Home > Tax and public expenditure > Increasing GST: not worth the effort. How about inheritance taxes?

Increasing GST: not worth the effort. How about inheritance taxes?

February 5th, 2016

I posted this analysis in December, suggesting that, once the necessary compensation is paid for, an increase in GST wouldn’t be worth the effort. Apparently Treasury modelling (which I haven’t yet located) produces the same conclusion. Given that everything is supposedly on the table, maybe it’s time to look at some new options. An obvious example is inheritance taxes, which raised a fair bit of money before being scrapped in the late 20th century. As the inequality of wealth increases, the case for such taxes becomes every stronger.

Repost

The Grattan Institute has just released a report suggesting that the government should get more revenue from the GST, either by broadening the base to include food, health and education (yielding an extra $17 billion) or by raising the rate to 15 per cent (yielding an extra $27 billion). As you’d expect from Grattan, the analysis is sound and careful. As long as you accept the standard framing of the tax reform debate, in terms of the need to shift from direct to indirect taxation, it is reasonably convincing.

Grattan suggest using 30 per cent of the extra revenue to increase welfare payments and 30 per cent in cutting the bottom two tax rates, thereby compensating low income earners. The overview concludes:

Around 40 per cent of the additional revenue from a higher GST would be left over after welfare increases and tax cuts. At least some will need to go to state governments to help them address their looming hospital funding gap, as the price for their support of the change. This would leave a little – but not much – to reduce the Commonwealth’s budget deficit, or to pay for other tax cuts that promote economic growth.

(emphasis added).

Is that enough to sell the package? I can’t imagine the states going along with a deal like this for less than 20 per cent of the total extra revenue, which implies the Feds are left with 20 per cent, somewhere between $3.5 and $5.5 billion. From a political viewpoint, it’s hard to see this being worth the effort for the Turnbull government, especially with no guarantee of success.

As a comparison, the FBT concession for motor vehicles, reinstated by Tony Abbott costs the budget around $1.5 billion. Exemptions for non-profits, which have been comprehensively rorted, cost at least as much. Add in a few ‘rats and mice” concessions, and the Federal government would have as much as it could get, in net terms, from the Grattan package (Getting rid of the non-profit concession would probably require some compensating expenditure, but the same is true of the health and education concessions under the GST.)

That’s before we get to the elephants: superannuation concessions (also supported by the Grattan report), corporate tax avoidance, land tax and higher income taxes for (say) the top 5 per cent of income earners (reflecting elite opinion, the Grattan report suggests cutting these rates). All of these are hard, but not obviously harder than the GST.

So, why is GST reform at the top of the government’s list? The answer is simple enough. The advocates of reform haven’t had a new idea, on taxation or anything else, in 30 years. They didn’t get the GST out of Keating’s Tax Summit in 1984 and they didn’t get the version they wanted from Howard and Costello in 2000. So, the same old idea keeps on coming up.

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  1. J-D
    February 5th, 2016 at 15:23 | #1

    You write, ‘As long as you accept the standard framing of the tax reform debate, in terms of the need to shift from direct to indirect taxation, it is reasonably convincing.’

    I feel as if I’m missing something here. Obviously if you accept it as an assumption that we need to shift from direct to indirect taxation, you can arrive without much delay at the conclusion that we need to increase indirect taxes like the GST. It’s not hard to argue in a circle. It must be tempting for anybody who wants a particular conclusion to suggest adopting it as an assumption, but why should anybody else play along? What you wrote seems to me about like saying, ‘If you accept that they’re not cheating, they seem reasonably honest.’

  2. hc
    February 5th, 2016 at 16:15 | #2

    I think death duties are worth reintroducing. They capture small though significant revenues from the very rich in the US and the UK. They facilitate the Rawlsian conviction that aggressively taxing the rich while they are alive has big inefficiency costs so that redistributions should be constructed so equality at birth is promoted. But the real issue of tax reform involves environmental taxes (carbon and congestion). Congestion taxes would give at least $10b in the major cities if the DWLs are internalised and reasonable carbon taxes (plus savings from the ill-conceived emissions subsidy schemes) would give far more than that.

    Fiddling with the direct and indirect tax mix and making compensations is as you suggest, small potatoes.

  3. Ernestine Gross
    February 5th, 2016 at 16:28 | #3

    I can’t deny I am in favour of an inheritance tax. [1] My reasons are:

    1) It is a logical taxation response in the sense that the empirical data on the growth of wealth concentration is incompatible with the minimum wealth condition in all non-macro G.E. models I have come accross including my own. The role of the minimum wealth condition is to ensure, within the theoretical model, that the notion of ‘freedom of choice’ is not empty in an otherwise classless (egalitarian) society.
    2) In contrast to a land tax, it includes physical as well as financial assets. (A good thing because it removes radical shifts in relative asset prices due to tax policy. Radical shifts in relative asset prices are undesirable in so far as they may lead to discontinuities, the consequences of which are difficult to foresee.)
    3) The death rate can be taken as independent of government policy (not everywhere in ‘the global economy’ – eg Syria at present – but surely in contemporary Australia) and therefore the revenue has a non-political element, which can be calculated by actuarial means (baseline stability of revenue idea.)
    4) On the practical side, as mentioned in JQ’s post, an inheritance tax is not a radically new idea in Australia. This is important for cultural common knowledge.
    5) Furthermore, since ‘global competitiveness’ – in the sense of international alignment of taxation rules – is a recurring discussion point in Australia, it is noted there are moves in several countries to look at inheritance tax to counteract wealth concentration. Among the more radical propositions is one put forward by an Emeritus Prof of Economics, Uni Freiburg, Germany, Guy Kirsch. Prof Kirsch proposes (for discussion purposes) to have inheritance tax replace income tax. Furthermore, Kirsch proposed 100% inheritance tax to be collected in a fund and then distributed equitably (numerically!) among the new generation. (I interpret ‘for discussion purposes’ to mean he goes to the extremes to outline the negotiation space.)
    6) Further on here and now practical matters, some Australian Premiers, particularly the one in NSW, have become used to substantial revenue inflows from stamp duties during the real estate boom (eg in Sydney). Introducing an inheritance tax would cushion the decline of revenue from stamp duties as the market conditions change. (Asking Premiers now to increase stamp duty is a bit like introducing a mining super profit tax after the mining boom.)

    It is one thing to say yes to inheritance tax on the ground of it going in the right direction for specified reasons, it is another to go into details as to the tax levied under various circumstances. One needs a lot of empirical data, wide consultations, and computing facilities, all of which I don’t have. But one more step can be taken, I believe, namely saying something about the structure of such a tax. Some elements:

    a) it should be progressive (within generation equity considerations)
    b) it should be in the national interest (eg farmers, small and medium size local businesses should not have to be sold off to pay the tax).
    c) it should not result in total disinheritance of children and close relatives (intergenerational equity considerations and motivation).
    d) no exemptions for religious or other so-called tax exempt institutions.

    [1] On a recent thread I convinced even Ikonoclast of the relative merit of such a tax over land taxes and reverse mortages.

  4. John Quiggin
    February 5th, 2016 at 16:38 | #4

    @J-D

    Even given the standard assumptions, most of the presentations of the case for a GST that I have seen have been thoroughly shoddy. At least with Grattan, if you accept the premises, the argument goes through.

  5. Ivor
    February 5th, 2016 at 16:51 | #5

    The GST is now 20% in the UK (“VAT”) and 27% in Hungary. It is 25% in several European states.

    Meanwhile foreign transactions are tax free. Go figure????

    Just spread the GST to include foreign transactions.

    Problem solved.

  6. Ernestine Gross
    February 5th, 2016 at 17:26 | #6

    Since the thread includes the ‘new tax ideas’, I venture to propose a revenue tax on multinational corporations. Furthermore, I suggest it is ‘efficient’ in the sense that I know it is extremely costly to check on income earned for any corporation but particularly for multinationals. Revenue, on the other hand, is something that can be monitored via physical and electronic cash registers. (It works for a well known shopping mall owning corporation.)

  7. Ivor
    February 5th, 2016 at 17:30 | #7

    @Ernestine Gross

    Revenue, on the other hand, is something that can be monitored via physical and electronic cash registers. (It works for a well known shopping mall owning corporation.)

    Exactly right. All AUD foreign exchange is recorded to the last cent by known agents.

  8. Ernestine Gross
    February 5th, 2016 at 18:27 | #8

    @Ivor

    Foreign exchange transactions data and revenue data are not the same thing. I am talking about revenue in Australia. Only internet purchases could be directly extracted from F.E. data.

  9. John Quiggin
    February 5th, 2016 at 18:48 | #9

    Ivor, you’ve been warned previously. Please knock off the snark.

  10. Stockingrate
    February 5th, 2016 at 19:35 | #10

    Tax thrift- great idea for a debtor country.

  11. Ivor
    February 5th, 2016 at 19:46 | #11

    @Ernestine Gross

    But every licensed foreign exchange dealer would have the data – internet or not.

    So it can all be extracted.

  12. Chris O’Neill
    February 5th, 2016 at 20:47 | #12

    inheritance taxes, which raised a fair bit of money before being scrapped in the late 20th century

    beginning with the conservative Bjelke-Petersen government and followed like dominos by all the other state governments. The conservative Menzies government also abolished federal land tax in the 1950s.

    Conservative governments are all-too-willing to abolish economically efficient taxes (e.g. land tax, inheritance tax, other forms of economic rent taxes) that are concentrated on the well-off and also all-too-willing to increase not so economically efficient taxes (e.g. GST) that are not concentrated on the well-off in the slightest.

    The astounding thing is that so many not so well off people vote for conservative governments.

  13. Chris O’Neill
    February 5th, 2016 at 21:01 | #13

    @hc

    I think death duties are worth reintroducing.

    Of course they are. But no conservative government is ever going to and if any other sort of government reintroduces death duties then the next conservative government will abolish them again.

  14. Ernestine Gross
    February 5th, 2016 at 21:03 | #14

    @Ivor

    McDonald’s is a multinational company. The fact that it has an incorporated subsidiary in Australia does not change this.

    Suppose resident X in Australia buys something from McDonalds. It costs, say $5.–

    $5 is revenue. I am saying a revenue tax is levied on the $5. There is no corresponding transaction recorded in the foreign exchange data set. Therefore your argument is wrong. Your argument applies only to internet transactions on purchases from outside Australia (imports). Your argument applies to GST but not to a revenue tax.

  15. Ikonoclast
    February 5th, 2016 at 21:34 | #15

    Meanwhile,

    “The historic Trans Pacific Partnership Agreement (TPP) … was formally signed today,
    (04/02/2016), in New Zealand by the Minister for Trade and Investment Andrew Robb.” – Govt press release.

    I wonder why Robb felt the need to sneak off and sign it in New Zealand?

    Historically, this is the day when the Corporations begin to take control of the 12 signing countries.

    “Each TPP country will now follow its own domestic treaty making process before the agreement can enter into force. In Australia this will include a Joint Standing Committee on Treaties (JSCOT) inquiry and the consideration by the parliament of any implementing legislation or amendments.”

    How long until the corporations tell us we can’t have the PBS, all hospitals have to privatised and welfare delivery most be outsourced? How long until our state and local governments face billion dollar law suits for making laws or by-laws for the citizens and the environment instead of for the transnational corporations?

  16. Ivor
    February 5th, 2016 at 21:47 | #16

    @Ernestine Gross

    Granted, but if the $5 stays in Australia there is no basis for imposing any tax that is not placed on domestic companies.

    If the $5 leaves Australia it can be taxed – irrespective of the nationality of the company and as it leaves it is all recorded – except for cash in suitcases.

  17. paul walter
    February 6th, 2016 at 06:20 | #17

    Sometimes I love the Prof an awful lot and sometimes even more..

  18. Ernestine Gross
    February 6th, 2016 at 08:40 | #18

    @Ivor

    Wrong again. There is no ‘revenue tax’ on companies at present. Tax is levied on ‘income’. While ‘income’ is effectively revenue for wage earners who have no legally allowable tax deductions, this is not the case for companies.

    May I suggest you download at least one annual report of a company listed on the Australian Stock Exchange (ASX) to get an idea as to what we are talking about. Furthermore, I suggest you look up Michael West’s articles on the topic of multinational corporations from the smh web-site. West’s articles may not make sense unless you have looked at at least one set of financial reports of a listed company.

    Also, please check your information on VAT rates for various countries. I don’t know of one EU country which has a uniform VAT rate for all transactions.

  19. GrueBleen
    February 6th, 2016 at 08:56 | #19

    @Ernestine Gross

    I certainly prefer an inheritance tax to a land tax because I won’t be leaving any inheritance to be taxed – other than the land that my old ‘best to wreck and rebuild’ house stands on.

    And I agree with your limitation re not having to sell up small/family businesses to pay the tax, but is there any size limit on that ? Would Gina Rinehart be exempt under that provision – or Packer or Clive Palmer or … Or would they be required to sell the family business ?

    How much annual revenue would an inheritance tax be expected to bring in ? I presume there would be some kind of threshold – eg the first $1 million is exempt (that being just an average sort of house price these days). So how many “well to do” Aussies would die each year and how much would we get ? I ask because I always understood an inheritance tax to be an anti wealth accumulation tax rather than a regular, consistent earner.

  20. Ikonoclast
    February 6th, 2016 at 09:47 | #20

    Why do we have endless debates on this site about taxes? Yet, we have no real debates, that I can recall, about the ownership of production and the distribution of rewards from production. It’s not a debate of course when I harp on this point and everyone else ignores it. Well, that is fine. But if you don’t frame the question properly you will never get the right answer. Framing our economic and social problems as a tax debate and a welfare redistribution debate misses the fundamental issues of our political economy. You are all going in circles. Don’t you get tired of it? I certainly do.

    Of course, I am free to leave a debate which seems to me to be going round in circles.

    Thus…

  21. Ivor
    February 6th, 2016 at 10:21 | #21

    @Ernestine Gross

    I do not follow 1) I never said there was a revenue tax. 2) I never said there was a uniform VAT tax anywhere.

    Who or what are you arguing against?

    Do you oppose taxing purchases of foreign currency?

    Do you think Australian businesses should be tax on gross revenue?

  22. Ernestine Gross
    February 6th, 2016 at 10:25 | #22

    @GrueBleen

    “And I agree with your limitation re not having to sell up small/family businesses to pay the tax, but is there any size limit on that ? Would Gina Rinehart be exempt under that provision – or Packer or Clive Palmer or … Or would they be required to sell the family business ?”

    As I have indicated in my initial post, there are good reasons why I can’t and why I shouldn’t be expected to answer questions on details of an inheritance tax. As for the three individuals you have identified, they are either the sole or dominant shareholders in ‘large’ corporations. On the face of it, including publicly available information, they could be ruled out as being exempt. (Beneficiaries of large parcels of wealth have different means to pay for inheritance tax than those of small enterprises. They can ‘liquidate’ (sell) some of their assets or borrow against the assets or a combination of both. Moreover, the ‘large’ enterprise does not need to be sold necessarily, if ever.) It gets a little more difficult to form an opinion if one considers a high wealth estate with 12 or more children and, name a big number, of grandchildren. These are questions where the norm on what is fair in a society becomes relevant, IMHO. Of course, the norm can be influenced by public discourse involving many people.

  23. Ernestine Gross
    February 6th, 2016 at 10:29 | #23

    @Ivor

    Please re-read the sequence of posts.

  24. Ivor
    February 6th, 2016 at 10:46 | #24

    @Ernestine Gross

    Ditto.

    The question remains …

  25. Ernestine Gross
    February 6th, 2016 at 10:57 | #25

    @GrueBleen

    “How much annual revenue would an inheritance tax be expected to bring in ? I presume there would be some kind of threshold – eg the first $1 million is exempt (that being just an average sort of house price these days). So how many “well to do” Aussies would die each year and how much would we get ? I ask because I always understood an inheritance tax to be an anti wealth accumulation tax rather than a regular, consistent earner.”

    Well, according to Prof Kirsch’s limiting case, revenue (to be placed in a fund and then equitably distributed to the ‘young’) would be 100%.

    I can’t see why the calculated ‘average’ (or median) price of a house in metropolitan areas of Australia is a relevant threshold variable. (I do know that this variable is considered in discussions about a land tax – a kind of lazy option for accountants who have access to land value data to calculate an estimated ‘earner’!)

    I can’t follow your last sentence. Wealth concentration (or degrees of inequality) and the time profile of such is concerned with individuals within a society with a government that needs revenue to meet socially desirable public expenditure. So, one has to go down to micro socio-economic data in such a system and not ‘anti-something’ per se reasoning.

  26. Chris O’Neill
    February 6th, 2016 at 11:34 | #26

    @GrueBleen

    I certainly prefer an inheritance tax to a land tax because ..of.. my old ‘best to wreck and rebuild’ house.

    This is why a general land tax has very little chance of being reinstated in Australia. There are too many people with skin in the game (however small) like GrueBleen. If land tax like the old federal land tax was reinstated then every petty landowner in Australia would say “why should I have to pay this land tax when all those lazy sods who never got off their arses and bought land get away scott-free?”

    The fact is that most of those petty landowners are getting an economic rent that non-land owners simply do not receive and land tax is simply an attempt to return to the community some of the value of that economic rent that is generated by the community, not the land owners.

    It would be more accurate if the economic rent itself was calculated and taxed but that’s certainly more complicated than land tax.

    There is an enormous inequality in land wealth in Australia, far more than the inequality in ordinary taxable incomes. So taxing according to land wealth would be much more progressive than according to income taxation. But this is part of the reason it won’t happen: the super-rich landowners with their political influence shift the political motivation from taxes that affect them the most (land taxes) to taxes that affect them the relative least (income taxes and GST).

  27. Ivor
    February 6th, 2016 at 11:34 | #27

    @Ikonoclast

    Taxes are the only means citizens can reinstate some measure of social justice in the middle of the ravages of capitalism.

    Capitalisats oppose taxes because it reduces the gains from their exploitation.

    It is class struggle created by

    the ownership of production and the distribution of rewards from production.

  28. BilB
    February 6th, 2016 at 11:39 | #28

    A bi product of a property based wealth/inheritance tax is that it would promote more regional population disbursement, not a bad thing at all.

    1. The upper tax bracket must return to halfway to where it was before Howard brought it down.

    2. We need a global flat rate goods and services import levy. Yes it pushes some prices up a margin but take a long hard look at the way people spend their money, we buy a huge amount of imported junk that we do not need, and it all ends up inflating land fills. The net result of this levy is an adjustment to the profitability of locally produced goods and an improvement in employment levels. The levy can be automatically linked to the unemployment level and the fiscal balance so where unemployment increases imported goods become marginally more expensive giving local labour a marginal competitive advantage and the government automatically has funds to stimulate local production quickly. Such a mechanism provides the logical economy balancing device to complement the reserve bank cash rate mechanism which on its own does not have sufficient power to achieve a stable economy.

    The swings and roundabouts that cripple business are not the 5 percents, they are the 30 percent changes. My business is working strongly despite operating with a currency that has plummeted from $1.10 to the US$ down to as low as 67 cents. Resources are in trouble not because of a 5 percent levy but because of a 50% drop in average price over a relatively short period. Would a 5 percent import levy equate for the average person to a 5 percent increase in the GST? No it would not as a levy does not affect locally produced goods and services other than by the very small margin that imported goods affects those products.

    You want some different thinking? There it is

  29. Ivor
    February 6th, 2016 at 11:43 | #29

    @Chris O’Neill

    Land tax is an old, old furphy.

    It is not the political power of the rich land-owners that are blocking land tax.

    It is best to tax land when it transfers, or the income from land as a regular stream.

  30. Chris O’Neill
    February 6th, 2016 at 11:51 | #30

    @Ivor

    Capitalisats oppose taxes because it reduces the gains from their exploitation.

    Everyone opposes taxes because it reduces their gains (regardless of type) that are taxed.

    But what we have now is a society that taxes different types of gains differently for no other reason than that they are of different type.

    If that type happens to be economic rent from PPOR land ownership (regardless of how large) then the tax rate on that type of gain is zero.

  31. Ivor
    February 6th, 2016 at 11:52 | #31

    @BilB

    Yes an import levy is needed.

    Unfortunately all our university economists draw strange diagrams whereby a levy lifts prices above equilibrium creating so-called “deadweight loss”. A tiny little geometric area in their diagrams.

    They then shreik in horror at their so-called “loss” – totally ignoring the savage losses to the Australian population due to imports of G&S from oppressed overseas workers.

    The entire Liberal Party and right-wing ALP are all glued to this mindset, as are some right-wing Greens.

  32. Chris O’Neill
    February 6th, 2016 at 11:54 | #32

    @Ivor

    Thanks for the bare assertions Ivor.

    Useless as usual.

    (The one about being “best to tax land when it transfers” is especially silly.)

  33. Ivor
    February 6th, 2016 at 12:02 | #33

    @Chris O’Neill

    Workers do not oppose taxes because this provides free access to schools, hospitals, roads, emergency services, recreation grounds and etc.

    It seems sensible to tax different types of gains differently.

    I assumne that your land tax is different to taxing economic rent from land. Taxing economic rents is desirable. The tax rate on economic rent should never be zero.

  34. Ivor
    February 6th, 2016 at 12:10 | #34

    @Chris O’Neill

    Taxing land when it transfers is normal – it is called stamp duty (or equivalent).

    Just read the Queensland ” Duties Act 2001.”

  35. Chris O’Neill
    February 6th, 2016 at 12:29 | #35

    @Ivor

    Workers do not oppose taxes because..

    Sorry Ivor, workers oppose taxes on land that they own. I suppose you’ve never heard of workers that do negative gearing either? You should get out more.

    It seems sensible to tax different types of gains differently.

    That’s very likely true but what justification is there for taxing economic rent at a (much) lower rate than taxing labour?

    I assumne that your land tax is different to taxing economic rent from land.

    That’s an interesting issue and one that doesn’t seem to attract anywhere near as much attention as it should. The fundamentally best tax is tax on economic rent which Australian land has achieved in spades. But I can tell you now that any such tax would be opposed tooth-and-nail in Australia by the rent-seekers who own such land. (Just think of the mining tax.)

    I think economic rent tax on land should be explored much more than it has been. There’s only a few people who canvas it e.g. http://blog.lvrg.org.au . So land tax is a fallback position from economic rent tax. In a sense land tax is a tax on previous economic rent but that’s like making the current owner pay tax that previous owners should have paid but didn’t. So it’s far from perfect. But I’m saying that general land tax is never going to happen again anyway and I’ve pointed out the reasons for that.

    Maybe there is some hope for economic rent tax on land one day, but it’s a long, long way off at the very least.

    Until then, workers will pay much more tax on their work than landowners pay on their economic rent.

  36. Chris O’Neill
    February 6th, 2016 at 12:34 | #36

    @Ivor

    Taxing land when it transfers is normal

    Oh dear.

    Just because something is normal (taxing land when it transfers) does not in any way shape or form mean that it is best (as you claimed “It is best to tax land when it transfers”).

  37. BilB
    February 6th, 2016 at 12:36 | #37

    Ivor,

    I think only an economist with no analytical skills at all would see an a import levy causing “deadweight losses” in Australia’s case. The reality is that the converse would be true creating what would have to be called “live weight gains”, a triangle on the other side of the supply demand curve curve intersection, as this is entirely what is intended to happen. The other feature of a universal levy is that everyone is disadvantaged equally, so competitive losses are against imported finished goods and services. Exactly what is intended.

  38. February 6th, 2016 at 12:45 | #38

    I would like a carbon price please.

    I realize I could also ask for a significant amount of carbon sequested inside ponies and be just as likely to receive it from the current government.

  39. Ivor
    February 6th, 2016 at 13:18 | #39

    @Chris O’Neill

    But there is no point taxing land when it is not transferring because you are already taxing the income that comes from the land.

    Taxing land and taxing income from land is double taxation. So taxing land transfers is the only sensible option.

  40. Ivor
    February 6th, 2016 at 13:47 | #40

    @BilB

    I do not know what “Live weight gains” are.

    I do not know what a “supply demand curve curve” is.

    I do not know how you get Harberger’s triangle “on the other side”.

    I do not know how Australia’s case is different.

    I think we need tariffs and must accept the deadweight loss as there are other social benefits.

  41. GrueBleen
    February 6th, 2016 at 14:36 | #41

    @Ikonoclast

    I don’t know why you think we can have a “debate” on matters which we don’t even have ‘in principle’ determinations for, but if you want to pursue this topic – not perhaps as a “debate” but as a rational investigation – shouldn’t it go to the Sandpit ?

    Are you interested in pursuing it there ?

  42. BilB
    February 6th, 2016 at 15:14 | #42

    Simple logic, Ivor. If tax drag can create a “dead zone”, a grant would create an opposite “live zone”. Frankly the notion of a “dead zone” or its opposite is a doubtful notion which seems to me to be a false notion arranged to argue for libertarian type zero government. Any tax or levy is simply another cost as is profit, and adjusts the supply and demand curves appropriately. In the real world distributors routinely mark products up 100% to 1000%, where does 5% figure into that degree of corporate greed.

    Australia’s case is a country where the standard of living is inflated by mineral wealth, and productive effort of the broad population is steadily directed away from manufacture of goods towards supply of services due to the policies of open competition with low labour cost nations. This is blatantly obvious and should not require explanation. We are living as on a really large Nauru during their good times before the resource ran out.

    Australian fiscal buoyancy has become dependent on resources royalties just as oil nations are dependent on their oil sales royalties and are now suffering similarly.

    http://www.businessinsider.com.au/chart-labour-costs-in-australia-compared-to-other-countries-2015-6

    The danger we face is that ideologues are attempting to use their extreme economic short sightedness and miserable fiscal management to restructure taxation and usher in taxation policies that are to the detriment of the population as a whole.

    Off topic: the hidden gearbox (illustrated on the linked page) in the supposed doping scandal is the bike motor I referred to in an earlier thread, and its operation is not silent. I would not be possible to use it at power without others hearing its motor and gears working.

  43. GrueBleen
    February 6th, 2016 at 15:24 | #43

    @Chris O’Neill

    Hmmm, well I’m not so sure about all that “having skin in the game” thing, Chris. Let me just say that my hair, what I have left of it, is grey, and I vote. In short, resurrect some ‘unimproved value’ land tax as much as you like, we grey power folk who live mostly off our pensions will do our mass voting best to ensure that it doesn’t apply to us.

    And why should it ? I pay rates – the current version of land tax – indeed I paid $1340 (up from $1230 the previous year or roughly a 9% increase – what is inflation at present ?) just a day ago for my year’s rates – and that includes a $213 pensioner discount. So what “rent” is it exactly that you think I’m getting ?

    Besides, when my partner and I bought our house back in 1983, we paid all of $75,000 for it – that’s house and land just to be accurate. Our council now values our land and property (ie my “best demolished and rebuilt” 3 bedroom 12 square weatherboard built in 1956) at $670,000 – a mere 893% increase in 32 years. So, who does the land valuation on which a land tax would be based, and would it include large, rapid increases in the valuation, and hence in the amount of land tax we “petty landowners” have to pay ? And if so, why wouldn’t we recalcitrant ‘grey power’ types just stage a tax revolt ?

  44. Chris O’Neill
    February 6th, 2016 at 15:50 | #44

    @Ivor

    you are already taxing the income that comes from the land

    You’re making a false assumption Ivor. An awful lot of property value does not generate taxable income, let alone income tax.

    Come back when you can leave out your false assumptions.

    By the way, stamp duty on land transfers is one of the worst existing taxes ever invented. It is sad that there are people who do not understand this.

  45. Chris O’Neill
    February 6th, 2016 at 15:53 | #45

    Ivor:

    you are already taxing the income that comes from the land

    You’re making a false assumption Ivor. An awful lot of property value does not generate taxable income, let alone income tax.

    Come back when you can leave out your false assumptions.

    By the way, stamp duty on land transfers is one of the worst existing taxes ever invented. It is sad that there are people who do not understand this.

  46. GrueBleen
    February 6th, 2016 at 15:57 | #46

    @Ernestine Gross
    Response to your comment #22

    Indeed you did say, if I may quote you: “It is one thing to say yes to inheritance tax on the ground of it going in the right direction for specified reasons, it is another to go into details as to the tax levied under various circumstances.”, but previously, and subsequently, you went into quite a few details, or so I had interpreted you.

    However, I’m fine if you only want to discuss principles at this stage. So, is there in principle a cutout level for the non-sale of small/family businesses ? You appear to be saying that there is, so I take it that you think that, in principle at least, there would be some equitable way of determining where that cutoff lies. But I raise for consideration the question of whether, if she was required by Australian Tax Law to flog off a significant proportion of her assets (or, more correctly, her executor to do the flogging off), why wouldn’t Gina Rinehart just ‘do a Rupert Murdoch’ and relinquish her Australian citizenship, and residency (as Packer seems increasingly likely to also do), in favour of say Ireland or some other low tax country and Australia gets nothing from her (them) in either income or inheritance tax.

    And she (they) don’t even have to ‘do a Turnbull’ and secrete their assets in some more or less dubious tax haven in order to do it.

  47. Chris O’Neill
    February 6th, 2016 at 16:25 | #47

    @GrueBleen

    Our council now values our land and property at $670,000 – a mere 893% increase in 32 years

    Maybe not so petty. So who do you think should eventually end up getting this economic rent on your property, even if you don’t? And who do you think should get the economic rent on properties far more valuable than yours?

    You said you preferred an inheritance tax and this is one way to tax an approximate value of the economic rent on inherited land. One of the proposals for taxing economic rent on land is to apply it at the time of sale which I think should include the time of inheritance.

    But one of the big problems is that most people don’t even know what economic rent is, so it’s not going to happen in a hurry.

  48. James
    February 6th, 2016 at 16:30 | #48

    @Chris O’Neill’s comment on the Queensland government abolishing death duties highlights a known problem with ‘beggar-thy-neighbour’ approach to efficient state taxes. That is, abolish state taxes, gain incremental advantage over other states. The current government has stated that state governments need to raise more of their own revenue. One way of enforcing this would be to implement a deemed revenue base for each state in COAG agreements. After the mining royalty debacle in WA, one would expect a reasonable model to be put on the table. Then if a state decides not to implement taxation at a level to maintain services at the Australian standard (mainly because of political pain) it cannot then cry poor to the Federal government to bail it out.

  49. Ivor
    February 6th, 2016 at 16:32 | #49

    @Chris O’Neill

    It doesn’t work like that.

    Why would you tax property that does not generate taxable income?

    Rates charges are about all that can be expected but even these are based on potential income.

    You can only do this when it is transferred if there is capital gain.

    So the assumption is safe enough.

    Land is adequately taxed through income, rates, when it is not being transferred and by duty and capital gains when it is transferred.

    The only reasonable options are to surcharge land transfers as part of probate or surcharge land transfers to foreigners, as they are now doing in the UK.

  50. Ivor
    February 6th, 2016 at 17:01 | #50

    @GrueBleen

    $75,000 in 1983 is $228,447.67 in 2015 dollars.

    So, in your case your real gain is only 3.4% pa (compounded). Which is quite good as it is safe and secure.

    Australia’s economic growth has been similar so you have probably just maintained equity in society.

    See: http://archive.is/1E8LS

    I find it hard to support any additional land tax on this given the % fees and duty you paid purchasing the house, maintaining it and what you will have to pay to realise your equity.

    So I cannot see any so-called “economic rent”.

    If anyone tries – you are right – its time for a tax revolt.

    Land tax is revolting.

  51. Ivor
    February 6th, 2016 at 17:01 | #51

    @GrueBleen

    $75,000 in 1983 is $228,447.67 in 2015 dollars.

    So, in your case your real gain is only 3.4% pa (compounded). Which is quite good as it is safe and secure.

    Australia’s economic growth has been similar so you have probably just maintained equity in society.

    See: http://archive.is/1E8LS

    I find it hard to support any additional land tax on this given the % fees and duty you paid purchasing the house, maintaining it and what you will have to pay to realise your equity.

    So I cannot see any so-called “economic rent”.

    If anyone tries – you are right – its time for a tax revolt.

    Land tax is revolting.

  52. paul walter
    February 6th, 2016 at 18:29 | #52

    Yes, tax it. Let the issue shift for themselves..

  53. Ernestine Gross
    February 6th, 2016 at 18:36 | #53

    @GrueBleen

    1. I refer back to my post at #3 regarding my suggestions as the structue of an inheritance tax. May I suggest you interpret these statements.
    2. May I point out Rupert Murdoch is still alive.

  54. GrueBleen
    February 6th, 2016 at 19:31 | #54

    @Ernestine Gross

    “2. May I point out Rupert Murdoch is still alive.”

    You may, and may I point out that at no stage did I state, suggest or even hint otherwise ?

    And may I express my great regret at wasting both our time by attempting to communicate with you ?

  55. GrueBleen
    February 6th, 2016 at 20:16 | #55

    @Ivor

    “maintained equity in society”.
    Let me see. Looking at the ratio of my property’s value to my gross annual salary, I’d say you might be right, the ratio was essentially unchanged. Whereas by comparison, the ratio of the price of a motor car had noticeably decreased in comparison with my salary. 🙂 The ratio has increased a bit since, but that’s because my property value has increased but, since i am now over 7 years fully retired, my (then) salary hasn’t changed.

    But “safe and secure” ? Only because Australia didn’t suffer a major housing value collapse like the USA (parts thereof) and the UK. If we had, it wouldn’t be 3.4% compounded, and it wouldn’t have been “safe and secure”. So thankfully the Gang of Four (Rudd, Gillard, Swan and Tanner) followed Ken Henry’s orders to “Go hard, go early, and go households” (well mostly, I don’t reckon school halls were exactly ‘households’).

    Do you reckon if I’d put $75,000 (which I didn’t actually have as a lump sum, of course, but if I had) into, say, term deposits it would have come to $670,000 by now ? Especially paying income tax at the marginal rate on all the annual interest payments.

    Your link indicates why Australia is the world’s 12th largest economy by exchange rate value despite having only about 0.3% of the world’s population. Unfortunately, it is almost certainly the most expensive ‘developed economy’ country to live in if you notice that we’re only the 19th largest economy by PPP. So it goes.

    Anyway, glad we can count on you if the revolution comes. (Bring out the pitchforks !)

  56. Chris O’Neill
    February 6th, 2016 at 20:56 | #56

    @Ivor

    Why would you tax property that does not generate taxable income?

    Surely the argument should be why wouldn’t you tax property that does not generate taxable income? Why should someone get away scott free just because they never put their property up for rent?

    Land is adequately taxed through income, rates, when it is not being transferred and by duty and capital gains when it is transferred.

    Simply wrong. PPOR land does not lead to any income tax or capital gains tax.

    As I said Ivor, come back when you can leave out your false assumptions. Your repetitious falsehoods are getting tedious.

  57. GrueBleen
    February 6th, 2016 at 21:12 | #57

    @Chris O’Neill

    Well I won’t pretend to be fully familiar with the meaning(s) of ‘economic rent’ but I’ll take the descriptive statement (from Wikipedia) that “Economic rent should be viewed as unearned revenue…”

    So now that leaves me with a couple of difficulties: 1. admitting that the value of my property is somehow “unearned” and 2. “who do you think should eventually end up getting this economic rent on your property, even if you don’t ?”

    I guess the value of my property might be considered “unearned” if somehow the value of my property had increased when the value of other properties hadn’t (or had simply increased more rapidly). But mostly that isn’t the case, and the value of many other people’s property has increased proportionally more and/or faster than mine. So, do I deserve a share of the ‘economic rent’ comprising increased value of property the value of which has increased faster than mine ? If yes, then I’ll take it, if not then why should anybody else share in my ‘economic rent’ ?

    The other side of this coin is use of the word “should”. Now you might mean that economically – ie let us pursue the impossible dream of maximizing efficiency (ignoring effectiveness, BOC) by allocating the ‘economic rent’ of my property to some economic agent who will maximize the return to the overall economy. Is that what you had in mind ?

    Or is the “should” a matter of morality – does someone(s) “deserve” to share my property’s ‘economic rent’ ? But I don’t have either a deontological or utilitarian morality schema that unequivocally tells me these things – do you ? If so, or if you have any other morality schema that is, at least in your judgement, ‘superior’ to deontological or utilitarian schemas, then please communicate same.

    In the meantime, I think I’ll go with Ivor’s analysis 🙂

  58. Ivor
    February 6th, 2016 at 22:10 | #58

    @GrueBleen

    Do you reckon if I’d put $75,000 (which I didn’t actually have as a lump sum, of course, but if I had) into, say, term deposits it would have come to $670,000 by now ? Especially paying income tax at the marginal rate on all the annual interest payments.

    No – it only works if the interest compounds. Depositing 75,000 1983 dollars in a term deposit can never give you $670,000 in 2015 dollars if you withdraw the interest.

    However sticking $75,000 into an Australian superannuation fund in 1982 would probably have given you over $670,000 in 2015 if average rate of return was 7.1% (nominal $).

    Superannuation (particularly industry super) and home ownership are the only ways ordinary workers can protect themselves under capitalism.

  59. Collin Street
    February 6th, 2016 at 22:26 | #59

    > 1. admitting that the value of my property is somehow “unearned”

    Does the land become valuable because of stuff you did? Did you lay in a sewer, build a nice house, fertilise the paddocks and drain the swamp? Is it irrigated, does it have an airport? “Earned”.

    Does the land become valuable because of stuff other people did, or stuff that happened naturally? Is it next door to a train station or a major shopping centre? Is it naturally fertile, or laden in copper ore? “Unearned”.

  60. Chris O’Neill
    February 6th, 2016 at 22:41 | #60

    @GrueBleen

    I guess the value of my property might be considered “unearned” if somehow the value of my property had increased when the value of other properties hadn’t

    What is the reason for that last condition?

    If yes, then I’ll take it

    Yes, the winners-and-losers argument. Don’t base tax policy on principle, base it on who has the most political influence. I guess humans will never change.

    by allocating the ‘economic rent’ of my property to some economic agent who will maximize the return to the overall economy

    You probably need to read a bit more about economic rent and also economic efficiency. Various taxes are “economically” inefficient because they discourage productive activity, e.g. income tax on labour is economically inefficient because it discourages labour that is taxed. So it encourages people to work for themselves tax-free rather than earn more and pay someone else to do something for them, even though they’re not as efficient doing it themselves.

    Taxes on economic rent, on the other hand, are economically efficient because they don’t discourage economic activity. Taxing real growth in land value doesn’t discourage any productive action the way taxing work does.

    does someone(s) “deserve” to share my property’s ‘economic rent’ ?

    You didn’t produce your property’s economic rent (that comes from community influence), so why should you share it more than anyone else?

    But you still haven’t answered the question, who should end up getting your property’s economic rent, when you pass on I mean?

  61. Chris O’Neill
    February 6th, 2016 at 22:46 | #61

    @Ivor

    Superannuation (particularly industry super) and home ownership are the only ways ordinary workers can protect themselves under capitalism.

    You forgot to mention buying shares themselves. They have to put up with the marginal tax rate on the gross dividend, but at least they can avoid the capital gains tax by not selling. Works extremely well for some shares.

  62. Ivor
    February 6th, 2016 at 23:15 | #62

    @Chris O’Neill

    Shares are a means for workers to share in the profits of capitalism but not in the bad times and the Japanese stock market demonstrates the risks involved.

    The best way to get secure return from shares is through a industry super fund.

    Share funds indexed to the all-ords are an option but there are greater risks.

    Despite ups and downs, the Australian share market has shown no growth over the last 10 years.

    All ords – Feb 1, 2006 – 4,878
    All ords – Feb 1, 2016 – 5,094

    And the next 10 years do not look promising.

  63. February 6th, 2016 at 23:41 | #63

    Can anyone point me to a resource which explain more fully the events which led up to former Prime Minister Howard introducing legislation for the “never ever” Goods and Services Tax (GST) after the federal elections of October 1998? My own recollection is this:

    Prior to 1998 John Howard had adamantly insisted that he would “never ever” introduce a GST.

    Then in 1998, just a few months prior to that surprise early election, he set up a supposed Parliamentary inquiry into “tax reform”. One of the Federal Liberal members resigned from that Inquiry committee and the Liberal Party after he realised that it was not an inquiry, but merely a vehicle to promote the “never ever” GST. After the inquiry concluded, Howard suddenly called the early election, but refused to make the inquiry report public until after the election.

    Howard lost the two party-preferred vote, but still narrowly won the election in the House of Representatives. He also failed to get an overall majority in the Senate,

    After the public were finally able to read the contents of the ‘inquiry’ into “tax reform” Howard claimed a mandate to introduce the GST over the loud objections from the Australian community. He was able to get his legislation carried through the Senate with the help of a renegade Democrats Senator Meg Lees.

  64. Chris O’Neill
    February 7th, 2016 at 01:16 | #64

    @Ivor

    The best way to get secure return from shares is through a industry super fund.

    Owning shares through a share fund has the same risk as owning the same shares directly. Only differences are the fund manager fees and the possible difference in tax status of the fund (such as for a super fund).

    All ords – Feb 1, 2006 – 4,878
    All ords – Feb 1, 2016 – 5,094

    Good cherry-picking Ivor. Well done.

    By the way, CBA – Feb 1, 2006 – $44.26
    CBA – Feb 1, 2016 – $78.22 with a 7.7% gross dividend yield over the past year.

    But we all know we shouldn’t cherry-pick, don’t we Ivor?

  65. Chris O’Neill
    February 7th, 2016 at 01:22 | #65

    @James

    a renegade Democrats Senator Meg Lees

    That woman put up some absolutely bizarre arguments. Like a card player saying she didn’t know what to do when she held all the aces.

  66. BilB
    February 7th, 2016 at 08:47 | #66

    Good on you, James.

    It is great to see that at least one person out there has a memory and can keep track of the procession political of deceit. I’ve saved your account so that I can add the next stage in our passage towards the Friedmanian economy.

  67. Ivor
    February 7th, 2016 at 08:55 | #67

    @Chris O’Neill

    Those who only look at best performing stocks and not the whole market are the cherry pickers.

    Fools and their money are soon parted.

  68. Chris O’Neill
    February 7th, 2016 at 12:10 | #68

    @Ivor

    Well spotted Ivor. As I said “we all know we shouldn’t cherry-pick, don’t we Ivor?”

    Said cherry-picking includes specific dates.

    Pity you didn’t spot that Ivor.

  69. Chris O’Neill
    February 7th, 2016 at 12:15 | #69

    @Ivor

    By the way Ivor, you didn’t seem to notice that your favourite way of owning shares, industry super funds, buys part of the same Australian share market that you have a problem with.

  70. derrida derider
    February 7th, 2016 at 12:44 | #70

    I used to be a big fan of death duties, but am a lot cooler on them than I once was. All experience is that they can never be big revenue raisers – at the very most a nice little earner for the government. The reason is twofold – first, heavy ones are easily evaded (and hence are pretty arbitrary in their incidence). Secondly, you’re taxing a once-in-a-lifetime event, unlike a very common event like earning and spending.

    I think the great virtue of a GST is NOT the economist’s one about exempting saving; it’s that VATs are pretty hard to evade on a large scale (basically because businesses have a financial incentive to dob in downstream evaders). Not impossible, but definitely harder than personal income tax and much harder than corporate taxes. So a GST is, relative to these taxes, not nearly as regressive as people think.

    But the signals we’re getting now are that Mr Turnbull has made similar calculations to John’s and concluded like him that the game is not worth the candle.

  71. Ivor
    February 7th, 2016 at 13:29 | #71

    @Chris O’Neill

    So what date would you pick to go back from today, 10 years ?????????????

    What other dates would you use to demonstrate my statement:

    Despite ups and downs, the Australian share market has shown no growth over the last 10 years.

    Just because you know a word exists doesn’t mean you can use it whenever it suits you.

  72. GrueBleen
    February 7th, 2016 at 13:52 | #72

    @Chris O’Neill

    Oh pish tush Chris, she was being shamelessly ‘duchessed’ by John Winston (who seemed to have some actual affection for her – maybe because she reminded him of his wife).

    But four aces or not, Meggles certainly knew how to ‘flush’ a political party which she did to the Democrats – along with her gang of 3 1/2: Aden Ridgeway, Andrew Murray, Brian Greig and Lyn Allisaon (who always had at least one buttock on the fence) – when they passed Howard’s GST in the Senate.

    With Natasha and Bartlett ‘dissenting’ – which is quite strange because it was Stott-Despoja and Bartlett who actually followed Democrat Party policy and it was Meg and the Gang who were the actual dissenters.

  73. GrueBleen
    February 7th, 2016 at 14:55 | #73

    @Ivor

    “Depositing 75,000 1983 dollars in a term deposit can never give you $670,000 in 2015 dollars if you withdraw the interest.”

    Correct me if I’m wrong, Ivor, but if I withdraw ALL of the interest every year, then I’d just end up with $75,000 (nominal) even after 1,000,000 years. So no, I think I could probably be relied on not to withdraw ALL of the interest every year. But I still have to pay income tax on the interest earned, and I have to get that from somewhere.

    So, say after many tears, my fund has got up to $600,000 with (nominal) 4% interest (which I used to get once upon a time). Then that year’s interest would be 600,000*0.04 = $24,000 so I might have to find as much as $12,000-$15,000 to pay for it.

    “Superannuation (particularly industry super) and home ownership are the only ways ordinary workers can protect themselves under capitalism.”

    Let me tell you about my super Ivor: I entered (forcibly) into the super scheme way back in the early days – when it was only 3% or so IIRC – and stayed in for 13 1/2 years in a company super fund until I retired. At the end of that time, the net result of fund earnings minus expenses and minus the fabulous triple tax that applied for nearly all of that time, was that my takeout super at retirement was actually less than the simple sum of all my contributions over 13 1/2 years. In short, if I’d just been allowed to take the cash and stash it under my bed (along with all the reds to guard it, of course) I’d have done better than having it invested in the fund.

    Now that’s what I call “worker protection under capitalism”, don’t you ?

  74. GrueBleen
    February 7th, 2016 at 15:19 | #74

    @Collin Street

    “Does the land become valuable because of stuff you did? Did you lay in a sewer, build a nice house, fertilise the paddocks and drain the swamp? Is it irrigated, does it have an airport? “Earned”.”

    And so on and so forth. Ok, Collin, you’ve got me, my “economic rent” is entirely unearned. So I guess I’ll just have to pay up via a land tax to distribute that “rent” to the entire population of the Earth. But hold on, wait a minute, every other ‘property’ on the planet also has “unearned” value, which the current possessors will have to pay land tax on to be distributed to the entire population of the Earth which, of course, includes me.

    So, just as soon as I see my cheque from the rest of the planet, I’ll post mine to the rest of the planet. Scout’s honour.

    In the meantime, of course, I am looking at another great store of unearned value: private share ownership. Mostly that just means people getting some money together and buying some shares in an established and profitable company: much as i did in buying my “unearned” house – but of course my interest payments to the bank (non-trivial, I assure you) helped to finance loans for other people to do “earned” things, like starting (small) busineses.

    But what did your average share owner do to “earn” the dividends and (sometimes) capital gains from the owned shares ? I repeat: absolutely nothing, of course other than just buying the shares (as I bought my property) so it’s all unearned. I therefore propose a share ownership tax the takings of which will be distributed to everyone in those countries where the company does business.

    We’ve gotta be consistent, now, don’t we.

  75. GrueBleen
    February 7th, 2016 at 16:02 | #75

    @Chris O’Neill

    Well, you might have to refer back to your own post, Chris, but here goes.

    “What is the reason for that last condition?”

    Err, because i want to impose it because i can ? But mainly because if the value of my property increased when the value of others didn’t then I would clearly have been the benefactor of some individual luck. Wouldn’t I ?

    “Yes, the winners-and-losers argument. Don’t base tax policy on principle, …”

    Is that some snarky little comment implying that I’m some kind of unprincipled greedy type ?

    Well I only have one comment on this: whose principles and which principles, Chris ? Do you have some license that entitles you to be the chooser and arbiter of principles ? Is this why you didn’t answer and won’t even acknowledge my question to you about whether you have a ‘superior’ moral schema ?

    “You probably need to read a bit more about economic rent and also economic efficiency.”

    Possibly. And possibly I need to read a bit more about tensors and Riemann spaces too so that I could read and maybe begin to understand Hilbert’s and Einstein’s original papers on General Relativity. Or maybe read a bit more about David Mermin’s concepts regarding ‘explanations’ versus ‘descriptions’. Or even try to catch up with the Hilbert Program and find out where, if anywhere, it stands today (though I may need to consult with Donald Oates about that one).

    So much to learn, so little time.

    “You didn’t produce your property’s economic rent (that comes from community influence),…”

    So you reckon it was the ‘community influence’ that saved up the deposit, and worked hard to pay off the bank loan thus helping to maintain and increase property values the way we’ve become used to. And if I hadn’t done that, and nobody else had, nonetheless a pool of unsold property would not have diminished any property values. Gee, there’s lots of folks in the USA and UK who would like to know that.

    “…who should end up getting your property’s economic rent, when you pass on I mean?”

    What kind of question is that ? Do you really think I am the least bit interested in anything that happens after I die ?

    But if you mean do I have a preference as to whom the ownership of my property passes when I, and my co-owning partner, die ? Because if it’s me first, then ownership goes to my partner.

    But whichever of us is last, and assuming we haven’t had to use the results of selling our property to pay for our last few years of aged care (thus foresightedly removing that cost from taxpayer funded welfare – would that benefit anybody d ‘you think ?), then ownership of our property will be passed to the RSPCA. No, human beings can never change.

  76. Chris O’Neill
    February 7th, 2016 at 17:52 | #76

    @GrueBleen

    “What is the reason for that last condition?”
    Err, because i want to impose it because i can ?

    So purely arbitrary and determined by self-interest.

    mainly because if the value of my property increased when the value of others didn’t then I would clearly have been the benefactor of some individual luck

    and also some individual luck compared to those whose property value hasn’t grown much at all or who don’t own any property at all (lazy sods I know).

    I’m some kind of unprincipled greedy type ?

    There may be some truth in that.

    Is this why you didn’t answer and won’t even acknowledge my question to you about whether you have a ‘superior’ moral schema ?

    I don’t answer gotcha questions.

    And possibly I need to read a bit more about tensors and Riemann spaces too so that I could read and maybe begin to understand Hilbert’s and Einstein’s

    Har, har, very funny GrueBleen. You’re such a comedian. I could remind you that the subject being discussed here is economic rent and economic efficiency as they relate to property ownership, not relativity, but my reminder would probably fall on deaf ears.

    So you reckon it was the ‘community influence’ that saved up the deposit

    You appear to have a strong desire to not know what economic rent is (heaven knows why) but just in case you do, the economic rent on your land is the real capital gain on it, not what you paid for it.

    thus helping to increase property values

    The increase in your land value had very little to do with you owning it. It could have been left vacant for the past 30+ years and still achieved the same increase in value.

    if I hadn’t done that, and nobody else had

    OK. So you agree that the value of your property depends on what everybody else does too. That’s my point.

    Do you really think I am the least bit interested in anything that happens after I die ?

    then ownership of our property will be passed to the RSPCA

    So you do have an interest in what happens to it after you die. It’s confusing when you contradict yourself. The point is that the community should have a say in what happens to the part of the value of your land that it created.

  77. Ivor
    February 7th, 2016 at 18:02 | #77

    hallelujah

    Tory toy boy Turnball has turned around.

    No GST.

    So who will they go for now – anyone but capitalists I reckon.

  78. Chris O’Neill
    February 7th, 2016 at 18:15 | #78

    @GrueBleen

    just buying the shares (as I bought my property) so it’s all unearned

    Very little of the growth in share value comes from community investments, unlike the growth in land value. Every share is subject to capital gains tax when it is sold, unlike PPOR land.

  79. Chris O’Neill
    February 7th, 2016 at 18:27 | #79

    @Ivor

    So what date would you pick to go back from today, 10 years ?????????????

    The point is, Ivor, that there is nothing valid about picking any particular date which just happens to suit your argument. You are reminding me of the global warming denialists who like to come up with phrases like:

    “no statistically significant warming since 1998”.

    That, of course, is a blatant cherry-pick. Yours is a cherry-pick too, even though you want to ignore that fact.

    I’ll leave you to your favourite method of share ownership, the industry super funds. Let me know how you go when you inform them that the Australian share market has shown no growth over the last 10 years. I have the feeling they won’t have a great deal of interest in listening to you.

  80. Chris O’Neill
    February 7th, 2016 at 18:35 | #80

    @GrueBleen

    she was being shamelessly ‘duchessed’ by John Winston

    Thanks. There had to be some motivation for her bizarre arguments.

  81. Ivor
    February 7th, 2016 at 18:42 | #81

    @Chris O’Neill

    So what date would you pick to go back 10 years from today.

  82. Chris O’Neill
    February 7th, 2016 at 18:51 | #82

    @derrida derider

    at the very most a nice little earner for the government

    Is there something wrong with having a nice little earner?

    The reason is twofold – first, heavy ones are easily evaded

    Taxes involving land are pretty difficult to evade. If the tax isn’t paid, the government can seize the land. Councils do it regularly.

    Secondly, you’re taxing a once-in-a-lifetime event, unlike a very common event like earning and spending.

    I don’t know why that’s a problem.

  83. Collin Street
    February 7th, 2016 at 19:48 | #83

    > So what date would you pick to go back 10 years from today.

    The answer to the question doesn’t mean what you think it means. We can’t say, “[answer]“, because you’ll take it to mean something it doesn’t, we can’t say “[answer that isn't right but would be taken by you as having the implications the actual answer actually has]“, because then you’ll protest — and rightly — that the answer isn’t correct.

    And if we say — as people have — that you’re asking the wrong question you’ll ignore that and keep asking anyway.

    There’s nothing he can tell you that will convey to you how he sees reality.

    So you’re stuck. You’ve trapped yourself in your own conceptual frame. Which would be fine if it’s correct… but it might not be, and you have no way of testing it.

    [the errors you make are not generally the errors you expected to make, because you guard against the problems you know about. Your actual errors will show in ways you aren’t expecting, aren’t looking for, and generally won’t have a response to; this little “eh?” moment is what you look for, so you can recognise the errors you’ve actually made and fix them. Learned skill, this, like most of the things that go towards being “clever”.]

  84. Ivor
    February 7th, 2016 at 21:43 | #84

    @Collin Street

    You objected to the dates … you made the accusation, you created whatever framework, so

    What date would you pick to go back 10 years from today???????

    or in the alternative …

    do you now accept that Feb 2006 is a relevant date to be 10 years from Feb 2016?

  85. derrida derider
    February 7th, 2016 at 21:54 | #85

    @Chris O’Neill
    Chris, the point is that death duties raise too little revenue to do their intended job of soaking the rich. Of course land taxes are hard to evade – but that just means that where there are heavy death duties the rich try not to die owning much land, at least directly. Only foolish English aristocrats insisted on keeping their ancestral home to the death so that Labour governments got it.

    And the point of my ‘once in a lifetime’ comment is that the stock of assets held is small relative to the flow of 80+ years of earning and spending, which is another reason death duties don’t raise near as much money as people tend to think.

    If we were starting with a blank slate I’d have death duties as part of my tax system, but my point is they’d only ever be a fairly small part,

  86. February 7th, 2016 at 23:02 | #86

    Thank you Chris O’Neill on February 7th, 2016 at 01:22 and BilB on February 7th, 2016 at 08:47

    Chris O’Neill wrote:

    [Democrats Senator Meg Lees] put up some absolutely bizarre arguments. Like a card player saying she didn’t know what to do when she held all the aces.

    Another more recent example, is Senator Barnaby Rubble – sorry, Joyce, who promised at the 2004 Federal elections to oppose the privatisation of Telstra (or was it then still called ‘Telecom’?). After he got elected, he voted for privatisation, contrary to what he had told voters. I recall that his one vote allowed the legislation to pass the Senate. If he had voted against privatisation, Telstra would have remained in public hands.

    Of course, as he did with the GST, Howard said almost nothing about Telstra during the 2004 elections and again, after the vote, claimed a mandate for a policy, about which he and the newsmedia had intentionally kept the public in the dark during the previous election.

    For his part, Kim Beazely refused to commit Labor to reversing privatisation should Labor have won the following election.

    On the GST election rort, I found myself unable to find any information on Hansard about the 1998 committee to supposedly ‘investigate’ ‘tax reform’. I am sure that an exhaustive search through the 1998 Hansard pdf files would reveal the information, but does anyone know the name of Liberal member, who, upon realising that it was only a vehicle to promote the ‘never ever’ GST, resigned from that committee?

    Bilb wrote:

    … I’ve saved your account so that I can add the next stage in our passage towards the Friedmanian economy.

    Thank you. Please feel welcome to visit my own web-site, candobetter _dot_ net which is linked to, over to the left.

    On that site, we try to cover a range of topics which we consider critically important, but which are not given space on any other Australian blog site of which I am aware.

  87. Chris O’Neill
    February 8th, 2016 at 00:42 | #87

    @derrida derider

    the point is that death duties raise too little revenue to do their intended job of soaking the rich

    Sounds like your objective is revenge on people for being rich. Well, class warfare might be a lot of fun but I don’t think it should be a government objective in itself. A far more appropriate objective for a government is to raise taxes in equitable and efficient (in every sense of the word) ways. Hence death duties, especially death duties on land.

    that just means that where there are heavy death duties the rich try not to die owning much land

    So how does that become an argument for having zero tax on PPOR land? That’s like saying we should make income tax flat because the rich are good at avoiding tax! And even if death duties were so high as to encourage the rich to dispose of land there should still be economic rent tax on the disposal of land which should be the same rate of tax anyway. Death should just trigger the same economic rent tax as a normal transfer.

  88. Collin Street
    February 8th, 2016 at 05:49 | #88

    Ivor :
    @Collin Street
    You objected to the dates

    I did no such thing. Check the names: things with different tags attached are written by different people, you know [have I told you this before? I may have]. I am trying to explain to you why you’re running into communication problems, which is as I said because you’re trapped in your own conceptual framework and so don’t read what people actually wrote, leaving people with no way to communicate how they think your conceptual framework is in error.

  89. Troy Prideaux
    February 8th, 2016 at 08:05 | #89

    Ernestine Gross :
    Since the thread includes the ‘new tax ideas’, I venture to propose a revenue tax on multinational corporations. Furthermore, I suggest it is ‘efficient’ in the sense that I know it is extremely costly to check on income earned for any corporation but particularly for multinationals. Revenue, on the other hand, is something that can be monitored via physical and electronic cash registers. (It works for a well known shopping mall owning corporation.)

    This is a very interesting idea – I like it!

  90. Ivor
    February 8th, 2016 at 08:25 | #90

    @Collin Street

    I did no such thing.

    So if you did “no such thing” then you obviously did not make any accusation of cherry-picking.

    Maybe you would like to explain that communication that you made.

    Instead of flaying around with all manner of diversions why don’t you just retract your false accusation.

    If you do not think “cherry-picking” was what you actually wrote – what did you actually write?

    If you now accept the dates I used then say so. Is this communication from you possible?

  91. February 8th, 2016 at 09:02 | #91

    Very few people realise how very rich the rich people are in this country. If string cost a thousand dollars a millimetre the poorest 10% of Australians could afford enough to measure the joint of their little finger. The average household would have under half a metre. Gina Rinehart’s allocation would stretch from Federation Square to Tullamarine Airport, as the crow flies. Do the math.
    Gina Rinehart and the Pratts, together, have 27 1/2 billion dollars. That’s ever so slightly more assets than the bottom 14% of Australians put together, right there.
    Rich people in this country sit on heaps of treasure like Smaug on his hoard, flying out to attack anybody who wants to diminish their wealth by a farthing. Their influence distorts our politics, our economics, and our media. Politicians, and ex-politicians, compete to lick their boots.
    Bring back death duties for estates over, say, fifty million dollars. It’s not as if Gina want to pass it on to her children anyway.

  92. February 8th, 2016 at 09:04 | #92

    Ok, looking at the fin review piece I see I’ve been using outdated figures. Make that halfway to the airport. Still.

  93. Ivor
    February 8th, 2016 at 09:21 | #93

    @ChrisB

    How far would $200 trillion of global debt reach?

  94. derrida derider
    February 8th, 2016 at 11:20 | #94

    Jeez, Chris – I’m an old Georgist who believes the unearned increment of unimproved land is a pure rent that could and should be taken away by governments. Yes, tax land heavily – but a regular property tax has got little to do with arguments about death duties.

    My purpose here is to hose down nice lefties who think you just have to put big death duties on “the rich” to transform society. As should be clear by now I’m not a strong opponent of death duties but a lukewarm supporter. Lukewarm, because their effects – good and bad- are just much smaller than people think; death duties confiscating much of the estate above a threshold of $50m would yield negligible revenue, though may perhaps entertain the populace by creating even more perverse behaviour among family dynasties than we already see.

  95. Ivor
    February 8th, 2016 at 12:20 | #95

    @derrida derider

    Unfortunately you are the one who needs to be hosed down.

    Proposals for death duties over a threshold are supported by progressives across the political spectrum. So where is your evidence of some “big death duty”????

    Only capitalists lust to keep their ill gotten gains even in their graves and part of their project is to argue for a threshold of an enormous $50 million. What is the point of pretending you support death duties if it is handicapped by such a self defeating provision?. These same people often call themselves Georgists.

    A properly designed death duty – or probate tax – would go a long way to countering inequity.

    However it will come as a bit of a shock to you, but the better elements of Australia’s left realise that it is far better to correct injustice as it occurs and not rely on taxing the damage after it has been done.

    Under socialism there will be no need for death duties.

  96. Chris O’Neill
    February 8th, 2016 at 13:03 | #96

    @derrida derider

    a regular property tax has got little to do with arguments about death duties

    Not that little. Death is one of the best opportunities for taxing economic rent – hence its relationship to death duties. It’s all very well to sit in an armchair and tell everyone there should be a general land tax, but as long as imposing a new land tax causes a capital loss to the owners, you can expect it to be fought tooth-and-nail by those land owners. You might be interested in hypothetical tax systems that have little or no chance of being imposed any time soon but I have some interest in the issue of political feasibility.

    death duties confiscating much of the estate above a threshold of $50m would yield negligible revenue

    There’s no reason why taxes assessable on death, such as on economic rent, have to have a threshold anything like $50m. As far as economic efficiency is concerned, for example, there is no need for a threshold.

    And the point of my ‘once in a lifetime’ comment is that the stock of assets held is small relative to the flow of 80+ years of earning and spending

    It depends on which 80+ years of earning and spending you are talking about. If you’re talking about 80+ years of the heirs’ lives then the net present value of the inheritance is worth at least as much as the net present value of the earnings from the assets that the heirs inherit, so the value of the inheritance is worth a relative lot.

  97. Chris O’Neill
    February 8th, 2016 at 13:33 | #97

    @Ivor

    @Collin Street: “I did no such thing.”
    Maybe you would like to explain that communication that you made.

    I can see that mixing up identities is another one of your cognitive failures.

    But presuming that you’re still whining about being accused of cherry-picking to me with:

    Feb 2006 is a relevant date to be 10 years from Feb 2016

    I don’t accept your presumption about 10 years.

    Obviously the point about global warming denialists cherry-picking 1998 as a starting point when it suited them (it doesn’t generally suit them anyone) was lost on you. So I doubt you’ll be capable of getting the point about timing cherry-picks anytime soon.

    And for some reason you choose to ignore the significance of the fact that your favourite method of share ownership, the industry super funds, were invested in Australian shares on the 1st February 2006. You don’t seem to have a problem with them owning Australian shares on the 1st February 2006 but woe betide any individual who also owned Australian shares on the 1st February 2006, according to you. Just another one of your cognitive failures I guess.

  98. Ivor
    February 8th, 2016 at 14:07 | #98

    @Chris O’Neill

    You do not have to accept 10 years but it is a industry standard.

    And not accepting industry standards does not allow you to falsely accuse others of cherry-picking.

    What period do you want – and what is an example of it being used on most financial websites.

    All the rest of your smoke and mirrors can be ignored.

  99. Ernestine Gross
    February 8th, 2016 at 16:13 | #99

    @Ivor
    The thread has been derailed. I assume it doesn’t matter now if I add a line.

    On your intertemporal spot check of ASX index data, I agree with you, you weren’t cherry picking. (Even if you had picked a number from August 2007 and compared it with a number from 2016 to arrive at a non-negligible negative rate of return, I would not accuse you of cherry picking. I would first assume you use a few numbers to raise some questions – off topic though.)

  100. Collin Street
    February 8th, 2016 at 19:56 | #100

    So if you did “no such thing” then you obviously did not make any accusation of cherry-picking.

    That’s correct. The posts making the accusations of “cherry-picking” were made by a person using the handle “Chris O’Neill”; the posts suggesting that you appear to have difficulties with processing unexpected information were made using the handle “Collin Street”. These are different people, to the best of my knowledge, and since I’m one of them — and to the best of my knowledge only one — I think my knowledge is reasonably reliable.

    Maybe you would like to explain that communication that you made.

    If by “that communication you just made” you mean my explaining why you are trapped by your own conceptual framework, then: Probably not, unfortunately.

    [“trapped by your conceptual framework” -> “ideas outside your conceptual framework cannot be explained to you”. If I’m right, and if your conceptual framework doesn’t include the idea of being trapped this way… then, yeah. You’re jiggered, aren’t you.]

    If by “that communication you made” you mean the accusations of cherry-picking: no, I cannot explain them, as they — the “communications I made” concerning cherry-picking — do not exist. Those comments were made, as I said, by “Chris O’Neil”.

    Instead of flaying around with all manner of diversions why don’t you just retract your false accusation.

    I have made no false accusations: see below. The accusation you are concerned by was not made by me.

    If you do not think “cherry-picking” was what you actually wrote – what did you actually write?

    I wrote that I think you are trapped by your own conceptual framework and unable to process ideas that you aren’t expecting, like the idea that the person who accused you of cherry picking and the person who accused you of being trapped by your own conceptual framework are different people.

    If you now accept the dates I used then say so. Is this communication from you possible?

    This, also, is the wrong question, because it’s rooted in the assumption that I have anything to do with the discussion on the applicability of the dates posted. I have said nothing on that topic.

    Are we clear? You are conflating comments made by two different people. And are continuing to do so, despite the error being explicitly pointed out to you.

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