Monday, December 18, 2006

Land tax

A Devil’s Dictionary definition of “Fabian” might be:

“A small, upper-middle class club, whose members are dedicated to the revolutionary propagation of unimplementable ideas”.

One such worthy-but-ridiculous Fabian-stamped idea is GenY (I’m assuming) law student Michael Janda’s proposal for an across-the-board 5% annual land tax.

Admittedly, Janda includes figures showing the compelling need for the tax base to be wholesale shifted away from salary and towards land and capital. But no party ain’t ever going to implement an across-the-board land tax. Even more certain is that with land tax being a states-only constitutional prerogative, while income tax is federally mandated, a simultaneous switcheroo between the two would be impossible, even if one or more state governments decided to commit political suicide by introducing a broad land tax.

Janda is not only blind to this obvious constitutional stumbling-block, he can’t help but try for some cheap partisan mileage at federal level:

Tax reforms could help erode [Australian's love of land ownership] rather than fuel it, as John Howard's new home buyer's grant has done in recent years.

Yes, this is an arguable point, but necessarily co-equal in fuelling land-price inflation are state-Labor governments cuts to stamp-duty, such as has been recently formulated in Victoria. To be consistent – and to further burnish his “unimplementable” Fabian credentials, to boot – Janda should also be howling that state governments should be increasing, not decreasing real-estate purchase stamp-duty.

So what’s the answer? In a nutshell, a new tax should (i) heavily target existing, as well as future holders of capital-gains windfalls (notional or not), and (ii) be levied as painlessly as possible, viz only upon sale, or certain other change-of-ownership triggers. Such a tax is one I modestly proposed a year or so ago, as a swingeing (50% at a minimum) state pocketing of vendors’ real capital gains across-the-board, a tax that would also help deflate purchase prices, particularly for first-home buyers.

On the unimplementable scale, my proposed vendor tax admittedly also rates at a Fabian “eleven”. At least it fits within a state-government-only bailiwick, however. Even a partial implementation of it – simply levying stamp duty on real-estate vendors, not purchasers* – would be an eminently justifiable small step, albeit still a brave one, and not a particularly strong price-deflator.

Speaking of unworthy GenY pin-ups, burnt-out Xer (I’m assuming) Chris Middendorp writes:

[O]nly half of the participants [in a recent survey] believed that a homeless male over the age of 30 deserved their financial support. The perception that they are an unattractive, drunken rabble may well clarify why homelessness has been neglected to the point of becoming almost unmanageable.

. . .

Homelessness isn't a permanent condition . . . People can and do build new lives. Those of us working in the field have seen many positive stories. I recall the case of 28-year-old Joe. When I first met him, he was calling a bus shelter home. With intensive support over a two-year period, Joe was able to obtain stable housing and even take up some training in the hospitality field. Eventually he secured a job in a prominent Melbourne hotel. Six years on, Joe is still employed; he now rents a comfortable house and owns his own car; [is] married and is expecting his first child. I've seen far too many people like Joe turn their lives around to ever believe that any situation is lost.

Umm, good on Joe, and people "like" him – but wasn’t Joe always in the “worthy” category of homeless persons by age (and gender)? By re-using the lazy “over 30 male” as a sort of statistical mass-grave, Middendorp does a gross disservice to Xer men.

* There would need to be an anti-double jeopardy provision here, for (mainly) recent purchasers whose capital-gains windfalls would be insufficient to cover their exit stamp duty.

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