Current Forms of Revenue-Raising
by David William Spain BA, LLB, LLM
(an extract taken from SITE REVENUE: KEY TO ECONOMIC SANITY)
The average Australian pays some 125 different taxes each year, there being about 160 different state taxes and 259 taxes nationally, not counting local government rates. Australian taxation law is so complicated that even the 7 judges of the full High Court, professionally conscripted to interpret acres of writing, can be completely fragmented in what they rule and the reasons given. The Australian Taxation Office issues over 10,000 rulings a year, many of them with extensive consequences. At one blow under an SR system, this complexity would all be ditched, simplified to 0.6%.
All taxation distorts the economy by suppressing & warping the object taxed. In the 18th century, European authorities raised revenue by taxing chimneys & windows: as a result, folk built houses with few, or bricked them up.
When Muhammad Ali, the Ottoman ruler of Egypt 1805-48, imposed a tax on date palms, the peasant farmers cut them down; (incidentally, replacing this impost with a tax on land of twice the amount produced no such result – indeed, the farmers had incentive to grow more palms so as to raise the revenue to pay the tax). In the USA, capital gains are only taxed at 15% but income from labour can be taxed at 35%: this encourages speculation not production.
If labour is taxed, it diminishes its effort or emigrates. If capital is taxed, it can flee the jurisdiction (perhaps to operate as an offshore company in a tax haven). If transactions (such as land sales) are taxed via stamp duties, people may hesitate to buy and efficiencies are curtailed. Similarly, income taxes constrain effort & initiative, payroll taxes constrain employment and tariffs exclude cheaper goods and coddle inefficient workers. Stamp duties impede mobility and relocation of residences to more efficient sites.
Deadweight taxes flourish throughout Australia so as to oppress effort & production and maximize profit for the manipulative puppeteers behind the scenes, the rentier class who pocket capital gains in land and skim off hidden values attending possession of sites.
In 2010-11 all levels of government in Australia collected 57% of total taxes as income tax (fining effort & initiative!), 13% as GST (complicating transactions!), 7% as excise on goods (increasing their price!), 5% as payroll tax (punishing employers!), and only 6% on land.
Possibly there is no salvation from the dead hand of the rentier class. They own the train and drive it, filled with bewildered voters and blinkered academics, straight to the cliff of oblivion. The time is late.
Various forms of stupid subsidies also distort the market. Thus, first home owner grants [“FHOG”] foster a general increase in house prices (benefiting no-one except vendors), and negative-gearing (which allows income-rich investors to tax-deduct interest paid on borrowings) strips $54bn p.a. from revenue, promotes increased land prices and assists the rentier class to outbid battling home buyers, locking these latter into tenancy. The hidden intent of both these subsidies is to coddle the rentier classes and to prop up the banks (whose securities are fixed upon assets) by keeping high the prices of assets (land, buildings, shares).
Such irrational taxes, and the rates of levy imposed under them, are relatively arbitrary and are necessarily complicated in order to reduce avoidance. This leads to evasion and complex litigation in which even the highest courts are severely divided. To make things worse, modern governments often (effectively) conscript or enslave citizens by forcing them to collect & remit GST and self-assess tax liability. This process is tremendously wasteful & inefficient, involving personal downtime & red tape and giving manipulative power to short-term politicians. Instead of continually tinkering with piecemeal adjustments, one should roundly condemn all taxes.
The term “rentier” arose when the lands of church & nobles, seized during the French Revolution 1789-93, were auctioned off by the embattled, cash-strapped new republic to the “rent-seeking” wealthy bourgeoisie, who then exploited the workers as their tenants. Much the same exploitation of the peasantry had been occurring in England ever since Henry VIII, in his breach with Rome, confiscated the Church lands, and subsequent statutes confiscated the traditional commons. Such enclosures were even more oppressive in Scotland, forcing emigration.
The rentier class (with their control of media, dumb unionists, tame academic twits & bipartisan politicians grasping for donations) love having a messy, complicated tax system where rip-off “tax minimization” dodges can be hidden, unproductive zombie mates can hold high-paid jobs suckling on the public teat, all whilst manipulated taxes on labourers & grants from afar improve their own property values and their rip-off of community-created capital gain & locational benefit escapes notice. A nice rip-off system if you have the stomach for it.
No, that’s the Mill Tax where you capture the increase in capital value at the time of a sale. It’s a rather clumsy way of doing things, but would achieve the same result – eventually. The best way is to capture the annual rental value of ALL sites–including mining spectrum–a far lesser amount, as you go. We capture only a part of this by way of rates, land tax and mineral royalties, &c.
Farmers, commercial and industrial should all pay this rent–no exemptions–and there should be NO taxes at all on labour or capital. If there were genuine hardship cases, these can be exempted, and a charge put on title for the beneficiaries to pay at the time of the title-holder’s death. If you listen to Fred Harrison’s interview in today’s post, Robert, you’d get a greater appreciation of the idea. At the end of the XV Century, even the humble labourer was able to save 2/3rds of his salary after food, clothing and shelter costs. Who can do this today? Today, it is the 99% who have been reduced to serfdom because the 1% steal the publicly-generated economic rent of our land and natural resources.
Farmers would be laughing under such a reformed revenue system, and so would householders; but due to the traumatised system under which they belong and the blandishments of the 1%, they are unable to see this (yet).
If I understand correctly, the meaning of site value is like this: suppose a person purchased vacant land for $10K in a remote area. After 10 years the owner sold the land for $100K having done nothing with it. The price rose over time because a town was established around the owner’s land. According to Henry George the $90K increase in value is created by the residents in that city and should therefore be returned to that community: either as a lump sum on sale, or as an annual payment representing the increase in site value attributable to the development of the town.
What of farmland? Agricultural land is effectively the capital employed for production. Land price must therefore relate to the expected rate of return for the employed capital. Fertile land will be dearer than infertile land only because it has a greater productive capacity. Land situated closer to a market and facilities will be dearer than remote land . How does site value work here? It seems there is no community created value as long as the land is zoned exclusively for agriculture. Would not site value only be created if the farmland was rezoned for another purpose – like residential housing? I’ve observed in NSW, productive agricultural land is not being used to it best purpose – it’s being lost to rural residential lots and expansion of towns. Would the site value payment proposed by George halt this? The way we’re heading now more marginal land is being forced into production, at the cost of environmental damage.
Australia’s high land prices seem to have a strong correlation with low interest rates, whereby banks write loans on ever increasing land prices as the mortgage security. To whom does this uplift in values belong?