Prosper Australia

photo credit: er1danus

Julian Lewis writes in the Age’s The Inescapable Crunch of Taxing Times

From prostitution to Pringles, tax officials want their bite.

GERMAN tax officials recently proved nothing is sacred when it comes to taxation, laying claim to half the $17,900 earned by a teenage student who auctioned off her virginity last month to an Italian businessman who paid cash for a weekend of sex.

It was not even a moral standpoint, said an official in Berlin, “but a fiscal one”, as they regarded the 18-year-old’s act as prostitution — which is not illegal in Germany but is heavily taxed.

Although the Romanian-born student’s visa allowed her to work in Germany for 90 days — even as a prostitute — one tax expert admitted that “she would have been better keeping quiet about this strange transaction”.

She may also be liable for a GST bill, which in Germany works out to 19 per cent, resulting in her only making about $6100 from the deal.

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photo credit: jimjarmo

Ross Gittens displays a neo-classical economist’s spectacular lack of understanding in today’s article Land Tax reform rehouses a flawed focus on rational.

As every politician understands, people’s “revealed preference” is to have tax extracted from them in ways they are less conscious of and so feel less pain and resentment about.

From this perspective, conveyancing duty is a tax people don’t greatly object to paying. The tax is dwarfed by the price of the property, and in return for paying it you get the different house you fancy.

By contrast, land tax is highly unpopular because it’s so visible. Every year you have to post a large cheque to the government, but get nothing in return.

You get nothing in return? Land Tax is one of the state government’s biggest income earners. This helps fund the wages of teachers, firemen and nurses. It funds road and infrastructure building and maintenance too.

We must recognise that these developments make a community more desirable. This in turns adds to land values. Wherever a new road is resurfaced or a new school gym built, the surrounding property takes the windfall gains for private profit. Land Tax is the best way to share those community funded benefits with the people that paid for them.

Because Land Tax is so small and ineffectual (as it is presently administered), key resources such as schools are surrounded by vacant land, sprawling our travel times and carbonising our kids future.

Unfortunately, due to the fallacies of commentators like Gittins, this perspective is rarely discussed. If it is, the property lobby will direct something quickly to the press to shoot it down. Isn’t it interesting that the week after the Henry Review experts talked about the need to move taxes onto immovable assets, both the Herald Sun and the Age have front cover stories trying to shoot down holding charges on land?

There are over half a dozen think tanks representing the property lobby in Victoria alone. We have 2.8 people and a growing number of volunteers. We’d love your help!

To debate Gittins other key points – yes Land Tax is visible. That reflects transparency. Public education is needed to show how much pain the layer upon layer of taxes we face in running a business or paying for goods effects the economy. These are called compliance costs and deadweight taxes.

Local Councils now send out public information documents showing what your council rates pay for. Why doesn’t the State Government re Land Tax?
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photo credit: arvindgrover

Letter to the Age 29/06/09
The ups and downs
Bryan Kavanagh
Glen Waverly

Re your page 1 headline about State land tax (Age 27/6). Our forecast in THE AGE Opinion Section on 11 March didn’t take long to materialise, did it? We said that the same property ‘investors’ (read speculators) who got land tax concessions for themselves as our real estate prices headed skyward will put their hands out for more when they start to collapse.

Wow! That would be some quite result in comparison to all other taxpayers, wouldn’t it, getting tax reductions for yourself both on the upside and the downside of the real estate bubble?

Bryan Kavanagh
Research Associate
Land Values Research Group
Melbourne

Planning Minister Justin Madden today writes about critics exhibiting cultural snobbery towards sprawling suburbs.

He goes on to discuss the rationality behind last week’s expansion:

Releasing land for homes in Melbourne’s west and north will allow for development where there is room, but not nearly as far out as some imagine…..Cranbourne in the east is 44 kilometres from the CBD — Werribee (30 kilometres), Melton, (30 kilometres) or Craigieburn (25 kilometres) in the west are not so far away.

Fair go Minister Madden, but what about applying the same rationality to the existing land already zoned residential? Prudence would see all land zoned residential be utilised to its’ full potential. We have written a number of times about former Commonwealth land at the Braybrook RAAF base, just off Ashley St. The trend is rife through any development.

Every day I cycle down Melon St, Braybrook and see a small building team slowly infilling one block at time. Over the last two years this land has been drip fed to the market in order to maximise profits. Wouldn’t it be nice if we all had the opportunity to hold people to ransom for one of the greatest moments in their life – gaining access to the Great Australian Dream?

Or would our morals (hopefully) call our conscience into line? Why doesn’t the tax system do this for us?

This entire RAAF site was sold off to the private market in the early 2000’s. Today one can pass through the area and still see at least 30% of this land vacant. Repeat – vacant! Land banking away to year long holidays, earning profits in their sleep whilst the rest of us engage in the daily slog.

In the middle of this housing crisis we have people begging for a piece of the earth to build on, but a concoction of inefficient taxes sees it more profitable to withhold this land from supply in order to extort prices.

RIP Richard Pratt – his reputation tarnished for price fixing cardboard boxes. Meanwhile the price of land is publicly released by various property lobby groups, in effect giving land speculators the heads up on when and where to sell. Why can land (needed to meet primal human rights for a roof over our head) be manipulated for profits, but throwaway cardboard boxes can’t be? Neither should, but such is the mystery behind our economic and legal system.

Is this economic snubbery due to the dominance of lobbyocracy on political decision making? Our right to vote is undermined if we have such little influence. We need economic freedom too. Then we can do what we really want. However, if the price of housing is double the long term average, we have less for food and fun, savings and investment. The wealth gap continues as policy makers avoid the too-hard box.

Madden should be called to account for this economic snubbery, but unfortunately too many youngsters are devoid of economic know-how, such that 200,000 young people will be manipulated into buying at the wrong time by the end of the federal FHOG this September.

Why doesn’t Minister Madden campaign to eradicate land banking by removing stamp duty and increasing and flattening Land Tax? The tax free threshold for Land Tax must be removed. Every time they increase it, the price of land increases, as fundamental economic law dictates.

An affordable block of land on the Braybrook site would incur barely $300 in yearly Land Taxes and $800 in rates. The tragedy with our rating system is that the family home will be paying 30% more in council rates than the land banker (due to CIV rating on the improvements, the house component). Site Rental rating is much more efficient. The rationality of this argument cannot be shot down.

We must use land wisely. Land is for housing, not hocking.

photo credit: tsevis

Dr Michael Hudson

as appeared on Global Research
Dr Hudson will be touring Australia in October 09

The story is worse than just “Pres. Obama labored, and brought forth a mouse.” He is morphing into Joe Lieberman in reaching across the aisle for Republican support – and no doubt future campaign contributions from the financial sector. There also is a touch of Boris Yeltsin in sponsoring a financial “reform” disturbingly similar to what advisor Larry Summers backed in Russia – relinquishing government power to a banking elite (the notorious “Seven Bankers” in post-Soviet Russia). The Financial Regulatory Reform proposal promotes Wall Street’s “product,” debt creation, at the expense of the economy at large, and lets financial chieftains continue to self-regulate the debt industry – and by the way, to keep all their gains from the past decade’s worth of fraudulent lending, scot-free.

Confronting the wreckage of a debt crisis worse than any since the Great Depression, Mr. Obama has achieved what no Republican could have: rescuing the Bush Administration’s pro-creditor policies that fostered the Bubble Economy in the first place. “Most of the financial sector lobby community is happy with what has emerged,” the Financial Times summarized. A spokesman for the Financial Services Forum, a major Wall Street lobbying organization, called the proposals “careful and balanced.” With such endorsements, victims of predatory lending have good reason to worry. The Obama plan is just the opposite from reforming the financial system along lines that progressive Democrats and other critics have urged.

The plan’s six most fatal flaws are apparent in its preamble, which lays out a false diagnosis of the financial problem in a way that whitewashes Wall Street (in contrast to Mr. Obama’s nice televised populist speech giving verbal criticism to “culture of irresponsibility”). A false diagnosis must lead to wrong-headed cures – rarely by accident. There invariably is a financial beneficiary who gains from blind spots in a legal “reform” package.

1. Regulatory capture. Preparing the ground for future Alan Greenspan “free market” ideologues

The most serious problem is “regulatory capture”: control of the public regulatory process by the special interests being regulated. Mr. Obama’s speech introducing his reform was forthright in acknowledging that “some companies shop for the regulator of their choice … That is why, as part of these reforms, we will dismantle the Office of Thrift Supervision [OTS] and close loopholes that have allowed important institutions to cherry-pick among banking rules. We will offer only one federal banking charter, regulated by a strengthened federal supervisor.” It was the OTS, after all, that AIG and Washington Mutual chose as their regulator, as did GE Capital. The most incompetent, most ideologically opposed to serious regulation, its idea of a “free market” in practice was one free for fraud-ridden subprime lenders to do whatever they wanted.

One could go down the list of non-enforcement agencies – the Securities and Exchange Commission (SEC) not responding to warnings about Bernie Madoff, and the most deregulatory agency of them all: the Federal Reserve under Bubblemeister Alan Greenspan. Traditionally, the Fed has acted as lobby for the commercial banking system and indeed for Wall Street as a whole. (Its shares are owned by the commercial bank members of its system.) The Fed’s refusal to intervene to stop the subprime mortgage bubble, fraudulent lending and other elements of the Greenspan Chairmanship does not give much faith that it will take actions that will interfere with Wall Street’s money-making at the expense of the rest of the economy. Even today, the Fed is stonewalling Congress by refusing to release details on its $2 trillion “cash for trash” giveaway to favored Wall Street institutions.
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More details

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Re the AFTS Tax Forum in Melbourne late last week, a number of articles came out highlighting points favourable to our cause.

Tim Colebatch writes in Scrap Negative Gearing:

The review, chaired by Treasury secretary Ken Henry, is due to deliver its report to the Government by the end of this year. Professor Sorensen, a corporate tax expert, is one of several leading international economists brought out to advise the review on possible directions for reform.

His joint paper with Mr Johnson proposes a radical change to Australia’s corporate tax system, allowing companies to deduct a standard return to shareholders — roughly 5 per cent on their equity — from their taxable income, cutting company tax by up to a third.

They suggest the cost to revenue — up to $24 billion a year — could be filled by closing long-established loopholes in the taxation of capital income, including:

- Closing the negative gearing loophole used by more than a million housing landlords, by imputing a standard profit margin on rental housing investments.

- Taxing home owners an imputed rent on the annual value of their housing.

Whilst there was the usual acceptance of land rents being the most efficient method, we need a public education campaign on how this can help avoid future boom busts.

photo credit: wellurban

The Brumby-Madden announcement to increase Melbourne by the equivalent size of Canberra is exasperating.

100,000 vacant sites already exist in Melbourne in areas already serviced by infrastructure (according to the recent census).

The government has failed us economically.

The have failed us environmentally.

The have failed on inter-generational equity too

The social costs in hours of commuter time will rob young families from the quality time they need.

And to think this is headlined Delivering Melbourne’s newest sustainable communities

With over 225,000 rezonings announced in 2008, why haven’t housing prices fallen significantly with the combined effect of the GFC and this added land supply?

Reason – any land supply is drip fed back onto the market to maintain profits.

We call on the government to explain why the massive rezonings from last year have not assisted affordability.

We believe that our land use policies are to blame because they promote land hoarding. Capital gains are prioritised over affordability. The Managing Director of Mirvac, Nick Collishaw, admitted this on public record (The Age, 18/02/09).

First home buyers are being held to ransom by such monopoly powers.

Young people are being used as the funders of a bailout for property speculators. This inter-generational theft is unacceptable and immoral.

The Brumby-Madden plan will cost the community $40 billion in unnecessary infrastructure production above and beyond that collected by the unjust and inefficient GAIC tax.

We call upon the Brumby government to abolish the GAIC and Stamp Duty and replace it with a higher and flatter Land Tax.

Read the Press Release