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The Forum > Article Comments > The planned obsolescence of the public interest > Comments

The planned obsolescence of the public interest : Comments

By Karl Fitzgerald, published 12/11/2015

The benefits are profound. Land Tax is the only revenue mechanism to generate positive benefits for the economy.

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Thanks for the article Karl Fitzgerald. The benefits of land value tax should be a first consideration in tax reform.

Our society is conditioned to consider land ownership as just another form of wealth like shares, buildings or other man-made possessions.

Land is provided by nature, location is critical, and is it an absolute requirement to do anything at all in life – you at least need a place to stand.

If it had been physically possible to parcel up the atmosphere and privatise its value we would accept that as normal and be having discussions about the unaffordable cost of breathing.

Economist Joseph Stiglitz was interviewed about Thomas Picketty’s conclusion that ever increasing inequality is driven by returns on wealth being greater than the economic growth rate.

Stiglitz said, ‘A closer look at what has gone on suggests that a large fraction of the increase in wealth is an increase in the value of land, not in the amount of capital goods.’

He goes on to say:
‘What has happened repeatedly in recent years is that we’ve had monetary authorities allowing — through deregulation and lax standards — banks to lend more. But this lending has not gone for creating new business, not for capital goods. Disproportionately it has gone to increase the value of land…’

This is a link to the article:
http://www.salon.com/2015/01/02/joseph_stiglitz_thomas_piketty_gets_income_inequality_wrong_partner/

Our tax system socialises our private incomes via income tax and privatises our social income –the community generated rising value of land. This becomes the preferred investment, causing unaffordable sites for housing and business and high private debt.

Change can only be incremental but a move towards a greater tax base from land needs to be a first objective.
Posted by Flet, Friday, 13 November 2015 11:11:28 AM
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imacentristmoderate,
"Aidan, why do you want to create more poverty for the workers by destroying more jobs with a high debt economy?"

I DON'T.

Your question relies on the false assumption that a high debt economy destroys jobs. But in fact it's almost the reverse: taking on debt means money is being spent, and most of that spending is wages. Far from destroying jobs, it creates them.

What destroys jobs (apart from cutting spending) is an uncompetitive business environment: where the roads and railways remain grossly inadequate, where electricity users pay artificially high charges to be connected to the grid (or worse still, can't get a reliable supply), and where the workforce doesn't have the skills that businesses require.

The idea that the debt itself deters business investment in a state is a myth that caused tremendous economic damage in South Australia under the Brown and Olsen governments, which is why Croweaters distrust the Liberals so much.

A broad based land tax would actually make housing more affordable, as the speculative component of property value would be less.

And even where people are less wealthy on paper, their standard of living would be higher. Particularly if it replaces other taxes.

___________________________________________________________________________________

toleo, taxing away 100% of land value is a very bad idea. Firstly it would be unfair on those who already have land. Secondly, even taxing away 100% of the increase of land value is economically and socially undesirable, as it means there would be strong opposition to anything that increases the local land value. Thirdly it would destroy the economic benefits of property ownership, and we could end up with something like the situation in Moscow, where there've been hundreds of arson attacks on buildings by those who want the land.
Posted by Aidan, Friday, 13 November 2015 1:00:57 PM
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Aidan

"the GST is not a wealth tax"

Why not? Isn't money wealth?

"How much of every article do you think should be devoted to definitions?"
As much as is necessary to determine whether the author makes logical sense in his own terms, or is just engaging in a fit of arbitrary self-contradictory moralising.

For example, can you see that if someone asserts that x provides a net benefit, and then in the same thread says that the costs of providing the benefit are irrelevant, that person is operating at the intellectual level of a gibbering idiot?

Can you see that, if someone says that the purpose of a compulsory acquisition of property is "fairness", but then is totally at a loss to give any objective criterion by which they know whether it's fair or not, that doesn't make sense?

Can you see that, or not?

How can they say something is fair, when they themselves don't have any coherent idea whether it is or not, and disagree with their own opinion by contradicting themselves when confronted and challenged to explain themselves?

"But if you like, I'll have a go at defining the appropriate rate of land tax"

Why is that appropriate? Because what? Are other people's equally arbitrary definitions equally appropriate? If not, why not?

"As for your complaint that it doesn't define the State, perhaps that's because it doesn't actually mention "the State""

Tax is a compulsory exaction by the State, remember? That's why you want it, remember?

The point is, the State requires the payment of tax so it can spend it on whatever it decides to spend it on. In order to justify it *in your own terms* (let alone anyone else's), you need to be able to demonstrate that the benefits it confers are greater than the detriments it imposes.

You haven't done that, so you haven't justified any rate of taxation as appropriate.
Posted by Jardine K. Jardine, Friday, 13 November 2015 1:50:41 PM
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Foleo
“Jardine, please define 'define'.”
How about “state or set forth the meaning”, “specify distinctly”, “determine or fix the boundaries of extent of”?
http://dictionary.reference.com/browse/define

I’m not just asking for definitions for the sake of it, as you seem to believe. I’m doing it because I know, and will show, that if the author does define what I have asked for, we will see that he is involved in a hopeless jumble of self-contradictions and circularities.

“The other definitions you seem to think are necessary are mostly in the Reports referred to. Read the Treasury paper.”
Ho hum, appeal to absent authority, more immediate logical fallacies as the stock-standard fall-back of the statists when challenged.
I am not going to be sent on an errand to construct the author’s argument for him. It is enough for me to point out that it doesn’t make sense, that he can’t defend it because he provides no rational or objective criterion by which his own argument could be verified or falsified. It’s flummery.
“ That might help you understand efficiency, and net benefit.”
Ho hum, assuming what is in issue. Do try to keep up with intellectual developments of 2,500 years ago. Let me put it this way, foleo. Have you got an argument that is *not* a logical fallacy? You need to prove the concepts of efficiency and net benefit, not just flaccidly and impotently *assume* them.
“Do you really need the State defined, or the public interest.”
Yes, because his definition of the state will show that he’s contradicting himself. And since the author is not “the public”, the public interest is not his to know.

In short, he’s talking nonsense, and your failure to distinctly specify the ideas you are dealing in, has caused you too to join his swim in the flummery.
Posted by Jardine K. Jardine, Friday, 13 November 2015 2:10:47 PM
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Jardine,

Since when did summarising the conclusions of papers linked to become an appeal to absent authority?

"Why not? Isn't money wealth?"
No. It's primarily a means of exchange. It can also be used as a means of storing wealth, but that's not what the GST taxes.

"How can they say something is fair, when they themselves don't have any coherent idea whether it is or not, and disagree with their own opinion by contradicting themselves when confronted and challenged to explain themselves?"
The real question isn't how they can say it, but how they can convince others of it.

"Why is that appropriate? Because what?"
Because of its effects:
More than 1% of unimproved land value: to make it a significant source of revenue.
Less than 5% of unimproved land value: to ensure that the landowners still have a significant stake in the value of their land.
Not rising more than 0.1% of unimproved property value per year: to avoid unfairly disadvantaging existing landowners;
(except when combined with measures such as abolition of GST): because a big drop in other taxes is likely to push property values up if not accompanied by a rise in land tax.

"Are other people's equally arbitrary definitions equally appropriate? If not, why not?"
As I haven't yet seen their definitions, I can't tell you. The appropriateness or otherwise ultimately depends on the effects. As we can't always predict all the effects in advance, we have to take the reasons into account. And they must be carefully examined - taking them at face value isn't enough.

"Tax is a compulsory exaction by the State, remember? That's why you want it, remember? "
Are you clear about what you mean by "the State"? If so, why do you require someone else to supply a definition? Did Karl Fitzgerald write anything that seems to contradict yours?

(TBC)
Posted by Aidan, Friday, 13 November 2015 3:39:43 PM
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"The point is, the State requires the payment of tax so it can spend it on whatever it decides to spend it on. In order to justify it *in your own terms* (let alone anyone else's), you need to be able to demonstrate that the benefits it confers are greater than the detriments it imposes."
It gets rather tedious going back to first principles all the time, and I think this site would be far too boring for me to participate in if all the articles did that.

States exist. Even if government at State level in Australia were abolished, entities that require the payment of tax would take over their responsibility. They require taxes to fund their spending*. Some taxes are more economically damaging than others, so it makes sense to compare the effects of different taxes at different rates, and select the least damaging combination.

* It could be argued that those states which print their own money don't require taxation to fund their spending. However they still require taxation to give their money value. The Weimar Republic demonstrated what happens when a financially sovereign state doesn't have an effective taxation system.
Posted by Aidan, Friday, 13 November 2015 3:40:19 PM
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