Site Rent
In contrast with, for example, a tax on buildings, a land value tax is levied only on the unimproved and undamaged value of economic land (i.e., all natural resources). Land tax has long been recognised as the only tax which does not distort market relations.
Whether what is called land "tax" is really a tax is also up to dispute. Certainly, it has no semantic relation. By definition a tax is onerous on activity, hence the use of the term "taxing burden". Yet in stark contrast to all other levies, the payment of site rental retards neither productive activity, nor the supply or demand of land.
Further, taxation of all forms has come under significant criticism from moral philosophy which claims personal ownership and responsibility for one's thoughts, body, labour and results. Yet once again, the peculiar characteristics of economic land do not accord with this definition.
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"Here are two simple principles, both of which are self-evident: I.--That all men have equal rights to the use and enjoyment of the elements provided by Nature. II.--That each man has an exclusive right to the use and enjoyment of what is produced by his own labor" (p. 280). [Emphasis mine] Henry George, from "Protection or Free Trade" |
One significant question that always arises is whether shifting public revenue collection from taxation to site or resource rents would generate sufficient income for public expenditure. This question was analysed in detail in an article published in the April 2003 edition of Australian Tax Forum by Terry Dwyer (Visiting Fellow to the Asia Pacific School of Economics and Management, Australian National University), under the title "The Taxable Capacity of Australian Land and Resources". Dwyer's paper - available as a PDF file - comes to the conclusion that:
The "bottom line" reinforces the overall conclusion ... that land-based revenues are indeed sufficient to allow the total abolition of company and personal income tax...
The logical implication is that Australia could choose to make a fundamental shift in tax policy. Australia could increase Federal reliance on land revenues and use the proceeds to make substantial cuts to marginal personal and company income tax rates...
Australia is indeed a lucky country to have in its land and resource values a tax base of such large potential. But is it a clever enough country to use that potential tax base to its advantage?
