land value taxation

Some interesting material coming out of Prosper Australia is a Melbourne-based organization and its partners, Earthsharing Australia and the Land Values Research Group.  A new report entitled “Total Resource Rents:  Harnessing the Power of Monopoly” (pdf file) finds that nearly one-quarter of Australia’s GDP comes from unearned income, not the 2% that neoclassical economists claim. 

This means that ten times greater revenue could be raised through taxing unearned income from monopolies than previously thought.  It also means that nearly half of Australia’s government revenues could be raised through channeling revenues from the real estate boom to more productive purposes.  In the process, income, company and sales taxes – along with 122 other current taxes – could be eliminated.

Report author Karl Fitzgerald, “the Renegade Economist,” describes the implications of the findings of the report:

“Unearned incomes equate to 23.6% of GDP and could be taxed without pushing up pricing structures. Most economists dismiss economic rents at just 2% of GDP. This report finds the free lunch driving the wealth gap is ten times greater than mainstream economists acknowledge. 

“Prices could fall by some 20% by reducing the number of taxes from 126 to 24” stated Fitzgerald. “The compliance and deadweight losses are a huge cost that fall disproportionately on small business.”  This reform offers a more efficient and equitable economic system, valuing productive over speculative activities.

Australia taxes productive work while averting its eyes from the incredible windfall gains handed to those who own monopoly rights. Victorian abalone licenses were sold outright for just $6 in the late 1960′s. Each license can now be leased out yearly for a reported $100,000. This unearned income can be taxed without affecting productive outcomes.