Mr Michael Janda’s advocacy of land value taxation as a means of lowering the tax burden on both workers and entrepreneurs is well advised. As Adam Smith recognized, there are only three factors of production – land, labour and capital – and only one of them does not flee or stop working or breeding when taxed.
In the modern context, land values cannot be shifted offshore to escape taxation (in contrast to nebulous and artificial concepts such as “income” or “capital gains”). Shrewd contemporary observers such as Samuel Brittan of the London Financial Times have recognized that taxing land values to reduce taxes on capital and labour can allow developed Western countries compete better against emerging low-wage economic giants such as India and China.Unfortunately, land value taxation in Australia has been degraded in recent years by its political abuse as a selective envy tax. It was not always so. Few people today realize that it was Sir Joseph Carruthers in 1906 in New South Wales as a Liberal Premier who brought in simple unimproved land value rating to pay for municipal services. Without that reform, Sydney would have lagged and “Marvellous Melbourne” would probably still be the financial capital of Australia.
Before 2006 passes into history, it would be wise for the people of Sydney to remember what was done for them by Sir Joseph Carruthers one hundred years ago and ask themselves if there is any valid reason why they cannot now pay for things such as new dams the same way they paid for Warragamba Dam.
The decay of great cities is not always inevitable but it is an inevitable result of a pervasive lack of knowledge of the past and a lack of foresight drawn from the lessons of the past.
Terence Dwyer B.A. (Hons) B.Ec. (Hons) (Syd.) A.M., Ph.D. (Harvard), Dip Law (Syd.)
Crawford School of Economics and Government
Australian National University
CANBERRA ACT 0200