The expected backlash to Jessica Irvine’s pro-land tax article arrived in today’s letters to THE AGE editor.  The super-wealthy will now join in to cry crocodile tears for asset-rich income-poor people.

No, Jessica Irvine was not saying we should kick oldies out of their homes but that, in some cases, a land tax may act as an incentive for some older people to re-assess their situation. If you’re happy in your house in your present position, you should most certainly remain in it, because it’s yours.  But community-generated land rent is not yours, you see?

So we should not let the exceptions make the rule.  We still need to introduce an all-in land tax because we’ve been taxing productivity to a standstill and rewarding land speculation, so we desperately need a tax that remedies this situation and abolishes much of the deadweight costs on labour and capital.  I’m sure you understand that’s for the greater good, letter-writers?

We’ll continue to look after you in your homes, grandma and grandpa. You deserve it!

http://www.macrobusiness.com.au/2015/04/oz-housing-affordability-measured/

…. as witnessed by the Australian Senate inquiry into corporate tax avoidance –> http://www.theage.com.au/business/the-economy/apple-google-microsoft-cop-tax-audit-20150408-1mgsma.html

And you think preaching at them, or seeking international tax agreements, can really fix this, Senators?  C’mon!  Get real!

Ah, but you do realise, don’t you guys, the big boys–no one–can avoid an all-in land tax, plus a full-on electro-magnetic spectrum rental?

Natural resource-based revenues can’t flee the country.

Jessica Irvine in Canberra Times.

I’ve said this before but it’s worth repeating, because I’ve heard so many ‘experts’ recently ascribing Australia’s impossibly high land prices simply to high demand and the inadequate supply of land.

Wrong!  Wonky economists press that view –  and most of us fall for it – because the real reason is something people don’t usually ‘get’.

Here’s the real explanation.

When a valuer values a commercial property, he or she will NOT simply try to sum the value of the land plus buildings but will capitalise its net annual market rental.  We see vacant residential land selling and pay attention to the prices attained, but we don’t realise the process is fundamentally the same.  Nobody realises that block of land selling for $500,000 probably has a net rental value of something like $20,000 per annum, and a current yield of about 4%.  So,  capitalising $20,000 at 4% (viz, $20,000 x 100/4), gives you a value of $500,000 for the parcel. People, including economists, don’t see and understand these sums behind the $500,000 price for a piece of land: they’re ignorant of them, so it must be “supply and demand”.

If governments were to capture (say) $10,000 of this $20,000 annual rent by way of council rates and/or state land tax, the net rent remaining in private hands is then only $10,000 pa., and if we capitalise this at 4%, we now only get $10,000 x 100/4, or $250,000 as the price of the same piece of land.  [!]

Therefore, the amount a government gets of this publicly-generated land rent has much more to do with the price of residential land than the current level of supply and demand of land.  Supply and demand and zonings are important, of course, but are secondary factors.  However, economists are wed only to supply and demand, and they fail to see the critical factor in land price is how much of the publicly-generated land rent we allow to be privatised.

High land prices signify inadequate public capture of revenues from land, pure and simple!

If you understand this, you’ll be able to put it as an alternative and more correct approach to the superficial “supply/demand” argument for Australia’s bubble land prices when it’s wrongly put forward.

For which block of land would you pay more? –>

Don’t miss these recent important interviews:-

Michael Hudson on the Ancient Near East

Fred Harrison – Beyond the 1%

Phil Anderson – Land takes All the Gains

Excellent Straits Times’ article –> 15-4-3 Singapore Home Prices & LVT

In the wake of the plague of the 14th Century, the period came to be known as “Merrie England”.

An English labourer with a family of five had more than half his income left to spend after paying for food, clothing and shelter.

How are you faring against this criterion, now that the 0.1% have had their way with you?

The Economist (again)

Imagine