~~~~

Why land tax is better than stamp duty.

A transfer tax such as stamp duty can be avoided or deferred by holding out or not selling.  It distorts the timing of sale decisions, thus hindering prompt re-allocation of land to higher and better uses.

All distortions of market decisions create excess burdens.

By contrast, a uniform land value rate is a holding charge – you can do nothing to avoid it.  If you sell, the buyer discounts the price for the annual holding charge attached to the land:-

i.e. Price = net rent/i

So, don’t let anybody try to tell you that there’s very little difference between stamp duty and land tax!

I didn’t really expect this letter to be published in THE AGE last week. It receives most of its advertising revenue from the real estate industry – and investors and the banks wouldn’t be too happy with this observation, either. Oh, well ….

Dear Letters Editor,

On last Wednesday’s 3AW breakfast program with Ross and Russel, an unexpected truth about Australia’s skyrocketing property prices managed to slip through. When Ross Stevenson pointed out that Victoria was the only state with declining real estate prices, it was agreed that Victoria’s higher land tax was the cause. A frustrated landlord called in to confirm this impact of Victoria’s higher land tax.

Australia’s tax system clearly favours property investment over productive activity, heavily taxing sales and earned income while allowing rent-seekers to extract publicly generated land and resource rents with minimal taxation. Perhaps it is time to revisit the Henry Tax Review’s proposal for an all-in land tax (together with the abolition of more than 100 other taxes) if housing is to become more affordable?

Sincerely,

Bryan Kavanagh

Just before the Great Depression, the man who was to become Australia’s longest-serving prime minister saw the inverse relationship between escalating land prices and Australian prosperity.

Unfortunately, by lumping land in with capital, neoclassical economics finally won the day against the classical ideas of Henry George at the Great Depression.

So, the insights of Robert Gordon Menzies have now come to elude economists, financial analysts and politicians across the spectrum.

Hence, the repetitive smaller nine and larger eighteen year recessions that continue to bedevil world economies.

We need to start taxing land prices more and wages and purchases less.

But that’s most unlikely to happen before we experience the upcoming financial depression.

~~~~

It is sometimes said that Pope Leo XIII’s “Rerum Novarum”, which in 1891 addressed the great surge for social change, was not related to Henry George’s call for a land tax to replace other public charges, or to the 1887 excommunication of his prominent Catholic supporter, Father Edward McGlynn.

On any reading of John Moloney’s “The Worker Question”, published on the 1991 centenary of “Rerum Novarum”, that position is impossible to maintain. Moloney, an avid opponent of Henry George’s ideas, was provided full access to Vatican archives. He left no doubt that whilst not specifically mentioning Henry George, countering him was the aim of the encyclical. Henry George obviously believed this was the case when he penned a sincere response to Pope Leo.

The year before the Pope’s encyclical, Henry George had spoken in Australia of the threat posed by impossibly excessive land prices.  The Adelaide Observer of 26 April 1890 reported George as saying “In the colonies I have been through, the curse of land monopoly and land speculation is over everything. I don’t know of any new country where more striking instances of the absurdity and injustice of our present treatment of land is to be seen.” Worldwide speculative land values collapsed in the following year (1891) and terribly sad outcomes ensued during the 1893-1897 economic depression.

The political uncertainty and divided times were remarkably similar to those of today. It’s also astonishingly coincidental that the succeeding Pope Leo is to oversee a likely 2027-2030 financial depression from another worldwide collapse in land prices.

As he has great clout, rather than clinging to the partly ineffective analysis of his namesake, Pope Leo XIV could do no better than promote the proto-Georgist principles teeming within Pope Francis’ “Laudate Si'”. They represent a quick exit strategy from impending financial collapse.

The Scottish Land Revenue Group

We bow to Thee, Oh Cycle!

~~~

We could end these endless rent-seeking cycles if we were to tax land prices instead of our incomes and purchases, but we choose not to. – Sad.

~~~

(Pardon my cartharsis.)

Bernie’s right on this one.