pay state and local councils rates/taxes, etc etc.

Excellent article Mr Sanchez! How can we keep ignoring all the studies showing land tax to be the most efficient and fair revenue base because land tax is an economic rent, a community-generated surplus, not an arbitrary tax on labour or capital (with all the related deadweight)? Commenters here clearly don't understand economic rents which Adam Smith, David Ricardo, JS Mill and Henry George pointed to as the natural revenue base.

How many people know we had a federal land tax in 1910, ever before income tax?

How many realise Canberra was set up on the basis of paying the rent of land into the public coffer - until PM John Gorton acceded to the land speculators' demands at a Canberra by-election in 1971? (Canberra is now only nominally on a leasehold system.)

How many understand the world is reeling from burst or bursting property bubbles because we fail to capture land rent? You can either have productivity or land price bubbles - not both.

As for disinformation from the main political parties about land tax, you only have to go back to Janine Haines' campaign for the lower house seat of Kingston in South Australia in 1990 when she said maybe we needed a land tax because of the then massive property bubble. BOTH parties immediately screamed "She's after your house!" She still managed to get an incredible 26% vote from thoughtful people who rejected the scare campaign and understood completely what she was on about. The main parties still remain complicit in burying the fact that land 'tax' (rent) remains the most efficient revenue base, as per looking for another report on tax reform rather than considering the well thought-out recommendations in Ken Henry's panel on "Australia's Future Tax System".

Aidan: Imagine you're a company.

Your current tax liability is 30%!

You pay around 7% of your bottom line to get it down to 13%; a 10% saving to the company, if you factor in the 7% tax compliance costs that made that savings happen. With me so far?

And you could be tempted to move to Ireland or maybe Singapore, where the tax rate may be as low as 15%; or china, where labor costs might make the combined outgoings a little cheaper, given ours at around 16% averaged, makes us a little dearer.

Now I can't change your wages bill much, except to make it significantly larger, without impacting on AUSTRALIAN company outgoings.

And just by unharnessing most of the tax liabilities from it bar one!

With me thus far?

Now if some cleverly lead government with the necessary testicular resolve to make real reform possible; approached you and said, we are not only going to reduce your total tax impost just to a very simple 5% expenditure tax, but into the bargain, allow you to return your tax compliance money, 7% to the bottom line, as a 7% increase to the net, (5% taken, 7% returned) would you say.

No thanks, that would force my cost up and force me to offshore!

Which effectively is most of your (as above, frivolous and vexatious) argument about overdue simplicity/real reform!

I wonder, if your brain were a lamp, would you still be able to find your way home in the dark?
Rhrosty

Actually, all land (including resources) is the gift of Creation or G-d (Lev.25:23) and was not made by humanity. Any privatizing of same is theft. Land price itself is the ubiquitous underlying crime. Our entire economy, including mortgage security for loans, is based on theft. No good can come of this. The rental-value of land privately occupied (ignoring improvements), as determined by independent valuers not by politicians, must be collected as the sole source of public revenue. All taxes are artificial & unwise imposts which warp their target (skill, effort, employment, transactions etc.) and should be ditched next 30 June. Collecting site revenue would destroy land price and enable sites to transfer for value of improvements only. Let the losses lie where they fall upon the thieves and their parasites involved. Economic health, government restraint, proper bargaining power for labour, and inter-generational equity would be restored immediately.

I completely agree with this article.

If you tax labour, at some rate of taxation people become more reluctant to work. If you tax capital, at some point it buggers off overseas. But if you tax the use of natural resources, such as land and minerals, you don't end up with fewer natural resources. You end up with more prudent use of those natural resources.

None of us made the land we use. We all improve our homes and hope for a capital gain, but most of that gain comes from a rise in the unimproved land value, caused by population growth and the actions of society (e.g., put good facilities near my home, and its value will rise without any effort on my part).

Any increase in the unimproved value of land has not been earned, and should be taxed.

Contrary to the self-interested comments of some critics above, there is no problem valuing unimproved land values. We've been doing it in NSW since 1906, and there is a well-organised system to challenge any valuation errors.

Rhosty, do you know the difference between refutation and contradiction? Because you haven't refuted anything I've said, you've merely contradicted it. Refutation requires sources or logical argument. Often both. For example:

Income tax revenue is $175.4 billion according to http://www.budget.gov.au/2013-14/content/overview/html/overview_44.htm
Total ATO budget in the same financial year was $3.598 billion according to Wikipedia's ATO page (they got that figure from an ATO document, but the link to it no longer works).

That's not 40% but 2.05%.

As for your other claims:

It is very very far from clear whether there is a structural deficit. Clearly there is a deficit but there's no real evidence it isn't all cyclical.

I'm not arguing for more complexity. As the land tax would replace other taxes, there would eventually be far less complexity.

Australia's foreign debt is nowhere near the size of our economy. But I do think we should make it easier for banks to source their funds domestically.

More than a million daily does need to be borrowed, but not necessarily from foreigners.

Maybe bragging, maybe just feeling smug; the effect is the same – it's not something we should subsidise. Or maybe your concerns are unfounded and it wouldn't bother him anyway. Either way, the economy does not benefit from the situation where the best investment is something that doesn't actually improve productivity.

YOU do the simple sums! You don't seem to realise that you can't tax sectors of the economy for more money than they make! In the financial sector, many have profit margins of far less than 5%. They would go bust or go overseas.

And what matters more to a company than how much it is taxed is how easy it is to make money in the first place. Good infrastructure and a highly skilled workforce matter much more than the tax rate.

And in answer to your final question, no I wouldn't be able to find my way home in the dark without a brain, and a lamp is useless in a position where it can't illuminate anything.

Valid commentary, Philip and Aidan.

'Excessive' valuation problems in those parts of the country where actual sales of undeveloped land are very infrequent, are possibly inevitable. For example in the small town I live in, the sale of just one empty block, at well above average asking prices of all the other ,unsold blocks, in my town, resulted in a near doubling of official land values for the whole town.
(The block was purchased solely so as to block a development that threatened the amenity and peace of mind of the eventual buyers neighboring land, so they were willing to pay more than the land was really worth).

And it does seem unfair that people who bought into an area because it was 'all they could afford, at the time', should later in life- after say 'gentrification', should be hit with a large tax on the land they live on.