The ABC’s “Q&A” was set in Albury/Wodonga last night as it discussed the problems existing in Australia’s regions. Most of these were obviously heartfelt by the big local audience.

There’s no doubt the coastal capital cities win out revenue-wise, and otherwise, and those in the regions, having grown most of Australia’s produce, go without as they also pay more in petrol for living outside the capital cities.

How do we deliver equivalent infrastructure to them? Do they have to make do with occasional carrots, such as the $65 million cancer clinic Minister for Regional Australia, Regional Development and Local Government and the Arts, Simon Crean, promised will be in this year’s budget?

Regional issues seemed endless. At least the national broadband network offered them a superhighway on which better health and education services might be delivered, most agreed.

But not one of Tony Jones’ Q&A guests, nor one of the people in the audience, got to grips with their greatest problem, which paradoxically also offers the only real solution to their long list.

People in the regions pay the same taxes as those in the cities. “That’s fair!” do I hear you cry? But what if the taxes paid, both by people in the cities and the regions, are patently unfair because they penalise production and reward property speculation?

What if there was a better source of revenue that recognised, perfectly, all the problems in the regions? What if Australia was to make a revenue switch based upon land values?

Land values are lower in the regions because of their smaller population, locational, capital works and facility disparities when compared with the cities.

Therefore, rural and regional areas would clearly be benefitted by the abolition of the 128 taxes  and the re-introduction of a federal land tax recommended in “Australia’s Future Tax System” by Ken Henry’s panel – but Tony Jones, the Q&A panel and his audience showed this is not even showing up on their radar.  Why not? Their circumstances would see them paying far less to each level of government.

Such is the ignorance on the issue of land value-based revenues that former Olympian and Gold Coast City Council mayor, Ron Clark, has been pleased to announce (in connection with the introduction of site value rating) that almost 50% of his municipality was “eligible” to pay the minimum rate.  That sounds nice, doesn’t it:  “I’m eligible to pay the minimum rate.” But let’s examine what it really means.

It means that people with lower-valued properties are having to pay more than if they were to pay the same rate in the dollar on their land value as is paid by the owners of more valuable land. Lower value property owners are therefore subsidising higher-valued properties, or, put another way, the Gold Coast City Council has progressed that half of the people with the least valuable properties onto what amounts to a poll tax.  And yet people found the gumption to revolt in the streets of London in 1990 when Margaret Thatcher tried to introduce a poll tax; but we don’t revolt, we cop it in the neck.

If the rating base is land values, then land values it should remain – and there must be no minimum rate – but the theory and benefits of land value taxation are as badly understood in the regions as they are here in the cities.  So, we continue to be screwed.

Meanwhile, as Q&A avoided the issue of how land-based revenues at local, state and federal levels might assist rural and regional areas in particular, Australia’s handful of uber-wealthy rent-seekers rubbed its hands that the secret of its free ride at the people’s expense remains a mystery.  

[FWIW, I’ve written on the subject of decentralisation in Online Opinion.]

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The death of Osama Bin Laden grabs all the headlines, but this article in The Guardian has greater import for people in the world’s staggering economies.

Pity about the qualification about abolishing other taxes towards the end.

Prosper Australia

Access → Opportunity → Prosperity 

Prosper Australia Press Release:

ABS Confirms Falling House prices

The ABS House Price Index* released today confirmed house prices are falling.  Both Brisbane and Melbourne are down 2.5 per cent QoQ and the eight capitals are down 1.7 per cent QoQ overall.

“While the price fall is modest it confirms the new downward trend in house prices is firmly established and will proceed rapidly from here,” Prosper Australia campaign manager David Collyer said today.

“The federal government has no further market interventions available. A fresh first home buyers’ grant would be met by derisive howls by young adults. They have learned such trickery merely inflates prices by at least the size of the grant.

“A cut in interest rates would prompt universal withdrawal of overseas funding from our banks. These now support over a quarter of bank lending.

“The boosters and spruikers of the property industry have suddenly flipped to a new narrative, that this modest change makes real estate a ‘buyers market’.

“Their claim is utter garbage. They should hang their heads in shame. This self-serving argument is an attempt to coerce naïve buyers to commit to a lifetime of debt at the peak of The Great Australian Land Bubble,” Collyer said.

Prosper Australia’s Buyers Strike and repeated warning – Don’t Buy Now – addresses prospective home buyers trying to negotiate the traps and pit-falls on the road to home ownership.

“House prices have a very long way to fall to become attractive. I say, house prices at three times buyers income is a neutral market and at 2.5 times is a buyers market. These targets remain a long way off.

“A third of adults are renters. While not every renter aspires to home ownership, all are excluded by high land prices. This is an abuse of the idea of citizenship in a property-owning democracy and our profound national commitment to opportunity for all.

“Prosper sees no reason why young Australians should pay grossly inflated prices for homes just so vendors can exit with their unearned wealth intact.

“I take no joy in the widespread economic destruction the bursting of the bubble will bring. The villain in this drama is the tax system, a scheme that advantages land speculation over genuine investment and wage-earners,” Collyer concluded.

*ABS 6416.0 – House Price Indexes: Eight Capital Cities, Mar 2011

If you can find 20 minutes, Karl Fitzgerald’s recent interview with Steve Keen on 3CR’s “The Renegade Economists” will reward you with facts on the economy you’re often denied in the mainstream media.  [Click on “Listen to Steve Keen” on the above EarthSharing link.] 

As Australian residential real estate prices begins to fall from their stratospheric heights, I sense those economists and financial analysts who’ve clotted together with the real estate industry to pooh pooh Steve Keen’s research and steadfast warning of an enormous Australian debt implosion are starting to squirm.

Fight of the Century, Round 2, is a brilliant video.

Keynes v. Hayek touches on ‘bubbles’; but do you hear them actually mention land or real estate? No, nothing.  It wasn’t there.

Even the Austrians, who come pretty close, manage, like Keynesians, to make what’s real – no, not money nor debt – LAND, disappear into the ether. (Geo-libertarian Dan Sullivan challenges libertarians to recognise this mocking stumbling block.)

Until real estate is reintegrated into economics, we’ll keep having this pointless Keynesian v. Austrian economist debate.  There’s a valid synthesis.

I like this recent dismissal of the Austrians – well, of Murray Rothbard in particular – from a colleague on a Georgist school discussion site:-

Murray Rothbard.  I consider that he was confused. He extolled the free-market, but could not see it was rigged, or gave any real method of ensuring it would remain unrigged and free. 

His view of landed property, was that once you mix your labour with land, all profit and rent extracted from it becomes the landowner’s, 100% until you sell the land. What we have now.

He believed that, as a result, individuals owned the fruits of their labor. So, full LVT should appeal to him, and eliminate income tax. He was not a great fan of LVT at all.

He created the rather odd Rothbard’s Law that, “people tend to specialize in what they are worst at.  Henry George, for example, is great on everything but land, so therefore he writes about land 90% of the time. Friedman is great except on money, so he concentrates on money.” 

Rothbard fails to see where community created wealth ends up.

                                            —ooOoo—

If there’s a point to be made, I reckon it can always be put simply.

There was a nice obituary for eminent Australian and former Land Values Research Group colleague, Dr Philip Day in Brisbane’s Courier-Mail last week.

Phil was a town planner who, having “seen the cat”, worked unassumingly but tenaciously for the principle of drawing revenues from the use of land instead of from the taxation of labour and capital.

Amongst other places, including academic journals, Phil committed his thoughts in this respect to two books, “LAND: The elusive quest for social justice, taxation reform and a sustainable planetary environment” (Australian Academic Press, Brisbane, 1995) and “Hijacked Inheritance: the Triumph of Dollar Darwinism” (CopyRight Publishing, Brisbane, 2005).

Phil was also a member of The Lord Mayor’s Committee of Inquiry into Valuation and Rating for the City of Brisbane in 1989. The committee was chaired by Sir Gordon Chalk KBE, and it fell to Phil to write the report enunciating its findings. The abovementioned Courier-Mail obituary has it quite correct: “To this day it stands as a landmark exposition of city financing.”

Phil also wrote an excellent paper for the Land Value Research Group (co-signed by The Hon. Rae Else-Mitchell, JD Tucker and me) on the occasion of the ACCI/ACOSS National Tax Reform Summit held at The National Press Club in Canberra on 4-5 October 1996. Phil and I attended the conference, caused a stir about land tax, but didn’t quite win the day.

In his spare time that particular weekend, Phil was kind enough to conduct me on a tour across Canberra’s gracious lawns to show off her more majestic public buildings, regaling me in his rich deep baritone of the history and details of each – his intimate knowledge gained from involvement in the 1950s as a public servant in Canberra and a member of the Australian Capital Territory Advisory Council.

Phil Day is another late-great member of the Land Values Research Group who has done us proud.  These include Sir Alfred Kemsley, Sir Ronald East, Allan Hutchinson, Rae Else-Mitchell, Sir Allen Fairhall and Clyde Cameron.  May Australia come to secure the aspiration these people had in common.

ANZAC DAY

I wrote about Anzac Day this time last year and have previously touched on the shocking genesis of WWI.  WWII, in turn, was the entirely logical result of overlying the 1930s depression on top of Germany’s impossible WWI reparations.  

The Treaty of Versailles denied Germany the lebensraum she needed, both in terms of debt and of territory, but the post-WWII Marshall Plan removed some of Germany’s shackles.

It does not exaggerate to say that with a proper revenue system in place neither WWI nor WWII would have been fought. 

AUSTRALIA DAY

Many people favour moving Australia Day from 26 January, the day celebrating the arrival of the first fleet at Sydney Cove in 1788, which seems at best a secondary reason for our indigenous people to celebrate.

Australia Day should be shifted to the day on which Australians learn to stand on their hind legs against the plutocrats who send us to war for nefarious purposes, and whom we have allowed to design our landholder-friendly/production-hostile tax regime.

The date of Australia Day should be the day on which we legislate to introduce a single rate charge on all Australian land values as our major source of revenue.

That’s really worth celebrating. It would be the day on which all Australians discovered true democracy; on which they freed themselves from arbitrary taxation and high prices, and which provided the revenue base most directly assisting to remove the need for wars fought over land, debt and territory. 

“PAY FOR WHAT YOU TAKE, NOT FOR WHAT YOU MAKE!” 

My colleague at the Land Values Research Group, Dr Gavin Putland, has a nose for smelling out bulltish.

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More US (and NZ) housing market news from patrick.net

(Landlords who think they’ll be able to ratchet rents up as the Australian real estate market bursts might want to read the last two items.)

The Housing Slump Continues And The South Is Where It’s Worst (businessinsider.com) Discuss 

Foreclosure Crisis and Opportunity (inthesetimes.com) Discuss 

Bay Area houses you can buy for the national median price of $157,000 (contracostatimes.com) Discuss 

US Housebuilder Confidence Fell in April on Sales Outlook (bloomberg.com) Discuss 

Will 20% Down Require Waiting 14 Years to Buy a House? (theatlantic.com) Discuss 

Fed Aims at Mortgage Fraud, Shoots Housing Market in the Gut (Charles Hugh Smith) Discuss 

NZ considers new tools to combat housing bubbles (macrobusiness.com.au) Discuss 

Goldman Sachs and Executive Charged With Fraud (At Last!) (truth-out.org) Discuss 

Negative S&P Outlook for the US Explains Nothing (cepr.net) Discuss 

S&P and Interest Rates (krugman.blogs.nytimes.com) Discuss 

QE3 coming up? (patrick.net) Discuss 

Economic deja vu from the 1937-38 recession (doctorhousingbubble.com) Discuss 

Weird difference in oil prices by location (econbrowser.com) Discuss 

The Education Bubble (Mish) Discuss 

Developer bets people will buy tiny ‘micro-houses’ (southeastportland.katu.com) Discuss 

Backyard Cottages Sprout Like Mushrooms (news.yahoo.com) Discuss 

LAND AND RESOURCE RENTS – OUR BLIND SPOT?

For years I’ve argued that we ensure the phenomenon of recurrent financial and social collapses once we come to believe that taxes are essential to the running of government, that is, once we lose sight of the truism that taxation destroys.

Australia has an incredibly vast bureaucracy (and much of its citizenry) wedded to the gross stupidity that there is some sort of social responsibility to pay taxes, and slowly but surely over the years we have progressed this manner of organised public theft into law. 

The periods of social instability and financial collapse we experience every eighteen years or so are neither the fault of capitalism nor of socialism per se, but of a sorely misguided revenue system. 

A proper blend of capitalism and socialism is necessary if society is to be resilient and to flourish, but, of course, this observation would be vehemently denied by the Ayn Randian right in the grand polarization that has fractured America and begun to turn up on the political shores of Australia.

Where the right might say “We’re with you about taxes, bro!”, it fails completely to observe that social and financial collapse has been the direct result of the extensive private rent-seeking of publicly generated economic rent by a tiny minority that obscenely enriches itself at enormous cost to the wider community – and the feverish but doomed-to-fail attempts of a far greater part of the population to do likewise – something that should offend both capitalist and socialist alike.

“Economic rent?”, do I hear the left and right inquire? Or maybe, in attempted put-down, “That’s just the late nineteenth century mumbo jumbo of Henry George!” Not so. Classical economists from Adam Smith to John Stuart Mill understood that as land rent is the surplus arising in the production process, it is eminently suited to be the revenue base. 

However, those on the right, claiming to be godchildren and inheritors of the wisdom of Smith and Mill, selectively eschew that part of their ideas that as land and resource rents are community-generated they lend themselves admirably to this purpose if we are to shake off the incredibly pathological effects of taxation.

In failing to realise that everyone in the community is entitled to share equally in the economic rent of Australia’s land and resources, we’ve left  it available to be monopolised and plundered by the finance, insurance and real estate (FIRE) sector, nominally a service provider to the more productive side of the economy, but rather parasitically pillaging it.

Other resource monopolisers, such as mining companies, are equally pleased that land and natural resource rents are in most Australians’ blind spot. That’s how our mining billionaires, armed with $22 million dollars in advertising, were able to convince us we had no right to Kevin Rudd’s proposed 40% partnership rental on their net profits.

A rampant FIRE sector has rapidly turned western capitalism into a caricature. As the private capture of land and resource rents has been elevated to the position of an end in itself, tax levels have increased, land prices have inflated into impossible bubbles, and production has begun to wilt, or forced to go offshore. Unemployment will follow, now that the real estate bubble is bursting.

It’s not just the right that’s misguided in allowing the private capture of land and resource rent. The left has little or no idea of its sufficiency, not only to replace all taxation, but additionally to provide such a substantial dividend to all Australians that pensions of every description could be readily abolished, along with a second bureaucracy that could easily re-employ itself in a healed and proactive economy.

In fact, it seems that Russian and Chinese communism graduated from Marx without having ever having read him thoroughly, because Karl Marx did finally espy the singular nature of the rent surplus in Book 3.

So, with both the right and left in political denial about land and resource rents, and the communist system having disintegrated, let me put the proposition that capitalism urgently needs to rediscover it, or we will otherwise be consigned to languish in the same deep torpor and economic malaise that has characterised Japan over the last twenty years.

Worse, when they can’t exit the economic depression, western leaders will no doubt look to manufacture a war with China. Whilst the precise nature of the heroic cause that will send us to war is unknown, let’s remember that when we were called to WWs I and II to liberate nations, in the end both were born of the absolute frustration with the stagnation that followed on the heels of economic depressions.  And of course a ‘good’ war is always a solution, isn’t it? 

So, here’s an idea. What if we allow enterprise to be truly free, free from all arbitrarily imposed taxation, and to socialise only society’s surplus, the people’s rent?

THE STUMBLING BLOCK – THE POLITICAL PARTIES

However, it is insufficient to achieve change simply by educating Australians to the manner in which the FIRE sector and mining industry have been ripping us off for years per medium of a tax regime that fines productivity, effort and thrift and rewards parasitic rent-seekers.

Like the USA, Australia is riven by a party political system. Once divided in this manner, it becomes a cinch for rentier plutocrats to quietly run the show from the shadows. They’ll give generously to the parties, provided they don’t interfere with their free ride.

Thus was Barack Obama castrated by a generous Wall Street. Thus was Kevin Rudd set aside as Prime Minister of Australia for daring to challenge billionaire mining magnates.

So, even if Julia Gillard and Tony Abbott were educated to see the people’s rent is 50% of the Australian economy, both are likely to keep pumping up land price bubbles and kow-towing to billionaire holders of mining licences. The plutocracy is now too powerful for our politicians; they are no longer in control, no longer our representatives.

Change is unlikely to come from baby boomers, stuck in their ways, and clinging to one or other of the parties. It’s also probably too late for it to come from many Generation Xers.

No, the hope of the side is Gen Y.  It has been cynically locked out of affordable access to housing by governments feeding the land price escalation with first home buyers’ (sic) grants, and a tax system that fosters real estate rorts.

Where the oldies say Gen Y want what they haven’t earned, I see things quite differently.  I’ve seen their high mindedness, enthusiasm and reasoned comments regarding Prosper Australia’s call for a residential buyers’ strike. They’ve seen and understood a perverse tax system’s complicity, and the shrug of shoulders from their political ‘representatives’. They want change.

Many of them have the indelible imprint on their minds of a system that completely sidelined them as young adults or condemned their brothers and sisters to decades of servicing impossible mortgages.

It is they who will bring about this most necessary of all political reforms.