16 Oct 09 John, a ratepayer, replied to my HCC election pamphlet advocating Site Value Rating, and a civil exchange has followed. It is important in the context of the “User Pays” debate, which is gathering momentum, so I add it here:
John Asks: Leo – What is the purpose of rate collection by the local Council? It is to provide a sum of money considered to be necessary for the maintenance, improvement and additions to infrastructure, provision and support of recreational facilities, collection of garbage etc. The Council decides how much is needed and sets rates accordingly. It is not the function of Council to impose wealth or income taxes which is the prerogative of Federal government.
If we are agreed on the function of the Council, then we will also have to agree that the actions of the Council are for the benefit of everyone living in that Council’s area: our environment is maintained, our roads mended, our garbage collected and so on. Some of us may choose not to avail ourselves of some of the other facilities provided. I don’t use the aquatic centre but it’s there if I wish to. But by and large we all benefit equally. It follows that ideally rates should therefore be charged on a per capita basis. Each of us receives the same services and opportunities, so each of us should pay the same amount. User pays, or as near as we can get it. Rates should have nothing whatsoever to do with how much our assets are worth or how much income we have.
Rates are levied on both businesses and households. It is the latter we are concerned about here, and since charging per capita has it’s problems a compromise is to charge per household and that should be done by a flat rate levied per household, with the reasonably valid assumption that each residential property owned equals one household – tenants pay indirectly through the landlord. Not perfect but much fairer than AAV or your proposal to levy rates on property value. Your idea would still mean that people in my position would pay much more than people who live in less desirable areas, and I would therefore be subsidising others who are likely to be more wealthy than I am. I am bewildered that you cannot admit to the gross inequity in that. Cheers, John
Leo replies: Hi John, Our difference is you want “User Pays”, and I want “Beneficiary Pays”. Most property owners, who have benefited enormously over the past few years, now want to move to “User Pays”. That’s a perfectly rational decision, taken in their own interests. But it is unfair, and I can’t support it.
I advocate a system that is fair to everyone, with no favours or privilege to anyone. For example, compare home owners against renters. 25% of Australians now rent. Under User Pays, both householde will pay the same amount. But homeowners will continue to receive the benefit of land value increases. Renters will not receive that. The result will be a larger gap between rich and poor, a more unequal society, and eventually an uprising by a whole group of people systematically excluded from the gains of our society. It could get very ugly, indeed.
John, consider Battery Point, where you live , I believe. The millions of dollars being spent around Sullivans Cove will result in far higher land values in your area. Under the present system, you and your neighbours will pocket those gains (as part of your net wealth), while it is paid for by taxpayers throughout Tasmania. That has already happened, with the rehabilitation of Salamanca Place, Elizabeth Wharf, etc. Rates levied on land value will recoup just some of that unearned gain, and use it for the benefit of the whole community.
Ideally, John, there would be no need for rates at all. If a full Land Value Tax was implemented, then all services would be paid from that (at whatever level of government it is collected), plus all of society’s other needs. We could then abandon destructive taxes such as Income Tax, Payroll tax, Stamp Duties, GST, etc.
The principle is: “What is created by the community, belongs to the community.” Conversely, “what is created by me, belongs to me.” That would reward enterprise, encourage initiative and hard work, and pay for all of things we now say we want, from hospitals to transport systems. The more services we provide, the more land value is created; more tax is collected (recouped is a better word; it is not a destructive tax), allowing even more services to be provided. It could be a wonderful upward spiral. I await Ken Henry’s Tax Review keenly!
Collecting the community-created value of land is not a wealth tax. It is returning to the community what is made by the community. AAV rating, on the other hand, is clearly a wealth tax. The bigger and better your house, the more you pay. It is a hangover from the days when socialist ideas permeated all sides of politics. It must be dispensed with.
So, I remain committed to my view that rates levied on land value are fair and equitable, but I do accept that hardship provisions must be part of the transition. I wonder if you will admit that you have received a massive windfall from your property value over the past few years. Compare your situation to the renter living down the road. How fair is that? Cheers, Leo
