Prosper Australia

Watch the Federal Reserve being questioned about where the trillions in loans have gone since this bailout era exploded 8 months ago. Watch the woman to her right.

photo credit: country_boy_shane

Ben Payne

Ben is a scholarship holder and studies Politics and Philosophy at Melbourne Uni

Discussions of property rights frequently focus on economics. However, in all schools of economics—both orthodox and heterodox—little attention is paid to the philosophical questions that accompany the notion of property.

Many popular political ideologies hold that people are free individuals and consequently we have laws that seek to protect our right to pursue our own desires and goals. To achieve these ends, we must make use of natural resources in some way.

The most common understanding of property rights allows for absolute appropriation of natural resources. That is, if a person uses land first then that land becomes their property. This form of property rights is derived from the influential British philosopher John Locke:

“The labour of his body, and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property.”

The Lockean conception of property rights forms the basis for our current system of property ownership. But many people now see property rights as the basis for many injustices. Feudal societies handed down land based on social status and wealth, colonising nations ignored the traditional rights of indigenous people, and wars use violence to claim ownership of natural resources.
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by Gavin R. Putland

A speech by Treasury Secretary Ken Henry on “The Future of State Revenue”, delivered on Mar.27, belatedly received some coverage in the Australian Financial Review on May 5.

At one point Dr Henry said:

Globalisation means that the things governments tax are becoming increasingly mobile. This has implications for tax system design.

…
But there are some inherently immobile tax bases, such as land. The importance of taxing these bases effectively is likely to increase in the future.

Returning to this theme later, he added:

I have noted that the taxation of immobile bases will become an increasingly important matter in the context of increasing globalisation. One of those bases is our non-renewable resources.

Referring to our non-renewable resources as a tax base is rather crude. While it is convenient to refer to the ‘taxation’ of resources, the royalties and other charges imposed by the Commonwealth and the States represent a return to Australians for assigning certain rights to appropriate — exploit, if you prefer — those resources. They represent a disposal price.

True. But why not apply the same logic to land? That is, why not consider “land tax” and “rates” on land values as a return to Australians for assigning certain rights to appropriate land?
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photo credit: The Rocketeer

The State Government has come under more pressure from the property lobby in Government Criticised for not cutting Land Tax

“The Treasurer should have provided stamp duty and land tax relief as measures to stimulate demand for property investment. They could have done that by increasing existing thresholds or reducing rates.” said TressCox Lawyers partner Michael Westaway

Commercial agents have reported that land tax bills for some prominent city buildings have soared by as much as 100 per cent. These are passed on to commercial tenants on net leases, who are finding the increases bear no relation to the financial health of their business.

That is because land tax is based on valuations taken every two years, and the last valuation was in December 2007, at the height of the property boom.

It also reflects the removal of a cap previously limiting annual land tax increases to 50 per cent.

The government continues to walk into these policy traps. It makes moves like removing the 50% cap but yet doesn’t ensure property is valued annually. With regards to this week’s State Budget, we would have preferred:

• Stamp Duty abolished
• Payroll Tax abolished
• Higher and flatter Land Taxes
• A lower Land Tax threshold
• Yearly land valuations

Many of these issues were promoted in the 2001 Harvey Report into State taxation. Both John Brumby and John Lenders were key signatures to that report.

The real estate industry would approve of the impediment that stamp duty provides to property turnover.
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photo credit: rick

A few months ago Bryan Kavanagh had this excellent piece published in the Age – Breaking In on the Rent Seekers.

It solicited a response from the IPA’s Sinclair Davidson. I probably should have stripped it apart at the time, but was satisfied that Davidson was given much less prominence than Kavanagh and our colleague Gavin Putland tore it up on the LVRG blog here and here.

However, Treasury officials have other agendas and invited Davidson to present to the Treasury on his opinions about Land Tax. Please don’t have a heart attack! We have submitted 6 major submissions to the Henry Review and haven’t been quoted in the Treasury’s consultation paper.

Read the scathing critique of Davidson by our American colleague Roy Langston below. A little bit hot-headed, but when you live with the constant frustration of 2 dimensional economists getting continual airplay, it does get a little infuriating. This is Roy’s opinion reprinted for information. No doubt there are other opinions.

Why Do Economists Lie About Land? as published in the Failed Experiment blog
by Roy L ~ May 2nd, 2009
the quoted content is Davidson’s

One of the more significant relationships in economics is that between success and eminence in the profession and the enthusiasm with which one chants whatever lies favor the interests of the privileged. On March 13, 2009, Sinclair Davidson, a professor at Australia’s Royal Melbourne Institute of Technology and senior fellow at the Institute of Public Affairs, decided to advance his career prospects by reiterating some oft-exploded anti-geoist lies in “The Age,” a venerable Melbourne broadsheet. Why would Davidson write this idiotic garbage? Who paid him to do it, and why did The Age decide to publish it? Certainly The Age hasn’t published any factual material on land economics recently. But Davidson will certainly be rewarded for lying to the public about land. Count on it. He will be getting some lucrative appointment or “consulting” job before very long.

The relationship between an economics profession (one cannot call it a science) dominated by liars for hire like Davidson, the current global financial crisis caused by lending for land speculation, and the recent multi-trillion-dollar giveaways of taxpayers’ money to rich landowners and the wealthy shareholders and obscenely overpaid top executives of financial institutions may not be entirely coincidental.
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A win for them, further strangulation of the US economy for the rest. By failing to allow those at-risk mortgagees to negotiate a more realistic mortgage, this will send many more famillies to the wall, lengthen social security queues and ultimately undermine the liquidity of banks. Why should banks be able to outmuscle the average person when they made risky loans based on speculative land prices? Risk has been relegated to the dust bin with the Rubinomics team in power.

Fascinating to see how well prepared the banking industry are in their lobbying tactics.

photo credit: Xava du [photographer padawan]

Letters to the Editor
THE AGE
April 29, 2009
Dr Gavin Putland

The supply of land is fixed; they’re not making any more of it. Therefore the owners of land automatically constitute a cartel, even if they don’t bother organising themselves. And because access to land is essential, the rents and prices of land are competed upward to absorb the economy’s capacity to pay. That’s why the first home owners’ boost went straight into land values.

Any policy that would weaken the power of the land cartel — e.g. letting land tax rise with land values, so that absentee landowners have to seek tenants or buyers to cover the tax bill — is condemned as an assault on property rights.

And woe to any producers of any other essential commodity, such as cardboard packaging, who organise themselves as a cartel, making their product land-like and thus obtaining a share of the profits that would otherwise accrue to landowners. Yes, producers’ cartels make their unearned profits not at the expense of other producers and consumers, but at the expense of landowners. So they’re treated as criminal conspiracies, and only death will rescue the perpetrators from the prosecutors.

But landowners, whose unearned profits really do come at the expense of producers and consumers, are treated as pillars of society.