Australia’s economic system should encourage work and reward enterprise. With our recent reputation as one of the world’s top performing economies, why hasn’t such progress delivered benefits to all?
To appreciate this we need a better understanding of the economic foundations.
This can be done by studying Georgist economics. Those who benefit from the use of scarce resources, particularly natural resources, should be required to pay something back to the community for this privilege. It is a simple but far-reaching change – stop punishing labour with taxes and start collecting the rental value of land and licensed monopolies. This can be achieved by using Land Value Tax to raise the majority of government revenue. A natural correction is then locked in to offset the current first-come-first-served system.
If not, those that have the privilege of ‘owning’ a licensed monopoly (say a bank license, a land holder or an owner of a unique website URL) can use their market power to push prices higher and higher in what is known as ‘Rent-Seeking’.
In relation to the property market, what we commonly term ‘rent’ is made up of two distinct elements:
- there is rent on buildings and improvements and this must go to the person who owns them.
- there is the rent on the land (natural resources) and this should go to the community because:
- community funds the government spending which pays for infrastructure (roads, public transport, hospitals etc)
- the natural increase of population places additional demands on a unique resource – land
You will notice that both 1. and 2. are natural forces of a community. Importantly, both add to land values. Why should the community’s efforts benefit those privileged enough to own large tracts of land? It’s a guaranteed winner for those in the know.
If government were to claim the part of ‘rent’ created by the community, taxation could be done away with and the average person would be far more prosperous. Albert Einstein, Walter Burley Griffin and Alfred Deakin all saw this as essential to achieve our true (economic) freedom.
Prosper Australia advocates the elimination of all taxes and their replacement with a Land Value Tax. If everybody in Australia paid 6% of the value of the resources they controlled to the Government, then other taxes would be unnecessary. This would cover all resources such as land, water, oil, coal, and the electromagnetic spectrum. Licensed monopolies in DNA, utility ownership and taxi licences should pay a yearly fee based on their ever increasing value. Read the Total Resource Rents of Australia report for more detail.
For the average person, if the land value of your property is $330,000, the occupants would have a combined Land Value Tax bill of $19,800. You would pay one bill and then be done with taxation for another year.
No longer would we require PAYE income tax, GST, sales tax, company tax, FBT, duties, tariffs, FID, BADT, excise, nor capital gains or payroll tax.
With these taxes removed, prices of general goods and services would fall significantly. Who could complain of a tax bill of $9,900 each for you and your partner plus a 30% reduction in the cost of living (due to the removal of indirect taxes and the inefficiencies this lumps into our pricing structure)?
Who wins and who loses?
Our proposal is a tax on economic rent, the naturally increasing value of monopolies in land and other scarce resources.
If you live off other people by collecting rent then you will be worse off. If you work for a living you will be better off. It’s that simple.
By the way
You cannot escape paying Land Value Tax – the only choice you have is who you pay it to. If you pay it to the community then other taxes are not needed. If the wealthy – who seem to own our democracy – collect the rents then they will keep getting richer and poverty and unemployment will continue.