All posts by Bryan Kavanagh

I'm a real estate valuer who worked in the Australian Taxation Office (ATO) and Commonwealth Bank of Australia (CBA) before co-founding a private valuation practice, Westlink Consulting. I discovered that we leave too much publicly-generated land rent to be privately capitalised by banks and individuals into land price bubbles. This generates repetitive recessions and depressions. These need to be avoided by capturing more revenue from land values to free up wages and household debt.

WHERE ARE THE QUANTS?

Why don’t quants assess unearned incomes in the economy? You know, extractive economic rents – ‘super profits’?

Here’s a start in the chart below. These are land rents and capital gains – in blue and green – only. Viz, they don’t include electromagnetic spectra rents.

And, of course, taxes on productivity are extractive, too. Not only that, but they inject deadweight losses of something like twice the amount levied.

Disappearing aggregate demand/wages and earned profits (blue) is the main reason world economies are in a mess.

C’mon, quants: make a name for yourselves!

4 THINGS NEED FIXING

(1) Elected politicians currently accommodate their party’s (or lobbyist) interests, instead of the interests of the people they are purported to represent. Using Proportional Representation to help elect people supporting other than binary party viewpoints will assist in fixing the current corruption of representative democracy.

(2) “Where is the money to come from?” Representative government is not like a household. It can spend national money on a universal basic income, infrastructure, and other necessary projects, without borrowing money. Such government expenditure would assist demand and, thereby, the socio-economic fabric.

(3) “We need to set up a fund.”  No, we don’t. We don’t need the Australian Government Future Fund, nor superannuation funds out of which retired people may be paid. We simply pay them their pensions, without building up funds which tend to lose vast sums at each recession, after the bursting of each bank-inflated land bubble. Nor is taxation a fund, a pot of money, from which our elected representatives may spend, despite current political mythology. Rather, we use taxation to withdraw money from the system, in order to maintain the currency’s purchasing power.

(4) Finally, and most importantly, we don’t need to tax wages and profits. These taxes on productivity carry enormous deadweight losses and ought to be abolished. However, we do need to tax away ‘ground’ rents (including mining and electromagnetic spectra rents), as advised by Adam Smith, if we’re to abolish monopolies. Capturing these economic rents instead of taxes will free up the economy and allow wages and profits to grow consistently, instead of granting super-profits to banks and other extractive rent seekers, at the expense of all others.

Although we do need these four surgeries to remedy the slough into which we’ve become entrapped, we seem to prefer applying band-aids to our ever-increasing number of socio-economic wounds.

Let’s hope that changes!