1 minute 50 seconds to 17 minutes 30 seconds in the podcast below.
https://www.abc.net.au/radionational/programs/saturdayextra/7-august-2021/13480276
I moved the following motion on 7 March 1985 at the A.G.M. of the Victorian Division of the Australian Institute of Valuers
“THAT this Institute have input to the national summit on taxation reform by way of a submission which indicates the many practical defects of taxes on wealth, death, or capital gains, and which supports in lieu of those taxes, a flat rate federal tax on all Australian site values as an equitable, non-avoidable and relatively cheaply–administered basis for raising revenue”.
The motion was moved by me, Bryan Kavanagh AAIV, and seconded. The President announced to the assembly that he was reducing my time to speak to the motion. I had only two minutes. I said the following (and snuck over my time):-
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“Mr. President, fellow valuers …. the major political parties run scared of tackling the tough decisions that need to be made on tax reform. They need to be prodded into action – and we should play our part – both for the sake of the Australian community and of the valuation profession.
Since I forwarded notice of this motion to the Institute in January, I see that the Australian Democrats have proposed an identical tax, plus a ‘materials-added’ tax. I congratulate them for drawing attention to the need for a national property-based tax.
How bad is the Australian tax system? …. There are not too many convinced of its equity. The December half-yearly ‘Financial Review’ summary carried the excellent lead article by Peter Jay: “How Tax Distorts Australia’s Economy”. It documented how high marginal rates of income tax act to penalise job-creating capital investment by granting special favours to investment in capital gains-seeking tax shelters.
Most tax experts agree. Professor Russell Mathews opts for a value-added tax plus a capital gains tax to remedy the situation. We certainly need a tax on the current tax hedges themselves. But capital gains taxes as variously imposed in the US, the UK and elsewhere have not curbed speculation in realty. After indexing it against inflation after it occurs, the UK capital gains tax is just one more tax and yields only 1% of national revenue. Similarly, death duties and wealth taxes as employed overseas have not significantly deterred capital gain-seeking. These taxes are particularly intrusive, or invasive of personal privacy.
Here’s where valuers come in …. We don’t need these cumbersome forms of capital taxes used overseas. Unlike other countries, in site valuations throughout most of Australia we already have the simple structure and machinery on which to levy a federal tax which will deter non-productive property rorts. Naturally, Australian site valuations will have to be brought to a common date and reviewed annually. This indicates an expanded role for local government valuers.
A flat rate, universal site tax is the most practical when you consider parameters of simplicity, effectiveness and non-intrusiveness. It’s the cheapest form of tax to administer and can’t be avoided. Surely, the real estate industry has a greater interest in genuine property use than in fostering increasingly higher prices?
We are alone in the developed western world in having no national tax on capital per se. Property taxes comprise only 4.5% of all Australian revenues; income taxes comprise 56.4, so, there is certainly room to move in this direction. A Commonwealth Government site value tax could be deducted in instalments from salaries – with State and Local Government rates, if required. A 5% tax on site values would allow a 40% reduction in income tax, and the incidence would be more equitable.
Working in the Tax Office, as I do, it is quite obvious that there is no longer any connection between wealth and disclosed income – if ever there was. The name of the game these days is minimising income by investment in speculative tax shelters. It’s in those shelters true ‘ability to pay’ is to be found.
I’m not moralising against particular companies and individuals …. I’m looking at the damaging cumulative effect on Australians and the economy, saying – along with many others – that the tax system has set up false incentives …. destructive, non-productive incentives …. This needs changing.
The choice on this motion is simple: Are we, the Institute, prepared to promote the use of the existing Municipal site valuation structure to the Federal Government? Or, have we a greater commitment to preserving tax shelters?”
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The motion was lost – overwhelmingly. The President declared that it had been “too political”.
Apparently it had now become ‘too political’ for an institution that had been founded by Federal Land Tax valuers.
THE AGE letters 2 February 2011
Acres of wealth
THE value of land embraced by the latest extension of the urban growth boundary has jumped from $25,000 to $375,000 a hectare, raising the land tax bill for the average 40-hectare lot from $2975 a year to $294,975 a year (The Age, 1/2).
A quick multiplication indicates that the value of the 40-hectare lot has leapt from $1 million to $15 million. Pity the poor owner, who did nothing to deserve such a burden. And now the wicked land tax would claw back the windfall at 2.1 per cent a year. Outrageous! Much better to maintain a payroll tax on businesses that hire people, and a stamp duty on home owners who relocate to take up jobs.
Worse, the tax will force some landowners to sell. That means the land inside the urban growth boundary will actually be used for urban growth. Unacceptable! And the buyers will be riff-raff who want to build their own homes. Obscene!
With a bit of luck, the new state government will roll back the tax so that the owner of the 40-hectare lot can sit on it even longer, waiting for its price to rise even higher, at the expense of first home buyers who have ideas beyond their station.
Gavin Putland, Land Values Research Group, Melbourne
Mason Gaffney recorded the comprehensive transition away from orthodox or classical economics to neoclassical economics coming at the behest of powerful rent-seeking interests. It was a reaction to the great popularity of the ideas of the American political economist, Henry George. The attack achieved full blossom at the Great Depression.
Meanwhile, Austrian economics had tied itself in knots about “excess money” and “increasing prices”, whilst ignoring the inflation generated by land prices and the cascading effect on all other prices from the taxing of labour and capital: these now being entirely overlooked in consumer price indices.
Therefore, it has been left to Georgists, supporters of the ideas of Henry George, to carry the mantle of the classical economists. Despite all the arguments in their favour, such as being able to call the recessions which inevitably follow the bursting of bubbles in land prices, the fundamental Georgist idea that wages and profits do poorly when land prices escalate fails to get a hearing in mainstream media. The study of economics has been captured by neoclassical and neoliberal economics; any alternative is seen to be ‘communist’.
Even in Henry George’s day, the rent-seeking uber-wealthy employed clever tactics to split supporters of his and classical economists’ ideas. When Henry George visited Ireland, they mocked the independently popular Irish land leaguer Michael Davitt for becoming ‘George’s pawn’. The classical idea of socialising publicly-generated economic rent was also useful to wedge those socialists who also wanted the means of production to be socialised.
Even modern monetary theorists or universal income supporters now overlook the need for Adam Smith’s “ground rent” to be publicly captured. This would make both MMT and UI entirely workable by abolishing the inflationary aspects of both.
It’s a big call, but maybe the emerging economic discontent that seems to have risen during the pause of the pandemic might have people revisit some of the fundamental principles of classical economics?
