“Unfortunately, at this point in the economic cycle, there are only two mechanisms that could solve the social and political issue of our time.

The first is for housing prices to experience a dramatic fall. And the second is for wages to rise substantially.

The first comes with a nasty side-effect: it would create economic chaos and send many of our banks to the wall.

Achieving, or at least promising, the second might get you elected but ultimately would prove disastrous with spiralling inflation and, you guessed it, a probable spike in housing prices.”

Reintroduction of a federal land tax, whilst cutting taxes on wages, would serve both mechanisms, without generating inflation, Ian, but you’re right, this would send banks to the wall.

But the banks are going to the wall anyhow, because of the excessive credit they’ve pumped into our astronomical land prices – so bring on a federal land tax! The Japanese experience shows us it’s certainly better to help people than the banks (and than to stagnate Zombie-like)!


We need to understand the truism “taxes destroy”. They do: terribly.

Well-meaning people–and less well-meaning people–are dismissive of the aphorism, saying we need taxes if the government is to get things done.

The truth is that we need taxes like we need an extra hole in our heads, but who can be found these days to show that taxes are literally destroying what could be?

What then is the alternative to taxation?

Capturing the economic rent of the nation for the nation is the alternative: the unearned income, or social dividend, that is currently largely being taken by banks and the 0.1%.

For government to take economic rent is NOT just another form of taxation.  It carries no damaging deadweight costs. As one social commentator said, it would be better for the economic rent of the nation to be thrown into the sea than to allow it to be taken privately.

What are these deadweight costs of taxation? The damage done to economies is at least as much as the amount of taxation collected. Harvard professor Martin Feldstein says the ratio can be higher than 2:1, that is, more than $2 damage for every $1 collected.

In “Unlocking the Riches of Oz” (2007) I explained exactly how, if Australia had taken the economic rent of land instead of taxes on wages and profits, her GDP would be double and, of course, everyone would be much better off.

Aren’t we stupid not to choose this option?

Now I’m off to watch the ABC’s “Insiders” discuss which taxes are good for us.  [The answers is NONE, guys!]


“Economists differ on their measures of what they call the ‘excess burden’ of taxes that distort economic activity. Some have concluded that the losses are in the order of $2 for every $1 raised by the taxes that damage people’s economic behaviour (Box 6:4).                                                  I base my assessment on Mason Gaffney’s judgement, which rests on a lifetime’s study of how real estate markets affect the economy. He lived through, and personally observed the fallout from, five 18-year business cycles. In his view, the appropriate starting point for the reassessment of an economy’s productive potential is a tax–induced loss of wealth and welfare as measured by a 1:1 ratio (Box 6:6).”

  • RENT UNMASKED: How to Save the Global Economy and Build a Sustainable future – Essays in Honour of Mason Gaffney, Fred Harrison (Editor), Shepheard-Walwyn (Publishers) Ltd., London, 2016, Chapter 6 (Fred Harrison), pp.128-29



  1. Ross Stevenson and John Burns spoke to “Murrindindi” on 3AW’s breakfast program this morning.  Controversially, he said people can’t  ‘own’ land.  In this he is on song with the first peoples of all nations – for that matter with the Bible of Jews and Christians. “The profit of the earth is for all.” (Ecclesiastes 5:9)The land shall not be sold …” (Leviticus 25:23).  Land may certainly be held exclusively upon payment of its rent: it should never be sold, and may never really be ‘owned’. It is what we earn that is our ‘private property’.

Ignoring fundamental morality provides deep insights into unsustainable levels of private debt, and helps explain floundering world economies.  It’s basic stuff really, but we choose to ignore it.

2.   Strangely, I also find myself on side with trucking magnate, Lindsay Fox, who today bemoaned the increase in Melbourne’s road tolls. His drivers will have to seek ‘rat runs’ in order to avoid the tolls, he says.  So will many of the poor, Lindsay.

Whatever happened to the age-old principle of the freedom of our highways and byways?  Seems it’s not only highwayman Dick Turpin who overthrew this fundamental condition of civil society? Transurban is ripping us off without mercy, by putting the toll gun to the heads of most Australians.


  1. The value of a property is not just about ‘supply and demand’. [!](Along with Chinese demand, increased population and zoning considerations, they are important but peripheral matters.)
  2. The value of a new property may equate to its ‘cost’ – but this is not necessarily the case.
  3. The value of a property is all about capitalizing its net maintainable rental (i.e. after outgoings, including municipal rates and taxes).

Viz, a factory can let for $80,000 pa net, and sales indicate net yields to be 8%.

Therefore, its value is $80,000 x 100/8 =  $1,000,000

If factories in the locality are virtually identical, all sales will take place at around $1,000,000. Although capitalization of the net rental remains fundamental to the property’s value, it is unnecessary to go through the capitalisation exercise when there is sufficient ‘direct’ sales evidence.

Even real estate valuers themselves often fail to see this is no different from the assessment of the value of a residential property. As there are many residential sales, ‘direct comparison’ is the primary valuation approach, and capitalization of the net rental becomes unnecessary.

But residential values notionally remain the capitalization of their net rental, i.e. net of rates and land tax – even though this may not be the primary valuation approach.

Three facts emerge from analyses of current Australian residential rentals:-

  1. City yields commonly show returns around 1% net. When it is understood that long term residential yields are more commonly around 5%, clearly investors expect the enormous capital gains of recent years to continue, because better returns are to be had elsewhere – even in the current low interest rate environment.
  2. As municipal rates and land tax continue to rise (even with the artificial caps which are becoming commonplace), residential investors’ net earnings will drop below 1%!
  3. The usual resolution of such untenably low returns is a major collapse in land prices, which will see yields increase back to their long term averages.

Governments at all levels resist taking the steam out of the market by further increasing municipal rates and land tax to reduce yields and hasten the necessary correction. Whilst this may assist to placate the increasing alarm of investors and their bankers, it has done nothing to make housing more affordable for millennials locked out of the housing market.

Governments, banking, investors and most baby boomers are fixated on supporting the real estate bubble at any cost: the system is fundamentally speculative, and despite impossibly low residential yields, apparently intelligent people try to deny the very existence of a bubble in land prices!

Meanwhile, as the real economy staggers under the weight of the bubble, generation Y must patiently await the impending land market collapse if they are to get their own homes.











“I like your depression site. It is quirky. It’s economics without the usual dryness.

The profligate spending by government to prop up real estate with our money really is poor.

Now as I inch toward retirement I’m getting more and more a feeling of the destructive effects of income tax.

I work hard in several part-time jobs keeping my family off the welfare lines. Do I get thanked?

No! Every quarter I get punished by having to send a huge pile of $$$ to the government.

Then they take my money and pump it into the real estate bubble.”


As I tweeted yesterday @bryankav123, who knows now that the USA only introduced income tax ‘temporarily’ for WWI, and Australia (which had a federal land tax from 1910 to 1952) introduced it federally as a WWII measure?


Can we accept for the moment that the 99.9% are not doing quite as well as the 0.1% – and it seems to be getting worse, rather than better?


For ease of identification, let’s just call the 0.1% ‘our masters’ and the 99.9% ‘the plebs’.

Without being accused of exaggeration may I suggest the plebs are starting to feel a little aggrieved and hard done by, whilst our masters seem to be doing exceptionally well?

Well, the plebs have been given a vote, you see, and for whom are they going to vote at a time like this: 1) the major parties that have taken it in turns over the last 45 years to gradually deliver the plebs and our masters to this point in history, or 2) some saviour out of left field?

That’s right – the saviour.

Enter Donald Trump, Marine Le Pen, Pauline Hanson, Cory Bernadi, etc.  And they have all the answers – right?

Certainly not, but at least the plebs have called out the political parties on their naked support of our masters as they stole from the plebs?

‘Stole’? Yes, they’ve been stealing the rents of our natural resources: our natural resources – 25% of the economy at the very least!

But the plebs and their political parties don’t get it, and our masters still retain strong support from many of the plebs who know their place in life and who don’t want to be forced into the arms of ‘saviours’.

Are you still with me?

So, we have a conundrum here. The plebs and our masters are witnessing the rise and rise of saviours, and the absolute intransigence of major political parties. Meanwhile, our masters continue to live off the theft of the plebs’ natural resource rents.

In this scenario, as much as I’d like to be optimistic about the direction world economies and politics have taken, may I suggest things are going to get far worse for the plebs before they’re likely get any better?