The front cover of today’s Herald Sun has a huge photo of Horse Stud owner Steve Spiteri (looking hard done by!) with a caption: ‘Thanks Premier: Steve Hits Paydirt’. Yesterday’s announcement to rezone all land residential within Melbourne’s 2030 boundary has made landowners, typically land bankers and the occasional farmer on the edge of the sprawl, rich overnight. Mr Spiteri bought his property for $375,000 twelve years ago and with the new zoning is now estimated to be worth $11 million dollars.
How much money will Spiteri make when he sells the property? Lets give him a million dollars for council rates, real estate commissions and to cover the next few years Land Tax (about $330,000 p.a). If we assume he pays capital gains tax at 30%, he will take home over $7 million dollars. This equates to more than 122 years income for the average wage earner.
That’s as if he’s earnt $11,217 per week for the last 12 years. Staggering!
Mr Spiteri is smart enough to understand basic economics. “Once the roads go through this will double (in value), so it pays to hold on a bit”. So he could earn over $14 million dollars. Economists call this ‘unearned income’ because no productive work was undertaken for the huge capital gain.
Those interested in social justice must ask:will land owners be willing to give a little bit back to the community to pay for the roads that will double the land’s value? Or will the jump in nominal Land Tax amounts be used as a weapon to criticise this effective tool? Land Tax, even with it’s admitted problems of progressive rates and bi-annual valuations, ensures that those benefiting most from the community’s work (ie rezoning or building a road), pay something back through the higher nominal Land Tax amounts in return for this added advantage. It doesn’t sound that unfair does it?
It’s interesting that NSW politicians are under fire for dodgy dealings with property developers but Victorian Premiers can deliver a gift horse without too many questions. How will political donations for the Brumby government, typically dominated by property speculators at the State level, reflect the free lunch speculators have been handed?