HOW  TO  MAKE  CAPITALISM
WORK  FOR  EVERYONE

SUMMARY:   The principle of government revenue being derived entirely from land and from resource rental is explained.   The value of land sites comes, not from land or land owners, but from the value of what is around the land, the value of others' improvements and which they (including governments) have to maintain.   Land "tax" is particularly suitable for government revenue.   This writer recommends three stages for the changeover from the present system of taxing enterprise and work, to a system of obtaining revenue from the value of land that has been created by community effort:   1. Changes to business and land taxes, 2. Collection of assorted economic rents, 3. Residential land revenue instead of sales tax and personal income tax such as PAYE (Pay As You Earn).

56   Contents 

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Land tax, as it is called, is a form of public revenue peculiarly suitable for government. Both the principle which lies behind a public charge on land, and the economic, social, and political effects of it, will make capitalism work for everyone.
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A.   THE  PRINCIPLE  BEHIND  THE  CHARGE  FOR  LAND
1. The value of sites comes, not from land or land owners, but from the value of what is around the land, the value of others' improvements and which they (including governments) have to maintain.
2. Land tax is derived from the concept of economic rent, an excess return which may be "taxed" or charged for without disturbing the normal returns to labour and capital needed to ensure uninterrupted economic activity.

Land value is our name for the value of the advantages to a site, and land tax is our name for part of that value used to maintain those advantages and those values. It might better be called a "community charge."

$25,000  TAX   REFORM CHALLENGE
Land Values Research Group
BOX 2688X GPO, Melbourne 3001
Ph: 03 9670 2754 Fax: 03 9670 3063
Closing 31 March 1998
Email: lydiak@earthsharing.org.au

See fuller details, including a SUMMARY of the document to be rebutted, on http://home.vicnet.net.au/~earthshr/Challeng.html
and the original version of the SUMMARY put on the Internet by the organisers of the National Tax Reform Summit, on http://impactservices.com.au/acci/submission/pdday.htm

or see our Website's brief Challenge document on http://www.multiline.com.au/~georgist/essay.htm
or our Website's copy from the original SUMMARY only of the document to be rebutted on http://www.multiline.com.au/~georgist/day-phil.htm

B.   ITS  ECONOMIC,  SOCIAL  AND  POLITICAL  EFFECTS
Since it is a differential holding charge on valuable land, this "community charge" has beneficial effects upon:

  1. The supply of land; and, because of this,
  2. The cost of land.
These primary benefits (cheaper and more freely available land) need naturally to:
Received from the AUSTRALIAN SCHOOL OF SOCIAL SCIENCE
P.O. Box 443, Enfield, NSW, 2136
Tel. (02) 9744 8815, (02) 9746 5154; Fax (02) 9744 3804

INTRODUCING  A  COMMUNITY  CHARGE
Despite these (and other) benefits, this land tax or Community Charge would face the opposition anyone has always faced when an attempt is made to reduce enormous unearned incomes and the status and power that go with them. And, whereas in the beginning it would have been easy to introduce this Community Charge, it is no longer easy to introduce it now that tax is daily becoming more complex and diverse.

What can be done to introduce this reasonable and beneficial reform in such an environment?
The following is a suggestion.

Australian School of Social Science..Australian School of Social Science, Sydney, New South Wales

THE  FIRST  STAGE  --  CHANGES  TO  BUSINESS  TAXES
The rates of company tax would be significantly reduced or eliminated, and the shortfall would be made up from increases in state land taxes, renamed a Community Charge. At the same time consideration could be given to the elimination of payroll taxes.

Such a change would lead to a reduction in Commonwealth Grants. The Community Charge would be placed upon all non-residential land.

Each State would become responsible to fund some agreed-upon percentage of the reduction in Commonwealth Grants from an increase in land tax.

A preliminary survey of the consequences of such an alteration of funding might identify the problems involved, and devise welfare measures to eliminate or reduce these problems. Nonetheless, if what has been said about this kind of site revenue are actual, the benefits of this revenue would flow on in reduced unemployment, higher wages, and lower welfare costs.

Public education regarding the mechanism involved and in the more general expectations would be of vital importance.

OBJECTIVES:   Social Justice, Land Rights for All, Collection of Site Revenue and Resource Rentals, Environmental Protection, Sustainable Development, Decentralisation, Opposition to Anti-Enterprise Taxes and Monopolies, Proportional Representation, Responsible Government Expenditure, Exclusive Land Occupation, Collection of Misappropriated "Economic Rent," Natural Public Revenue, Abolition of Involuntary Unemployment, Wealth Producers to keep Full Value of their Production and Enterprise, Reducing Speculation, Freedom, Civil Liberties, Human Rights.
THE  SECOND  STAGE  --  THE  COLLECTION  OF  ASSORTED  ECONOMIC  RENTS
In the second stage, after an extensive study, the Federal Government could apply its existing Resources Rent Tax to a large number of extractive industries. This RRT would be fashioned so as not to disturb marginal enterprises, though research might well improve its operation. Such an RRT or Resource Charges would be applied to frequency bands, affecting television and radio licences.

Some consideration could be given to its use to charge for other licences, quotas and tariff protection. Again, public education would be important, so that the electorate understands how these changes would work, the evils they address, and the way government decisions have in the past created windfall gains.

THE  THIRD  STAGE  --  RESIDENTIAL  LAND
Should the advantages of the first stage become apparent, and the second stage likewise show promising results, it would be inevitable that taxes which especially affect the consumer and the worker (sales taxes, and PAYE) would be abolished or reduced, in favour of the more or less complete use of the Community Charge. At this stage it might be reasonable to look also at what may be called a "social dividend;" that is, a social wage generated by surplus revenue.

Naturally, the problems of the "asset-rich, income-poor" would require research and very possibly ameliorative measures.

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PUBLIC  EDUCATION
Much of the public education into this method of public finance would be generated from the experience of those who are subject to it. It may be expected that one large feature of this public education would be that more people would refrain from speculative activities, especially, but not only, in the area of real estate. Such an effect would possibly have greater benefits to the community and to business activities in particular than the whole of the public financial changes themselves. Business people may in fact themselves begin to exert a social pressure upon those areas of the economy where speculation in assets is so damaging to enterprise.

It might be that many in the Liberal and National Parties would espouse the changes as more favourable to business and less intrusive into private life, and that many in the Labor Party would see how the Community Charge improves the security of workers and small business, and how it yields more intangible rights which we seek as citizens and human beings.

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