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 could be avoided by freeing up wages and earned profits and capturing most revenue from land values.

JACKALS MOVING IN AGAIN …..

…. to get a mandate to rip off those of us in the State of Victoria, with Daniel Andrew’s privatisation of the Land Titles Office. http://www.afr.com/street-talk/bankers-set-to-front-victoria-government-officials-for-latest-mandate-20170716-gxch9h

The Andrews Government  is also engaged in PPP tollways which shames Labor Party principles of freedom of access. The poor will be hurt most.

Terrible stuff, for which all Victorians will pay – heavily!

Who’s advising you for God’s sake, Labor?

THE *REAL* ECONOMIST

In demolishing  Nobel Prize winner Robert Lucas in “Can we avoid another financial crisis?“,  Professor Steve Keen says: This [the aggregation of all microeconomic demand into the macro-economy] is valid if you aggregate all wage earners into a group called ‘Workers’, all profit earners into a group called ‘Capitalists’, and all rent earners into a group called ‘Bankers’ …. [p.28].

Keen makes the point that it’s impossible simply to aggregate all micro-demand into the macro-economy without a proviso reflecting the differential natures of demand. Let’s not quibble with Keen that rent can be ‘earned’, but move to Henry George’s elaboration of oppositional demand. And that opposition is not between labour and capital,Thomas Piketty: banking rentierism is the issue.

George made the very telling distinction that land rent has first claim on all income, and being unearned by its very nature, it must be captured to the public purse if we are to avoid economic depression. This is because the incomes of labour and capital actually rise and fall together, in inverse relationship to privatised rent/land price. Were we to capture rent/unearned income–in order to generate real wealth and prosperity–we’d soon come to learn there is no necessary ‘business cycle’.  Banks may not be impressed, however!

Any person who is able to appreciate the validity of George’s argument is indeed worthy of the name ‘economist’.  In Georgist circles, this insight became known as ‘seeing the cat’. For the vast majority of ‘economists’, therefore, the appellation, in Donald Trump terms, is a ‘fake’ one. Apologies to all you non-Georgist professional ‘economists’ out there!

Do you see the cat?

DECENTRALISATION MADE EASY

As Australian capital cities spill out into their hinterland, our regional cities and towns serviced by good infrastructure are failing worse than ever to attract their share of population growth. Politicians regularly breast-beat about the developmental imbalance, occasionally sending this or that centrally-located administrative department off to the regions to redress the lopsidedness artificially. They always manage, however, to overlook the sort of natural incentives that could be employed to encourage people out of our clogging cities.

Why not remove IMPEDIMENTS to living in the regions?

Such as:-

  1. Increasing council site value rates and State land taxes, in order to facilitate removal or reduction of payroll taxes, stamp duty, motor registration fees, rail freight charges and differential petroleum costs, the latter which requires oil company cooperation. Site values will increase more in capital cities than in the regions.
  2. Getting rid of council rates on buildings, as in Victoria where all municipalities fine people for constructing buildings or for redeveloping properties. Site value rating, with a single rate in the dollar and no minimum rate, is an essential foundation for economic activity and for decentralisation to occur naturally. It encourages construction and economic activity, instead of penalising it by rating on capital improved values, or by net annual value rating.
  3. In site value rating States, such as Queensland and New South Wales, we should be looking at abolishing ‘minimum rates’, because these have the deleterious effect that owners of the least valuable sites effectively subsidise owners of more valuable land. Abolishing the minimum rate would put everyone on a fair and equitable footing and better encourage construction activity.
  4. Reforming State land taxes, so that all properties are levied with a single rate charge with no exemptions, thresholds or aggregation provisions.

Anticipated results

As site values in capital cities are substantially higher than those in the regions, the increased rates in cities and the removal of obstacles in the regions clearly offer incentives to relocate from the cities to where both real estate and council rates are cheaper.

It was, after all, differential council rating and the federal land tax (1910-1952) that had initially assisted to establish and develop Australia’s regional towns and cities. There was no federal income tax during the greater part of that period. When people ask “Where is the money to come from?” we might well re-visit how our forebears handled the situation and respond: “From part of the uplift in land values that infrastructure and population delivers to local landholders.”

Studies confirm this outcome

Economists accept that taxes on land, unlike other taxes and charges, carry no excess burden because they are in the nature of rents which can’t be passed on in prices. However, as the foregoing amounts to a big claim for the efficacy of land-based revenues in relation to decentralisation, where’s the practical evidence behind the efficacy of rating and taxing land values?

There’s plenty of evidence. The State of Victoria used to rate entirely on the net annual value of properties (NAV), i.e. on the improved rental value, until legislation was passed in 1920 which allowed municipalities to change to unimproved capital value rating (since redefined as site value rating).

Between 1943 and 1986 the Land Values Research Group conducted many municipal rating studies, amongst other things, quantifying the benefits enjoyed by those 67 municipalities which chose to switch from NAV to SV rating to leave improvements untaxed. In all cases, even during periods of recession, where the change to SV occurred, building activity not only rose, but increased at rates greater than those in adjacent NAV-rating municipalities which had not made the switch.

These comparative results also held for State-based agricultural activity, as represented by areas under crops:-

Depression (1929/30 to 38/39)       Post-War (1946/47 to 1958/59)

Site value rating States                               Site value rating States

Western Australia   + 3%                        Western Australia            + 71%

New South Wales    + 22%                      New South Wales             + 5%

Queensland                 + 68%                      Queensland                         + 76%

Net Annual value States                               Net Annual value States

South Australia          – 5%                           South Australia                  + 7%

Tasmania                       -8%                             Tasmania                              – 6%

Victoria                          -10%                           Victoria                                – 6%

Go for it Australia: you’ve done it before!

It’s not all that difficult to comprehend: if you un-tax people for being productive and remove current obstacles placed in the way of their living outside the capital cities, some people will take the hint. We need to offer ongoing structural incentives if decentralisation is to occur.

And whilst the vast majority of developers are currently to be found within our State capitals, the impetus provided by such a positive regionalisation program would encourage a change of habit for some developers – to venture out into the regions, to where the action is.

Hello, Regional Development Victoria?

 

Australia: You’re being ripped off mercilessly!

“The more tuned out the general population, the more James can get away with his Game before voters notice.”

A full house attended the official Melbourne book launch by co-author Dr Cameron Murray of the “Game of Mates: How Favours Bleed the Nation” at RMIT’s Francis Ormond Building on Friday.

I’ll let people read this excellent book to see precisely how we’re being ripped off by “grey gifts” which authors Murray and Paul Frijters explain are unearned economic rents. But if ‘economic rent’ is a term unknown to the average Australian (or “Bruce” in the book), maybe Bruce will respond better to the term “grey gifts” which are being exchanged between Australia’s rip-off merchants (called “James”) at an incredible cost to Australia.

Both on reading “Mates” and seeing Cameron Murray’s surgical presentation on Friday, I was struck by why our politics and media have fractured over matters such as the Brexit and Donald Trump phenomena: people sense they are being taken as fools, but don’t quite understand the mechanism that’s robbing them.

It’s rent-seeking, or ‘grey gifts’, guys!

Many thanks to RMIT and Prosper Australia for organising the event.

Forget climate change and population increase for a moment, deal with these grey gifts, folks, and you’ll find there’s a vast fund available to address these and all of Australia’s current issues, including housing, education, health, infrastructure and social welfare.

By failing to tap grey gifts (which I’ve assessed amounts to one-third of the economy), our political system has directed itself into supporting productivity-destroying tax regimes that cost $2.34 for every dollar raised.

A report in THE AGE today exposes the latest grey gift rip-off – in our gas exports. There are even accounts of people re-importing the exported gas to sell in Oz, and still make a good profit!    🙁

 

 

FORGOTTEN COMMON SENSE

With respect to monopolies other than the monopoly on land, we hold that where free competition becomes impossible, as in telegraphs, railroads, water and gas supplies, etc., such business becomes a proper social function, which should be controlled and managed by and for the whole people concerned, through their proper governmental, local, state or national, as may be.

– Henry George (US Single Tax League platform, paragraph 11, 1890)

Today in the wonderful rent-seeking land of Oz, we even have privatised tollroads, Henry! So much for freedom of the highways and byways?