STATES COULD BE BIG WINNER IN TAX PLAN

Australian municipalities cried poormouth to the federal government the early 1970s, so Prime Minister Gough Whitlam chose to ‘assist’ them by meeting half the cost of local government out of federal taxation revenues.

Today, state governments, having mainly reneged on their promises to get rid of certain taxes if the national government instituted a goods and services tax and rebated it back to the states, are now also crying poormouth for all their inadequacies.

Each level of government should be accountable for funding itself.

Every government inquiry into taxation the last twenty years has shown land tax to be the most efficient of all taxes, but because of the squawks the property lobby raises, state land taxes, cursed by exemptions, thresholds, multiple rates and aggregation provisions, have never been reformed nor extended.

The trend over the last forty years in Australia as elsewhere has been to reduce reliance on property-based taxation, whether it be municipal rates or state land taxes.

That’s why the world has experienced incredible bubbles in land prices and extreme financial collapse.  Land taxes not capturing sufficient publicly-generated land rent, have left too much rent in private hands to be capitalised into these land price bubbles every 18 years.

It’s very simple: if you don’t choose the right fiscal path, you pay the penalty and experience the pain.

So, the Australian states should get off their bums and reform and broaden the land tax base, because it’s the most efficient revenue source, and they already have the land-taxing power.

Extending rapacious hands to the federal government for money is a cop-out: it’s not the states’ answer.  The best instrument lies in their own hands.

Thus, I find it extremely difficult to disagree with this article in THE AGE today.  Yea!!

[And, Victorian Treasurer Kim Wells, wake up to yourself – because it would be your own fault if federal funding were to be withheld for non-compliance!]