The Total Resource Rents of Australia report finds the complete removal of income, company and sales tax is possible by replacement with a tax on monopolies such as water trading, cyber squatting, taxi licenses and land.
“Economists have for hundreds of years pointed to a more efficient system by harnessing the naturally rising value of scarce resources as the tax base. Few reports have calculated if this is actually possible” said report author Karl Fitzgerald.
“Unearned incomes equate to 23.6% of GDP and could be taxed without pushing up pricing structures. Most economists dismiss economic rents at just 2% of GDP. This report finds the free lunch driving the wealth gap is ten times greater than mainstream economists acknowledge.”
“Prices could fall by some 20% by reducing the number of taxes from 126 to 24” stated Fitzgerald. “The compliance and deadweight losses are a huge cost that fall disproportionately on small business.”
“This reform offers a more efficient and equitable economic system, valuing productive over speculative activities.”
“Australia taxes productive work while averting its eyes from the incredible windfall gains handed to those who own monopoly rights. Victorian abalone licenses were sold outright for just $6 in the late 1960’s. Each license can now be leased out yearly for a reported $100,000. This unearned income can be taxed without affecting productive outcomes.”
“The largest component of monopoly rents is land. Land rents rose by some $154 billion, amounting to 14.2% of GDP in 2011-12. If desired, the inevitable property bubble could be channelled into funding over half of all Australian government revenue. Less debt and more flexibility are worthy objectives for government and citizens alike.”
“The Federal government is enticing state governments to sell off public assets with a share of company tax. The majority of recent Public Private Partnerships have been unabashed economic failures, delivering few if any profits. ‘Value capture’ is a more effective model for financing infrastructure. Land values rise in areas where the public finances a new train station. By capturing one third of this uplift, all the infrastructure needed could be financed.”
The report builds on the work of Dr Ken Henry’s Australia’s Future Tax Review to show that economic rents can finance government at all three levels.
“The first nation to capture the majority of revenue from these unearned incomes will develop a profound export advantage. The lower pricing structure will exist due to cheaper land prices, less tax paperwork and eighty percent less taxes.”
The report acknowledges the significant hurdles such reform would face, with vested interests well placed to deter change.
“Politicians are forced to pawn their policies to pay for advertising on what was once known as the public airwaves. Some countries include in spectrum leasing arrangements an obligation for free political advertising in election campaigns. This would be a welcome step forward in a world where voters and entrepreneurs play second fiddle to rentier interests” said Fitzgerald.