“According to research undertaken by Paul D Egan and Philip Soos, in 2013 we lost a staggering $73 billion of output stemming from deadweight losses of taxation, yet, economic rents, which exhibit no deadweight loss, are a significant component of the Australian economy, comprising 23.6% of GDP.”* (Catherine Cashmore in MacroBusiness)
It’s worth noting that these publicly-created economic rents are largely privately captured. It’s called rent-seeking, and it’s bringing the financial system to its knees. Philip Soos further notes in The Conversation that the negative gearing of real estate investments cost Australia $33.5 billion over the last seventeen years (or more recently approximately $3 billion a year).
A big part of the costs of public service is endeavouring to manage the socially damaging outcomes from this counterproductive tax regime to which we have shackled ourselves – a system which taxes the incomes of labour and capital instead of land, effectively fining Australia’s doers for working whilst it rewards the increasing number who speculate in real estate land prices.
The point is that all taxes add to costs, whereas taxing economic rent does not. This surely points to the urgent need for switching revenues from taxes to economic rents if we are ever to resurrect our declining economy?
Tax ‘reform’ which looks to shore up the GST, or introduce a financial transactions tax, is no reform at all.
The only tax reform Australia needs is tax abolition, the revenue to be replaced by capturing our natural resource rents.*
Now for a little relaxation with “Weird Al” Yankovic: –