The Rudd Government has reviewed the tax system.
The Henry Review came out strongly in favour of capturing economic rents for the common good. Read our analysis of the report here and here.
The Rudd Government has written off any serious reforms to issues relevant to housing affordability.
Why tax people $285bn for daring to work but capture just $40bn of the publicly created ground rents?
Now is the time to send a clear message to the Rudd Labor Government that the balance needs to change.
We need to build the pressure on the Rudd Government – please sign our petition!
March 23rd, 2010 at 5:51 pm
Hell yeah!
March 27th, 2010 at 8:53 pm
“…land-value represents nothing but monopoly, the right to levy tribute from labour for the privilege of using advantages not created by the owner of the land, but which are being created bv the community of which his tenants form part as well as himself.” Max Hirsch
—
Recently I have read Max Hirsch’s “Democracy Versus Socialism” (1901). Max Hirsch (1852 – 1909), was the president of the Victorian Single Tax League.
In the pages 123-127 of this book, Max Hirsch describes “the law of rent.” However, he claims that this law as formulated by Ricardo (and universalized by Henry George) “expresses only part of the truth.”
Max Hirsch reformulated this law as follows : “The rent of any piece of land is determined by the excess of its productivity over that of an equal area of the least productive land in use, after the sum of exertions which in both cases yield the most profitable result has been deducted.”
Could it be that Max Hirsch was the only one to ever have thought of the necessity of this reformulation?
Suppose that Max Hirsch was correct, would the rent then, calculated according to this reformulated law be less or more?!!
This free on-line book can be read at: http://www.archive.org/details/democracyversus00hirsgoog
March 31st, 2010 at 9:45 am
We all know that the previous governments aproach was not about what they could tangibly deliver, but recasts the issue of lack of infulstructure spending not in terms of what they could tangibly deliver but in the attitudes and disposition of Those affected by current infulstructure shortfalls, an approach that ignores the demand side seeing the problem as one that lies with the attitude and disposition towards lack of affordable housing, homessness etc etc.
April 7th, 2010 at 5:33 pm
I do not see that what Hirsch wrote was a “reformulation” of the law of rent. Perhaps a clarification, bringing to the readers’ attention more specific information regarding labour, which had not been taken into account by the authors he mentions in Ch.8.
Rent is distorted under the present system:
1. because of the private ownership of the rent and
2. the private ownership of land at & below the margin where no rent is produced. This completes the exclusion of people from the land.
The transferring of rent to government (quaintly called ‘taxation’) would immediately raise the margin, by bringing into use land currently excluded from the market (by private owners and by government) for speculative purposes. Effectively raising wages and adding greater emphasis to what Hirsch wrote in Chapter 8. This shutting off of the land at the margin and below (inferior land) has been, as Hirsch points out, the factor giving support to the Malthusian doctrine. To see through it one needs to simply read Henry Georges’ Progress & Poverty.
As to whether Max Hirsch was “correct” is primarily irrelevant. The system is what it is. Whatever man may do or think about it the system is there, it works. Whatever man may do he is simply part of the system. And the system is politician proof, idiot proof and greenie proof.
April 8th, 2010 at 11:27 am
The only problem with terms like “Democracy Versus Socialism” is that we tend to forget we are not just Capatalist or socialist, but all of them, all at once. without China’s system, for example the west would not have had the huge prosperity and all its cheap goods which fuelled its finance loaning speculative, cheap credit binge of last 20 years etc, The world is a mass of contradicting and isolated systems each with their own unique way of achieving a means and an ends, and converse with one another.
April 8th, 2010 at 11:54 pm
The Moderator of the site has asked me to clarify the last paragraph of my comment above.
The economic system is a natural system. Long before governments and/or landowners there were economics. Perhaps not recognised as such but certainly there.
Men work. Men get wealth. That is the system. (Just like Isaac Newtons law of gravity. It was there long before he came along.)And it is the system that works in the 21st Century just as well as it did 20,000 years ago and 1 million years ago.
The difference between then & now, the one that causes the poverty, mal- distribution of wealth, power hungry politicians,lobbyists and greedy corporations, is landowners and taxation.
The simple system – men work, men get wealth, is still there. It is simply that men believe they know better than nature. And “work” remains a four letter word. Therefore we have the distortions that we all cry about – made by ourselves.
These distortions of course, are the substance of endless discussions, University Courses, Wars, robbery, but in the 21st Century can you see a person so liked, that the people voluntarily build a Pyramid for him? They did in ancient Egypt!
In the 21st Century, our civilisation cannot even run a train on time!
April 13th, 2010 at 10:03 pm
Economic rent is that part of wealth which has been produced by the expenditure of private capital and labour in common services, as distinguished from interest and wages (those parts which have been produced by the expenditure of private capital and labor).
This definition of rent (as the product of labour and capital) differs from that of Ricardo, which has been most widely accepted. Ricardo goes on to show how rent arises, and in doing so describes a process which never takes place in real life. “Thus,” he says, “suppose land – No. 1, 2, 3 – to yield with an equal employment of capital and labour a net produce of 100, 90 and 80 quarters of corn. In a new country, where there is an abundance of fertile land compared with the population, and where therefore it is only necessary to cultivate No. 1, the whole net produce will belong to the cultivator, and will be the profits of the stock which he advances. As soon as population has so far increased as to make it necessary to cultivate No. 2, from which ninety quarters only can be obtained after supporting the labourers, rent would commence on No. 1.”
Assuming the quality or value of the corn to be similar in each case, it is doubtful if 100 quarters in one case, and 80 or even 90 quarters in others, are ever produced “with an equal employment of capital and labour.”
The cost of producing any one form of wealth like wheat over a series of years approximates on the different lands devoted to its production. When the cost of production on any land exceeds this average for a sufficient time, the cultivation of the land for that purpose ceases. The land which yields 100 quarters requires more capital and labour for its cultivation than the land which yields only 80. “Good” land differs from “bad” land chiefly because it admits of the application of a greater amount of capital and labour to a given area. The presence of fertile elements in greater abundance in anyone place involves the employment of more capital and labour to control and direct them. The larger crop, simply because it is larger, requires more capital and labour to reap, to stack, to thrash and to winnow it, to provide a market, to carry it there, and to maintain the roads over which it is carried.
In the second place, whatever variations there are in the productivity of land, it is agreed that these affect the total amount of wealth produced, and they also affect each of the forms in which wealth is distributed. A low production means low wages, low interest, and low rent. When wages rise, rent rises, and when wages fall, rent falls. Rent varies directly with wages, and not inversely. Therefore Ricardo’s illustration shows something the opposite of that which actually takes place!
In the third place, it is certain that the production of wheat by a given expenditure of capital and labour has not fallen from 100 to 80 quarters. On the contrary, the same expenditure that produced 100 quarters of wheat of standard value in Ricardo’s time, or at an earlier date, now produces a greater amount, not less. Instead of 80, it perhaps yields from no to 120 quarters. This is proved by the fall in the value of wheat, since its value is the cost of its production. This fact is at once the refutation of the theories of Malthus and of Ricardo; for the latter’s law of rent is simply the former’s law of population stated in different form. There seems to be no other reason for discussing this question with reference to the production of food. If the existence of rent depended on an increase in the cost of producing wheat, there would be no rent; for, with the division of labour, the cost of producing wheat has fallen.
John Orr, “Taxation of land values as it affects landowners and others”(1912)
http://www.archive.org/stream/cu31924032551149#page/n13/mode/2up
April 14th, 2010 at 12:54 am
To Thiry, the quote from John Orr’s book is a confused attack on Ricardo’s law of rent. The author misses the whole concept of rent. However, it is a mistake that is quite easy to make given today’s academic conditioning.
John Orr approaches his reasoning by basing it on individual cases, micro economics instead of looking at the overall effects, macro economics.
The same type of mistakes can be made by people believing that land tax can be shifted onto renters. They imagine what the landlord would do if they had to pay more land tax. Ok, immediately the landlord might say, hey, I’m going to increase the rent so I still get the same amount as before. This is the microeconomics, looking at the single business unit. But that’s forgetting that there is a market out there that determines rental prices. This is the macroeconomic forces coming in, considering all business units as a group. If the rent asked for is too high, renters will move out and find cheaper places to rent. Therefore landlords are already extracting the most the market will bear. The other force is that land tax will cause many landholders who haven’t done so, to rent out their land in order to cover the land tax. The extra supply will have downward pressure on rents.
April 14th, 2010 at 2:38 am
“Rent,” says Ricardo, “is that portion of the produce of the earth which is paid to the landlord for the use of the original and indestructible powers of the soil.” The flaws of this definition are not readily apparent, yet they are serious. Something essential is wanting, and something non-essential is introduced. Rent is a part of wealth, and therefore the product of labour and capital. Nothing can be regarded as a definition of rent which fails to show this as one of its indispensable features.
But the other parts of wealth are also produced by labour and capital, so that it is necessary to distinguish between the two kinds of labour and capital in order to make the definition complete. Before he proceeds far, Ricardo feels that “the original and indestructible powers of the soil” do not furnish even a plausible basis for the existence of rent in many cases, and he adds a second and distinct basis in such a phrase as the “peculiar advantages of situation.” This consideration brings us back to the essential principle; for advantage of situation in relation to common services is the only thing that accounts for the existence and amount of rent.
Ricardo errs in his observation of facts, but his capital mistake is that he offers a definition which is NOT economic at all. The error is not due to a casual lapse in expression; it is a defect in a chain of thought. Ricardo, and other economists before and since his time, have treated political economy, not as a purely mental, but as a physical or chemical science. [Ricardo emphasizes the influence of the chemical properties of land, and ignores the effect of common labour]. Instead of confining themselves to man’s activities in producing wealth as the subject-matter of their study, they concern themselves with activities in the soil which are properly the groundwork of chemical science.
…
The essential error, therefore, is that we are given a definition of rent with reference to chemical activities instead of with reference to economic activities! There may also be definitions with physiological and moral references, but they are not economic definitions at all. The phenomena which they are intended to represent must be translated into their economic character and terminology before they are treated in the science, before they can be of the slightest use. They cannot otherwise serve as the basis for reasoning, or for the formulation of laws. The precedent set by Ricardo in adulterating the basis of political economy has been largely followed. … If there had been a resort to “inferior” land, and a consequent reduction of wages, even in the slightest proportion to the great increase in rent during the last hundred years, wages would have almost disappeared.
John Orr, “Taxation of land values as it affects landowners and others”(1912)
http://www.archive.org/stream/cu31924032551149#page/n13/mode/2up
May 27th, 2010 at 2:29 am
Do you folks realise how crazy your proposals are. Thank God you are fringe elements.
How about for starters you get off your backsides and go get a constructive job instead of wasting your time on a web site.
What happens with cemeteries. That seems to be unused land. Perhaps you could start with digging up Henry George and building some low cost housing for the poor on his gravesite.
May 27th, 2010 at 2:33 pm
Thanks Mattz,
Australia’s Henry Tax Review and New Zealand’s Working Group on Taxation both recommended the move towards taxation of fixed assets (land) rather than mobile capital (tax havens beware).
It is a common misconception that we talk about every piece of land being used to it’s utmost productivity. America has some 19 million vacant homes and probably double that in vacant land (residentially/ industrially zoned).
With an 8% Land Value Tax able to fund the removal of company tax and incomer tax) these sites would go to market, reducing sprawl pressures, affordability pressures and helping finance something your forebearers thought of as very useful – public transport.
Our time is very well spent on this website and with China looking seriously at this system, perhaps things are speeding up faster than many want to admit.
June 10th, 2010 at 5:48 pm
[...] Sign the Petition! [...]
June 16th, 2010 at 4:00 pm
[...] Sign the petition! [...]