We’re on our way to the 2026 depression!
Ever since John Locke noted that as all taxes come out of land rent, that’s where we should put them in the first instance, most classical economist have agreed with him. The late great Mason Gaffney called this principle ‘ATCOR’–all taxes come out of rent–adding that the failure to do this generates ‘excess burden’, and that this excess burden of course also comes out of rent – ‘EBCOR’.
So, I assessed the excess burden to be in the order of one trillion dollars between 1972 and 2006, that is to say, a deadweight loss of $2.34 for each dollar of tax levied. In other words, had we taxed land values at half the rate of other taxes levied, it would have done what the taxes did but would have also controlled the land price inflation that shrank the value of the dollar, in addition to being protective of the environment. By 2006 real Australian real GDP would have doubled to two trillion dollars.
Under the influence of Henry George in the early days of the Australian federation, members of the Australian Labor Party and many members of the conservative parties came to accept the principle of taxing land values in the wake of the 1890s land bust depression. It provided a virtuous circle as governments provided infrastructure.
From 1910, when the Australian Taxation Office was founded to introduce the federal land tax, Australia had land taxes at all three levels of government. This was the manner in which we came to deal with real estate monopoly and land speculation. And it worked!
As in the USA, however, things changed in Australia at the Great Depression, neoclassical economists having at last established ascendency for the rent-grabbers who had been selling the fairy tale for 30 years that there was no difference between man-made capital and natural resources. The story continued that things were bad and money was required for the 1930s depression, then WWII, and “there’s not enough rent”. There certainly was! Remember ATCOR and EBCOR?
Things got worse as Australian home-ownership progressed during the 1960s. The Labor Party secretary Cyril Wyndham decided to write the land tax plank out of the ALP platform because it might offend people. “A man’s home is his castle, isn’t it?” The mandatory vote was not taken on this reversal of land tax policy.
Then in the 1970s we removed state death duties in accordance with the ‘initiative’ of Queensland’s Joh Bjelke-Peterson. The federal government followed dutifully.
Then Labor’s Gough Whitlam got into the act by opting to fund half of local government’s requirements because councils “couldn’t keep taxing people’s property”.
More recently, some states have put caps on municipal rates, so here we are deeply immersed in the fools’ paradise. We don’t have to work. Why bother with that? We can all simply become wealthy property investors. Pity about the lack of wages growth and increasing poverty.
It’s obviously going to end well! We do property spec better than any other nation.
Madness prevails in the Land of Oz.
