“To most modern readers, probably George seems too minor a figure to have warranted such an extreme reaction. This impression is a measure of the neo-classicals’ success: it is what they sought to make of him. It took a generation, but by 1930 they had succeeded in reducing him in the public mind. In the process of succeeding, however, they emasculated the discipline, impoverished economic thought, muddled the minds of countless students, rationalized free-riding by landowners, took dignity from labor, rationalized chronic unemployment, hobbled us with today’s counter-productive tax tangle, marginalized the obvious alternative system of public finance, shattered our sense of community, subverted a rising economic democracy for the benefit of rent-takers, and led us into becoming an increasingly nasty and dangerously divided plutocracy.”

Mason Gaffney, Neo-classical Economics as a Stratagem against Henry George



Terry Dwyer  B.A. (Hons) B.Ec. (Hons) (Syd.) M.A. Ph.D. (Harvard), Dip. Law (Syd.), FTIA

Tax reform means cutting some taxes and making up the loss from others.

But “reform” is not worth doing if the new taxes are economically worse than the old and deadly politically if more voters are antagonized than pleased.

The economic argument for land value taxation as opposed to taxing income, consumption or incomes from work or capital investment are well known in the economic literature.

At its simplest, there are only three things you can tax – land, labour or capital and only the first can’t run away, die off, stop working, get old or worn out or be hidden offshore.

Land value taxation is completely visible and unavoidable – if you don’t pay, the land can be sold out from under you.  No vexatious inquisition or harassing audits are required.  The tax (really a form of rent charge by the Crown) is visible upfront.

Unfortunately, the economic merits of a land value tax – its visibility and unavoidability – are often seen as political weaknesses.  Most political numbers men would prefer a bad but hidden tax to a good but visible and unavoidable one.

Assuming LVT (which can be best described as “land rent charge” to the government) is the best tax, how can one sell such a tax shift while incurring as little wrath as possible from voters?

Let’s start by looking at the favoured alternative of many economically ill-informed commentators – increasing GST to cut income taxes.

Apart from the fact that taxing consumption is the same as taxing the income from which it is paid while exempting saved income and foreigners not spending in Australia, the basic political problem for a party seeking middle class votes is that out of every dollar raised from GST expansion some 30 cents has to be spent on “compensating” families”, low income earners and welfare recipients.  In short, for every dollar raised from the tax reform you only have some 70 cents left to cut other taxes.  You can end up with a bigger welfare state, more poverty traps and more discontented middle class voters than pleased voters looking at their income tax “cuts”.

By contrast, leaving aside the superior incentive effects of LVT (which imposes no distortions or deadweight loss on the economy), LVT can produce a political surplus for personal income tax cuts.


Let us suppose, purely for illustration, that of the land values of Australia: –

  1. 20% is owned by foreigners (individuals or companies)
  2. 20% is owned by companies and Australian superfunds and real estate investment trusts
  3. 10% is owned by individual farmers
  4. 40% is owned by individual homeowners
  5. 10% is owned by individual investors

Let us further suppose that we allow business and investors to deduct LVT against income tax as usual.

Let us assume we do not want revolt in the suburbs so we allow a non-refundable tax credit against PAYG instalments for every individual home owner – for every $1 paid as LVT on their homes they get a $1 credit against PAYG and an immediate corresponding $1 increase in net taxable income.  In short, we don’t expect to get much from homeowners (except for income poor, asset rich elderly people – which can be deferred against sale of the house).

The rough arithmetic then becomes: –

  1. $20 less $6 ($14) comes from foreigners (individuals or companies) – who don’t vote
  2. $14 or more comes from companies and Australian superfunds and real estate investment trusts – which do not vote as such
  3. $7 or less comes from individual farmers (assuming they can credit some of the LVT against their homes) – and they do vote
  4. $0 net or a bit more comes from individual homeowners – who do vote
  5. $7 comes from individual investors – who do vote

Hence, if one raises $100 in gross LVT revenue, you could end up with a net contribution from actual individual voters of $14 yet have $48 net (after giving deductions and credits) to spend on income or other tax cuts for voters –  $3 for tax cuts for individuals for every net $1 they pay in LVT.  $3 in tax cuts translates to being able to give a $10 increase in the 30% tax bracket step.

Obviously, this is very simplified arithmetic but the message is clear.  Rather than trying to do the impossible of squaring the circle by using GST as the revenue source and being left with less than nothing in the cupboard to win over voters, LVT offers the chance of pleasing the voters by giving them back more than they pay.  Basic to this is making tax-free foreigners, superfunds and non-voting companies pay.

Of course, to get a winning package designed not all the $3 in tax cuts need go to individual voters.  You may, for example, want to ease Australian corporate concerns by giving them a well-merited reform such as letting foreign tax credits flow through to shareholders as imputation credits – that would get plaudits from Australian corporates as well as shareholders without giving tax cuts to foreigners.



Try a little mental experiment: Imagine a real estate agent, a banker, a developer, a shop owner, a pharmacist, a vehicle manufacturer, a farmer, a computer, and then remove land from these, or anything made from land. What’s left? Zip!

Maybe it’s time to tax land values, instead of what proceeds from land? This will have a profound effect in producing socio-economic freedom and a genuine care for the natural environment.

Why aren’t we doing this?

Qui bono?



When jobs disappear because of developments in IT and industry, new occupations will arise – as always?

No, on this occasion it’s certainly very different. With very few exceptions, we’ll only be able to create useless, underpaid ‘gig’ jobs.

Failing genuine economic reform, any ‘recovery’ between now and 2026 will only be false, as governments and central banks continue to pump asset values. This adds to the privatised ‘R’ in Henry George’s equation P – R = W + I. That means that wages (W) and profits (I) will decrease, because there is a reciprocal relationship–not between wages and profits–but between privatised land rent and wages and profits.

This is nothing approaching a ‘market’ economy. Behind this new ‘gilded age’, private debt, poverty and dispossession has been growing rapidly, exacerbated by central banks and governments.

Unfortunately, Andrew Yang, while you’re on the right track, your US$12,000 pa UBI is a pretty miserable approach. At that rate, it can’t work for what lies ahead. A living wage UBI could replace all welfare as it also lowers business wage costs. A ‘Job Guarantee’ is insufficient, because that’s only: “You must all work for gig jobs because you have a duty to work!”

Inflation? That’s fundamentally generated by escalating land prices (notably missing from assessment of CPI) and is addressed by the LVT in VIMMLBUTT – as are the deadweight losses from other forms of tax.

So, you’re saying ‘VIMMLBUTT’ could repair financial madness?

Yup! Mainstream neoclassical economics has been feeding rentier capitalism’s 0.1% at the expense of the 99.9%. Except for a few heterodox economists, the principles behind VIMMLBUTT are unknown. Economist need to read Henry George before they criticise what he really said.

VIMMLBUTT is our final chance before the biggie, but I ain’t holding my breath on it, because there’s great power supporting the political policy of the rentier economy.