I put the failure of land taxes to gain more than a toehold in economic thinking these days down to the fact that economists who support the relative benefits of resource rents–Nobel prize-winners though they may sometimes be–are rarely reported in a media perceiving the interests of its big bosses and major advertisers are not well served by abolishing rent-seeking. “There must be no such thing as public resource rents, there are only income and sales taxes – just remember that!” Free press? Baloney!
It’s counter-intuitive, but ad valorem land taxes respond precisely to the needs of an increasingly complex society. The benefits of available infrastructure, the relative size and location of each parcel in terms of community amenities, and even of new advances in science and technology are all differentially reflected in the market value of each and every allotment.
The principle of Ockham’s Razor is that the answer to complex problems is often a simple solution. Land taxes and electromagnetic spectrum rents are elegant solutions to the increasing economic canker and deadweight losses generated by income and sales taxes.
Far higher levels of resource rents replacing income and sales taxes may not be the answer to all of our economic ills – but the switch has much to recommend it.
Maybe economic cycles of death and renewal will always be with us , but we have an amazing and much underutilised tool which could prevent the cycles from being so repetitively socially devastating.
Economists, from John Locke, Adam Smith, David Ricardo, JS Mill,
Tom Paine and Henry George, to Mason Gaffney, Joseph Stiglitz and Michael
Hudson, were/are onto something. They thought/think, it’s crazy taxing productivity
and workers, and grossly under-taxing unearned ‘ground rents’.
Adam Smith said not taxing ground rent generates monopolies. He was right.
It wasn’t always this bad. In fact, Australia did even better than the USA in capturing unearned incomes – at all three levels of government.
There were some terrible decisions taken to reverse this situation in the last depression and following WWII. In this great confusion, it’s difficult to believe the 0.1% were not behind these swift changes ‘for the good of the people’. We was dudded! Ayn Rand and the Reagan-Thatcher era compounded these ills that have delivered us to this point in history.
So why won’t economists act to fix this incredibly stupid
Because they believe what the 0.1% has told them: “There’s
not enough rent!” (Though all taxation comes out of rent.) What they really
mean is: “There’s not enough rent for you! It’s all ours! You just keep paying
taxes on your wages whilst we ship our banking and rent-seeking profits out to
The Henry Tax Review tried to enlighten us to start making the switch back to a better tax regime (Australia’s Future Tax System), recommending we abolish more than 100 taxes and introduce a land tax. The 0.1% saw to it that it got nowhere.
And so, we keep having these ridiculous annual budgets based on a false ‘scarcity’ instead of the actual abundance; and we keep aiming for the ludicrously false security of a ‘balanced budget’. [Sigh!]
So, let’s capture the economy’s ‘externalities’–economic rents–folks!
Despite agreeing with MichaeL Hudson that we’re being comprehensively done over by the FIRE sector–that is, finance, insurance and real estate–I certainly don’t condemn all FIRE sector practitioners.
Isn’t this having the proverbial “two bob, each way”?
No, it’s not. I know many in the banking industry who wouldn’t disagree with the ideas that are found on this website. It’s just that they’re not at the top of the tree.
I remember a certain bank manager who was sent to the bush during the late 1980s boom because he was unable to recommend to his staff that they invest virtually everyone into a new or bigger mortgage. He was your old-style reputable banker: an avuncular Spencer Tracy type who understood the good side of banking. Fittingly, he was later called back to his major branch and his expertise acknowledged, in order to sort out the branch’s financial mess when the real estate bubble burst at the outset of the 1990s.
As for the real estate industry, I’ve known many reputable real estate agents and valuers who would “buy and sell” most economists on where the economy “is at”, and why. As in banking, many are not all into skullduggery at all.
Economists on the other hand …… there are none so blind …..
It is vain in a country whose great fund is land to hope to lay the publick charge on anything else; there at last it will terminate.
John Locke (1632-1704), “Some Considerations of the Lowering of Interest”
To have made the abovementioned statement–akin to Mason Gaffney’s modern ATCOR and EBCOR (‘all taxes come out of rent’, and ‘excess burden comes out of rent’)–Locke was clearly aware that if we fail to capture ground rent directly, other sources of public revenue must introduce needless cost burdens into the community.
So-called ‘tax reform’ has always managed to skirt around this basic fact. The claim has been that “there’s not enough rent”, even though it can indeed be shown that all taxes do come out of rent anyway.
So, what’s the point of retaining income tax or taxes on goods, services and exchange?
Well, it suits certain people, especially the politically powerful 0.1%. Landowners are then able to pass these costs on, you see? This way, they’re able to avoid paying their fair share into the public purse. And, of course, land can’t be hidden in the Caymans!
Taxation, instead of capturing ground rents, explains the inadequacy of our politicians: terribly failing economies; increasing private debt and social distress. It’s just that people don’t understand the economic underpinnings of these failures. Education is required on the point.
Maybe this old cartoon bears more than a little truth?