An economy amok

No political party has shown the guts to challenge the privatisation of our natural resource rents. These were once seen as common property and captured as a public good. We now collect these only at the margins. i.e. In the last six years taxes on real estate captured from 8.6% to 10.8% of all taxation, even during our greatest real estate bubble. Yet rent-seekers complained vehemently even about this!

The point that land and resource rent (such as the electro-magnetic spectra) are publicly-generated, and therefore owed back to the public as a citizens’ dividend, goes missing in obeisance to the parasitically-extractive practice of rent-seeking. Political parties are unable to call it out, only fiddling at the edges with measures such as slightly increasing taxes on capital gains, or seeking to curtail one part of the negative gearing of real estate purchases.

Because we fail to capture these resource rents which carry no excess burden in costs when publicly collected, we’re forced to levy taxes on wages, goods and services and non-extractively earned profits. These taxes carry an excess burden of twice the amount of tax levied.

The chart above shows the ‘squeeze’ taxes on productivity and the privatisation of publicly-generated resource rents (red, blue and green) are applying to the productive segment of the economy (coloured blue).

No politician is prepared to remedy this pathological situation in which Australian wage earners are being denied their fair share of the GDP pie whilst rent-seekers rip them off. They’ll all talk about the damaging outfall, but they won’t apply the solution.