… TO POLITICAL DISCOURSE
Historical Boundaries in Public Policy
Australian politicians currently operate within clearly defined boundaries when it comes to public policy, especially regarding taxation. This marks a sharp contrast with the Progressive Era from 1898 to 1920 when lawmakers at the federal, state, and local levels actively implemented land taxes. Back then, land taxes were a central part of fiscal policy, designed to regulate land ownership and moderate land prices.
Transformation of Tax Policy
The emergence of neoclassical economic thought brought significant changes to tax policy in Australia. Instead of focusing on taxes based on land value, policymakers shifted towards taxing earned incomes. This change was instrumental in limiting the scope and prevalence of land-based taxes and introducing taxes that could be passed on in prices.
Current Political Climate
In present-day Australia, proposing the introduction or expansion of land taxes is widely viewed as politically unacceptable. Politicians generally avoid suggesting these taxes as a means to manage rising land prices, considering it an ‘off limits’ topic in public debate. This unwritten rule restricts discussion around tax reform, reinforces the existing system, and narrows available policy options to address housing affordability.
As Exemplar: The Melbourne to Brisbane Very Fast Train (VFT)
The proposed Melbourne to Brisbane very fast train (VFT) project exemplifies these constraints in Australian political discussion. Rather than implement a modest one-tenth of a cent levy on land values over the whole of Victoria, the Australian Capital Territory, New South Wales, and Queensland which would fund the project over twenty years in collaboration with the federal government (refer ABS 5204.061), advocates for the VFT instead propose substantial charges. These amount to tens of thousands of dollars, being levied only on individuals living adjacent to the railway and on proposed new cities along the route, under the rationale of piecemeal “value capture.” As a result, the very fast train “can’t get off the ground”, albeit an essential alternative to Australia’s conventional intercity aircraft and rail transport.
Reformative Change?
Instead of creating separate “value capture” levies for each new piece of infrastructure, politicians need to see that these charges could be incorporated into existing local government rates or into state land taxes, dependant upon the location and scope of the project.
Of course, the federal government might also consider reinstating a federal land tax to lessen its reliance on the destructive effect of income and goods and services taxes on productivity.
It seems beyond time for citizens to urge Australian politicians to reconsider the constraints that have been applied to effective options for change.