The Victorian government should study the descent of California from ‘The Golden State’ to economic basket case since 1978 under Proposition 13 before implementing the populist capping of council rates.  If we understand the rationale for property rating, we will surely see why rate capping or ‘the minimum rate’ both have the poor subsidising properties of the wealthy.

_____________________________________

Meanwhile, on another matter, a challenging letter to THE AGE today …..

A distant dream

While  Treasury Secretary  John Fraser issues a warning on the  housing bubble, our Prime Minister   identifies himself with its cause: “I do hope that our housing prices are increasing” (“PM wants affordability as well as rising house prices”,  2/6). Despite the Treasurer’s statement on tax reform that “everything is on the table”,  changes to negative gearing are ruled out.  Ninety-five  per cent of members of  parliament own property.  It is not surprising that neither Liberal nor Labor are lining up to introduce reforms.

At the same time, my daughter and her family are being priced out of buying even a modest unit.  Sydney houses are  selling for 10 times the median annual income, with Melbourne not far behind. Owning a home of their own is becoming nothing but a distant dream for the next generation.

Bryan Long, Balwyn

My Lords and Gentlemen, a direct tax of 7% would be a dangerous experiment and one likely to incite revolt. But there is a method whereby you can tax the last rag from the back and the last bite from the mouth without causing a murmur against high taxes, and that is to tax a large number of articles of daily use so indirectly that the people will pay without knowing it. Their grumblings will then be of hard times, but they will not know that the hard times are caused by taxation.   – British Prime Minister William Pitt (1759 – 1806)
__________________________________

The Goods and Services Tax (GST) is a tax on productivity. Economics should concern itself with the relationship between nature and society. With such a focus, it can be seen that taxes for the use of resources should be used to replace taxes on labour and capital–that is, on productivity–if we are to resurrect prosperity and greater community spirit.

Re-introduction of the federal land tax, or reform of state land taxes, would comply with the principle of taxing our resources and un-taxing product.  It would also help to keep the lid on destructive land booms such as has been experienced in Australia ever since 1997.

Land taxes on economic rent*, that is, the community-created value of our natural resources, would permit Australia to reduce its taxes on employment and wealth creation, reputedly the federal government’s aim. The best federal land tax would be an ‘all in’ tax, with no thresholds or exemptions. The wealthy own more land, and also the most valuable land, while the poor own less land and the least valuable. Rich Australians, and international investors, would pay their fair share under a flat rate land tax – as land cannot be hidden nor flee the country.  Impoverishing poorer Australians, who spend most of their net income, with a GST, is in the long run not even in the interests of Australia’s most wealthy.

__________________________________

I do not deny that all taxes – with the exception of those on economic rent* and inherited wealth – have some adverse employment and economic growth effects.    – Australian Prime Minister John Howard, Australian Financial Review, 10 December 1991.

The Guardian

Australian Financial Review

MacroBusiness

See the original research article by Cameron K. Murray and Paul Frijters at http://ftp.iza.org/dp9028.pdf

And hear Cameron Murray interviewed by Karl Fitzgerald on 3CR’s Renegade Economists.

Lindsay David blogs Aussie John

So we’ve come to this … and it’s a growing lifestyle.

Redolent of this plaintive song?

So Andrew ‘Twiggy’ Forrest of Fortescue Metals wants an inquiry into why Big Miners such as Rio Tinto and BHP Billiton are selling iron ore so readily at these currently depressed prices.

Is it to get rid of the smaller players, such as Fortescue, he asks?

Let’s have an inquiry then, says Prime Minister Tony Abbott.

Let’s not, say the Big Miners.

OK, let’s not, says the Prime Minister.

That’s redolent of the necessary RSPT mining tax morphing into the worthless MRRT mining tax in a backroom deal with former Prime Minister Julia Gillard, isn’t it?

Er, so who’s running this country, guys? It certainly doesn’t look like it’s our prime ministers!

But wasn’t that you standing up on the back of a flatbed truck with another mining billionaire, Gina Rinehart, crying poormouth, Twiggy?

Anyway, it was very heartening seeing Katharine Murphy on the ABC’s “Insiders” this morning using the correct term for miners trying to retain their super-profits in the exploitation of OUR natural resources – she used the term “rent-seeking”.

But the show’s host, Barrie Cassidy–using the same term for the first time?–suggested that it’s not just the big boys, but the third party seeking relief (Fortescue) which is also a “rent-seeker”.

Correct, Barrie!

Now maybe “Insiders” will continue putting the finger on ALL of Australia’s rent-seekers, if they wish to analyse properly why the economy is collapsing into a heap?

…. and looking at the comments on this article in The Conversation (especially Terry Dwyer’s), seems many Australians agree.