How does this system affect:
Resource rental will take the pressure off the job market. Wage levels will rise. Goods and services will cost less.
Resource rentals give the average wage earner the best chance of escaping the burden of a hand-to-mouth existence, rising debt, and a declining standard of living. The purchasing power of wages will effectively double under this reform. The ABS (Aus Bureau of Statistics) says average wage-earners currently pay 32% of their income in taxes and compliance costs. The abolition of income, other taxes and compliance will see our purchasing power greatly improve.
There are pro’s and cons:
- Goods and services will cost less as a result of the abolition of all taxes on trade. Even Company Tax, ostensibly paid by businesses, is simply transferred onto the cost of goods and is ultimately borne by the consumer.
- The purchasing power of wages and pensions will effectively double. Average wage-earners currently pay 32% of their income in taxes and compliance costs. Pensioners and those on unemployment benefits have similar amounts of their income clawed back through indirect taxes and compliance costs. The abolishing of all these taxes will therefore see the purchasing power of current incomes greatly improved.
- Most estates are bequeathed to the children of the family or to charitable institutions, so saving the beneficiaries from the financial burden of buying such property. With the demise of ‘capitalised value’ in land your own children or other beneficiaries will not be burdened as you were with the weight of a large mortgage on land, and will be in a much better position to fend for themselves, or to simply take over your residence on your vacating, and continue paying the site rent only.
- There will be no penalty for supplementing your income by working, or pursuing a paying hobby.
- There will be no capital gains taxes, or taxes on gifts to children.
- Resource rentals give your children and grandchildren the best chance of getting off the unemployment queues.
- If you live solely off rent then your income will fall, although you would still be receiving income from building rentals and the rental of any improvements.
- If you occupy a valuable site, the resource rental you pay may not be offset by the fall in the cost of goods and services.
- Your estate will be worth less due to the fall in the price of land, but consider points 1 and 2 above
Q: How do you make people take care of the environment? How do you make people sparing in their use of resources? How do you make people take only what they need and leave the rest?
A: Charge resource rentals.
With resource rentals there are no taxes levied on businesses at all.
Also, under a resource rental system, tax compliance costs for businesses fall to zero. All your taxes are paid like the rates – with a single cheque each year, based on the value of resources to which you hold title. Further, all business inputs would be cheaper without the current layer upon layer of taxation.
When you consider that you pay for the resources you use already – either by buying them, or renting them – the advantages are enormous.
However, if your business is collecting rent from others through site and resource investment, then you may be worse off; it really depends on what ratio of your gross income comes from actual site and resource rent (i.e. the rental value of the title to the site/resource), and what ratio comes from the productive improvements (i.e. factory, mining structures etc.) If the bulk of your income is from the improvements, then it is likely that you will still be ahead, but if most of the income is from the site(s), then you may see a real decline in income.
“I am prepared to concede that all taxes, with the exception of those on economic rent have some [adverse] effects on employment and economic growth.” John Howard, 1991
Resource rental are taxes on economic rent. They do not damage employment as do almost all current taxes. The best chance of the unemployed to get back to work would be if Australia moved to a tax system based on resource rentals and damaging taxes were removed. Cheaper access to land encourages small business and thus employment.
Resource rentals do not penalise farmers. All the advantages for business apply to farmers.
Farming is carried out on land that is very cheap per acre (compared with city land) and therefore the rental burden is low.
One considerable advantage in this age of uncertain rain is that rental fees vary with the seasonal output of the land. If it is a bumper crop, farmers pay more because of the higher nominal amount earnt, whereas if the drought wreaks havoc on crops, fees are smaller. Sounds sensible?
The cost of buying a home will be much less under resource rentals.
If a resource rental system was fully implemented, then land cost would drop close to zero. Building a home would be cheaper too.
If you don’t already own a home, resource rentals will mean you can afford one much more readily, and you will be free of your mortgage years earlier.
If you own a home already, then your land will fall in value. But, if you ever want to move, the new land will be much cheaper. This is an important factor to remember.
What does the average welfare recipient want?
Do they want hand-outs? Or, do they want a chance to find gainful satisfying employment so that they can assume a productive and essential role in the life of the community? If the answer is the latter then resource rentals are the only way to go. Resource rentals and the simultaneous abolition of income and indirect taxes will see the conditions which lead to endemic unemployment disappear. The mechanism is easy to see. When consumers have effectively double the purchasing power in their pockets as they do at present, demand for goods and services will boom. Rather than the present situation where desperate employees are chasing too few jobs, and where the jobs that are available are only to be had at the expense of deteriorating working conditions and artificially low wages, the situation under a site/resource rent system will be reversed. Employers will be competing for labour, causing wages to rise to a much more realistic level. With increasing choice in the type of work they do, and improved conditions of employment, employees will be happier and therefore more productive, the quality and range of products will improve, and both workers, employers and consumers will be better off.
Landlords are not necessarily losers from the proposed site/resource rent reform. It is true that the portion of the rents they collect which is really site rent will be handed straight over to the government; but the rental of the building or improvements will go to the landlord as it does now. Where the landlord will see a benefit is that his/her own taxation liability for income and other indirect taxes will disappear. This in effect will see the purchasing power of his/her income improve. Most landlords therefore should benefit from the reform.
Geonomics – A policy for planet and people
Jeffrey J Smith, Oregon, USA
Caring about the ecosystem inevitably forces one to confront the economy, how we chew the earth at one end and spew waste at the other. Yet to survive, all species do this. What’s different about the way we convert earth into wealth is that it may no longer be sustainable.
Depleting and polluting ourselves out of our earthly home is not necessary. Available to us are products and practices that are sustainable. Yet, neither producers nor consumers choose them. Why?
Because “bads” cost less than goods: sprayed food costs less than organic, virgin materials less than recycled, hydro electricity less than wind power, and so on.
Yet given competition, isn’t waste supposed to cost more and efficiency less? Why are prices backwards? Examine the flow of public revenue. Note how taxes and subsidies tilt the playing field in favour of extraction and consumption, unintentionally inducing sprawl and waste.
Price distortion renders the knee-jerk strategy of “just say no” hopelessly inadequate. As long as despoliation is cheaper, our salmon and forests haven’t a chance Correcting taxes and subsidies, to make prices precise, has become the cutting edge of environmental advocacy.
Requiring responsible parties to pay their way while all of us share the benefits of nature has a name: Geonomics. While aspects of this policy are already finding their way into law in Western Europe, the idea is not new. The collection half – shifting taxes off effort onto earth – goes back centuries. In the 1600s, John Locke and Baruch Spinoza proposed a socialisation of rent. In the 1700s, the physiocrats – which included Rousseau and Voltaire, Jefferson and Paine – thought that l’impot unique (the single tax on land value) would have “as great an impact as that of the invention of writing.” In the 1800s, John Stuart Mill flirted with the idea, noting how “landlords get rich in their sleep.”
American reformer Henry George, author of Progress and Poverty (1879), made himself famous promoting the shift. Around the planet, many jurisdictions have tried this reform, each time with positive results. The world’s fastest site recycling rate (which precludes sprawl) belongs to Johannesburg, South Africa; there they tax land, not buildings.
As a new millennium dawns, it’s the greens’ turn to wonder about the backward incentives of taxes. We tax things we do want – homes and income – and not things we do not want – pollution and depletion. If you like traffic, don’t tax it. Were we to make polluters pay, how would we charge them? We’d auction off permits to pollute. Taxing bads is such a good idea, that smart taxes can obviate much costly regulation.
The rationale for taxing resources can be extended to levying dues for the use of any site. Land value measures not what improvements an owner makes but how well society is doing. Tapping site value could pay for new infrastructure – even make home sites more affordable.
On the other hand (the doling out of largesse), follow the trail of public dollars to factory farms. Family farms are victims of subsidy abuse. And if you don’t like salmon, our indicator species, do subsidise dams. It’s our choice, one we should make consciously and democratically.
Even though the Geonomic idea is win/win (who would not want to replace their income tax with a geo-bonus?) it still must be conveyed by those who relate to all sides.
The justification of Geonomics, for all this rearranging of revenue, is that we – if not all life – have a right to Earth in good health. Like other basic rights this one should be in the State’s constitution. From there, land use dues in lieu of taxes could logically and legally follow.