Letters

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Hobart has made it into the big league! – Leo Foley
Jan 23, The Mercury

House prices have pushed us into the top 20 of unaffordable cities in the world.
After seven years of boom, the legacy of this government, elected by ordinary
working people, will be a city owned by the elites.

It need not be so. House building is a competitive industry, and with proper
foresight on trade skills, costs will always tend to rise only in line with wages
and the general price index.

The real ‘boom’ has been in land price. Speculation in real estate has pushed
land beyond the price of Tasmanian wages. Young Tasmanian families are excluded
from the market. That demands government action, not with more subsidies and
grants that benefit only existing owners, but real tax reform that will overcome
the existing market failure.

Associate Professor (Economics) Graeme Wells points the way in his letter,
23 January. He says “There would be significant efficiency gains in moving from
the present transactions tax to a flat-rate land tax.” Not only would it be
efficient, it would also be equitable.

The Labor government, under pressure on so many fronts, still has the opportunity
to create conditions of prosperity for all Tasmanians, and to make home ownership
a reality for following generations. Will it rise to the occasion?

Leo Foley
Lenah Valley, Tasmania
Justice the Aim


History’s Lessons – Terry Dwyer
The Australian

 

Dear Sir,

Mr Michael Janda’s advocacy of land value taxation as a means of lowering
the tax burden on both workers and entrepreneurs is well advised. As Adam
Smith recognized, there are only three factors of production – land, labour
and capital – and only one of them does not flee or stop working or breeding
when taxed.

In the modern context, land values cannot be shifted offshore to escape
taxation (in contrast to nebulous and artificial concepts such as “income”
or “capital gains”). Shrewd contemporary observers such as Samuel Brittan
of the London Financial Times have recognized that taxing land values to
reduce taxes on capital and labour can allow developed Western countries
compete better against emerging low-wage economic giants such as India and
China.

Unfortunately, land value taxation in Australia has been degraded in recent
years by its political abuse as a selective envy tax. It was not always so.
Few people today realize that it was Sir Joseph Carruthers in 1906 in New
South Wales as a Liberal Premier who brought in simple unimproved land value
rating to pay for municipal services. Without that reform, Sydney would
have lagged and “Marvellous Melbourne” would probably still be the financial
capital of Australia.

Before 2006 passes into history, it would be wise for the people of Sydney
to remember what was done for them by Sir Joseph Carruthers one hundred
years ago and ask themselves if there is any valid reason why they cannot
now pay for things such as new dams the same way they paid for Warragamba
Dam.

The decay of great cities is not always inevitable but it is an inevitable
result of a pervasive lack of knowledge of the past and a lack of foresight
drawn from the lessons of the past.

Terence Dwyer B.A. (Hons) B.Ec. (Hons) (Syd.) A.M., Ph.D. (Harvard), Dip Law
(Syd.)

Visiting Fellow
Crawford School of Economics and Government
Australian National University
CANBERRA ACT 0200
AUSTRALIA


Unbiased Policy Advice Needed – Keith Thomas
as published in Crikey, Jan 11th

 

Re. “The crisis in our housing markets” (yesterday, item 2). David
Imber is right to point to the self-seeking publicity from the real
estate industry. I’d like to add that the emotional term “home” and
the more neutral one “house” disguise the fact that the largest
component in domestic property prices is often the land.

Travelling through country Victoria over Christmas I saw many houses
in agent’s windows half or even a third the price of otherwise
equivalent properties in my city, Canberra.

The reason that the city properties cost more is simply demand — that
is, their value derives from the proximity of services and employment,
not the hardware that goes into their construction. House prices are
rising, too; not because of better hardware, but because of demand.

What we need to do is to slice off this unearned value increase and
return it to the people who created it (the Australians who provide
the demand and the services), not allow it to slip unremarked into the
pockets of “property developers” and “investors”.

Despite the logic of this solution, do you think it will happen?

No way — almost every legislator in this country has property
investments and is counting on pocketing some unearned value for
themselves — the parasites. The Tenants Union is probably one of
the few places to look for unbiased policy advice in this area.


Taxing Times – Dr Gavin Putland
Canberra Times – October 24, 2006

 

The ACT Opposition would have us believe that land tax reduces the
supply of rental housing. How so? The tax is on the land, not the
housing.

The land can’t run away to escape the tax. The owners can’t escape
the tax except by selling the land, and the resulting pressure to
sell makes land more affordable for prospective buyers.

If the buyers are owner-occupants, they divert the demand for
rental accommodation. If the buyers are investors, the tax gives
them an incentive to seek tenants to bring in rent and cover the
tax liability. To this end, the buyers must build on the land if
it has not already been built on.

Thus the effect of land tax is to increase the supply of rental
housing and therefore make rents more affordable. And the higher
the tax, the greater the effect.

Dr Gavin R. Putland (Research Officer, Prosper Australia), West
End, Qld

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