Building bridges to ourselves: Infrastructure Australia’s Value Capture initiative

A great way to bury an unwelcome government report is to release it into the alcoholic haze of a hot Australian Christmas.

Infrastructure Australia’s Capturing Value paper is too important to suffer this fate: who pays for the infrastructure we need is a matter of first importance.

Australia’s excessive reliance on labour taxes means wage-earners pay for almost everything and landholders enjoy a free ride. The two groups are not the same, as those who must rent a home quickly discover.

Infrastructure Australia is blunt:

“We need to rethink the funding balance between those who directly benefit from infrastructure and broader taxpayers. Users and other beneficiaries will have to take a greater share of the funding burden, releasing taxpayer dollars to meet the needs of a growing and ageing population.

Value Capture has been loudly proclaimed as the solution by Prime Minister Malcolm Turnbull and Environment Minister Greg Hunt. Local landholders deemed to benefit would be levied part of the foreseeable uplift to land prices that comes from shrinking distance with new transport links.

However, government infrastructure is a broader concept that new roads and rail. Just about everything government does – supplying the things we certainly need but are unwilling or unable to provide ourselves – can be regarded as infrastructure.

Anyone visiting new estates on the outskirts of the capital cities will be struck by how far housing has outstripped the schools, playgrounds, libraries, public pools, sewer mains and hospitals. Limiting Value Capture to arterial transport projects won’t build the urgently needed education facilities and everything else in short supply on the fringe.

Then there is the problem of deciding who contributes to a particular project. VC means a bureaucrat gets to draw lines on a map – those inside pay, those outside get a free carry. The cost of land reflects the community-provided infrastructure servicing a plot, so that market price is an excellent place to base the calculation of civic benefit

Infrastructure Australia looks right over and past the current VC fashion and directs government firmly onto the high road:

“Over time Australian governments should look to introduce a more consistent approach to value capture. Transitioning to a broad-based land tax – alongside the removal of stamp duty – will eliminate many of the challenges posed by individual measures and provide a permanent, more efficient method of value capture which could help fund the infrastructure Australia needs over coming decades.

Exactly. VC is good, but land tax is better. Why settle for weak half-measures when we could all ride in comfort.

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https://prosper.org.au/2017/01/09/building-bridges-to-ourselves-infrastructure-australias-value-capture-initiative/