We can do this the easy way, or…

When those words are said, you never assume that this way is easy; there is always a cost involved.  The cost is just less than the alternative.

There are four aspects of governance we need to change: the state must tax the state, and only the state; the people who pay the state’s bills must have a upper house that represents them and only them; the responsibility for discrimination must be held by the community and only by the community; and we must learn to value nature that is productive, and productivity that is natural.

This is the easy way.

I believe in a Tasmania that thrives in and because of adversity, that has an inclination to step out of its comfort zone and make something of itself.  That is our history, and it is our future.

Men and women were sent to Macquarie Harbour as the worst of the worst; they set about building the best boat hulls the world had seen to that point.  Making use of the exceptional natural resources that Tasmania had to offer, and combining it with technology and productivity.

And then government stepped on it.

Which also is part of the story of this place.   The clash between the frontier and the urbane.  At our best, we are personally engaged with the natural wonder of this place we live.  We work on and within the frontier, pushing back against the wild and growing from the experience. When we isolate ourselves from the elemental, the wild, the uncontrollable, the uncivilised aspects of life, it lessens us.  In isolation from the wonder that surrounds us we become insular, our self focus festering within our communities. People grow to miss something they cannot identify for they have no experience of it.  They seek to preserve nature rather than engage it, because the thought that they have kept something ‘other’ gives them comfort in their civilised emptiness.  Yet that very act distances not only themselves but others from the very thing we as a community missing when we disengage with the frontier.  Communion, in community.

That then is the point of exhortation.  Engage the place around you, with the people around you.  Communicate more.  Achieve more.  Explore more.  Take more risk.  Have influence.  Be influenced by those you want to emulate.

For we do find ourselves in a difficult place, make no bones about that.  Our federal government spends 10% more than it takes in, vainly projecting a better tomorrow that cannot come while it continues to do so.  Our state government does the same.  Do not be the third link in a chain to disaster.  Hope for a better future, but don’t count on it coming tomorrow.  Do not count on a new government doing a new thing.  Your future gets better each day you produce more than you spend, but that means working a bit more today, and a bit more tomorrow.  As we each do that, each day, Tasmania’s bright future moves a day closer.

The Swagman’s Ghost

Once a jolly swagman
Camped by a billabong
Under the shade of a coolabah tree
And he sang as he watched
And waited till his billy boiled
‘You’ll come a Waltzing Matilda with me’

It’s a song etched in the memory of most every Australian. Yet seldom do we stop to listen and ponder the words within. Like many song that have been handed down through the generations, this song has much that is lost to time.

We pass by the billabong without hearing the words of the ghost.

Yet the song describes the archetypal Australian struggle; the swagman against the squatter. A struggle that is just as current today as it was when the song was written. Today, the squatter, backed by the law, still wins against the swagman as a direct result of his windfall.

Still today, everyone wants their bit of something for nothing. Still today, because the swagman takes his ‘something for nothing’, the squatter gets away with gouging orders of magnitude greater. And still today, the swagman still ends up ruined.

For the sake of a sheep. After that point the difference is only a matter of scale. With the power of the law, the power of the systems in place, brought to bear, there is only ruin for the small. We don’t seem to learn that it is through the chinks within the systems that are established that the benefits flows, without labour or risk, to those in position to take advantage of them. The beauty and the terror of our system is that not despite but because these flaws are open to all, nothing is done about them.

Because so many do well from owning a home, we seem to forget that society still divides along the line of those who hold land and those who don’t. We see those who take best advantage of the system as good business, the same business we are in but at a different scale. Those who act to preserve these advantages act ‘in everyone’s interest’.

In everyone’s interest; At everyone’s cost. To the advantage of the few, at the cost of the many. For the sake of a sheep. Behind the strength of the law.

The cost, at any one time is not too great. A few percent a year. Each year. Year after year. Generation after generation. Wealth that would have been built never is. Changes for the better that would have occurred never do.

All for the sake of a sheep.

The fragile nature of the gift

To receive a gift is a precious moment; no less the giving of one.  To give willingly, without expectation of return provides a momentary glimpse of the greatness that is inherent within mankind.  The gift embodies self-sacrifice.  Whether it is from a known loved one, or a total stranger; whether in time of plenty or time of need, it is a beautiful act.

Nothing denigrates a gift more than a sense of an entitlement to that gift.  With our children, it is this delicate balancing act teaching this.  There is a sense that you cannot give the same thing, the same way, too often or it becomes an expectation, and loses it’s nature as a gift.  Thus we avoid giving gifts when asked, we are creative in our giving, and we speak disapprovingly into those times where a child reacts negatively when gift is expected but not received.

The perspective of the gift sheds an interesting light on the contention within our culture over the provision of public services.  The vast majority of those producing wealth in this, and other nations feel to one degree or another that they are happy to help out through taxation others in need.  What grates is not that this help is given, but that it becomes expected, demanded.  The gift they give is not honoured; at some point it is no longer a gift.

Government inserts an immense dissociation between giver and receiver.  There is no ‘person’ giving,  just the amorphous, bottomless pit of money that is the government.  Critically, there is no relationship, and without that relationship, there is no sense of the sacrifice involved.  The gifts people receive become perceived merely as outworking of the system.

Confounding the issue further is the systemic lack of a discrete point at which people’s obligations as members of society end and their generosity as gift givers begins.  There is no clarity, just an ever changing taxation system that morphs to reflect the political aspirations of the government of the day.  This ambiguity about what is appropriate leads to the situation we see where those who are paying in to the system feel they are paying in too much, and those that are receiving from the system feel that others are paying in too little.

Part of the beauty of land tax is that it clearly indicates this boundary.  We are paying the community for the right to sole use of a limited and valuable resource.  There is no gift involved; the returns from this are equally distributable to all.  We already get our return from our expense in the land we occupy; what happens to the money is then the choice of the community.  Gift giving returns to the personal, relational act that it is supposed to be.

Transition point: where taxation becomes theft.

I was asked yesterday whether I ‘subscribed to the view’ that taxation was theft.  I indicated at the time using a few more words that ‘it depends’.  The question was prompted by an observation I made that there were three methods of aquiring something not your own; the receipt of a gift, the exchange for something of yours, and theft.  So starting from that basis,  let me rearrange the question a bit so it can be answered.

Rather than the inherent ‘Is taxation theft?’, lets consider ‘At what point does taxation become theft?’.  Or similarly, ‘At what point does taxation become slavery?’

First lets take the extreme case for a simply show that it can be.  All capital is charged 100% taxation, all income is charged at 100% taxation.  The first is theft – where everything you own is taken from you by force.  The second is slavery – where your labour is not your own, even if your needs are provided for to a greater or lesser extent.

So already a couple of observations; it is possible for taxation to be theft; dependant on the target of taxation, slavery may be a better description.  I’ll leave aside the issue of description for now however, and stick with the original term of theft.

At what point does taxation start to become theft?  Obviously part of our tax goes towards things that we value; a secure environment, government services, education, health, and so forth.  So there is a sense that there is an exchange for value going on.  There is also, for many of us, a contribution above this that we are happy to make because it helps support those less well off than we are, or those who are momentarily so; a part of our taxation is a gift.  So if we add up the benefit we receive from community, and the gift we are willing to give to the community, we reach a figure that represents the most we, individually, can be taxed morally.  Any taxation beyond the sum of our benefit and our willing gift is theft.

If we take what we know about land value – that it represents the value we receive from natural resource and the community – then we can come reasonably quickly to a personal calculation of whether we are being stolen from.  Take the current value of the land (just the land, not house) you own and multiply it by the relevant loan rate.  That gives a rough and ready approximation of the annual benefit the community is providing you.  Add to this the amount you are willing to gift the community through the government.  Anything over that is theft.  Anything less than that suggests you may not be covering your share, or giving the gift you are willing to.  Ok, so its a rough and ready calculation, and there are probably lots of things you could add or take away from these.  Mostly it provides a ballpark figure to consider.

But it also illustrates that this notion of theft is extremely personal.  The amount you are willing to give the community through the government is going to vary wildly from person to person; from zero on up.  That however, is a choice for you to make, and beyond that point, at each individuals discretion, taxation is theft.

Land ownership : a subtle misnomer

We commonly accept that land is owned in our culture.  If we want to get picky, and most don’t, we would say that title to land is owned.  But we do that without realising that there is actually a difference, a significant difference, between the two.

At the most basic level, something is ours because we made it; because we traded some we made for it; because it was gifted to us.  The act of human creation is actually a critical prerequisite for something to be able to be owned.

Land is different.  Getting away from the complexities of our culture and systems, what we call ‘ownership’ of land is actually an agreement with others regarding the right to use that land.  What today we call a ‘title’.  What we own is the monopoly, not the actual land.

Land title has more in common with a set of taxi plates, that it does with the taxi itself.  The plates provide the license to operate.

Land title has more in common with a fishing quota, that it does with the ocean in which fish are caught.  The quota grants a licence to catch a certain amount, or to operate a certain amount of equipment.

While this may seem semantic, it has significant consequences.  It goes to the heart of why land value is a suitable basis for council rates, and why the value of improvements there on is not.

Consider this.  If rates go up on the value of land, the value of land will drop in response.  If rates go up on the value of improvements, the cost of those improvements is increased.

In different words.  If an ongoing charge is levied against the possession of land title, the capital value of the land will drop proportionally in response.  If an ongoing charge is levied against something that we build, its cost will be compounded.

Again.  If rates are raised on the value of land, all it does is change a capital cost into a ongoing cost.  If rates are raised on improvements, they increase the cost of those improvement.

One of these things is not like the other.

The Point One Percent: Changing the Rules of the Game

Its hard at time to generate interest in resolving systemic weaknesses.  But consider.

There are those who unknowingly take advantage of systematic weaknesses for their own benefit.  These people are not doing wrong knowingly, merely acting on the stage set for them to their best advantage.  These people, in a rectified system, will be some of the biggest contributors we have.  It takes skill to find the best returns; if similar skill is applied to seeing that the best returns are to the advantage of the community rather than to its disadvantage, all will benefit.

There are those, fewer, that seek out systematic weaknesses for their own benefit.  These people knowingly take advantage of opportunities that cause the community loss.  We have come to know these people under the grouping ‘the one percent’.  These people knowingly and selfishly impose parasitic costs upon the community, and no tolerance for this should be shown.  And let me be clear; this is not limited to the rich and powerful, although the costs to the community are there disproportionately higher.  The same characteristic applies to those who abuse the welfare system as to those who abuse the land title system.   It is the attitude that is characteristic, not the wealth.  In a very real sense, the little cheat enables the big cheat to exist within society by establishing the sense that this sort of systemic abuse is common.

At the depths there are those who set out to introduce systematic weaknesses for their own and others benefit, at the cost of the community.  These, the ‘point one percent’, impose an insidious cost on the community far beyond their own benefit, for they enable all the parasitic behaviour noted above, intentional and unintentional.  There is a term we associate with these sort of actions – ‘big’.  Big government, Big business, Big environment, Big welfare.  ’Big’ as a descriptive term in this sense engenders a sense of access, of privilege, of undue influence; far more than simply size.  In fact it is quite possible to be large in scale without being ‘big’ in nature.  But that very scale offers opportunities that are not available to smaller players.  The possibility of changing the rules to your advantage becomes more significant and less costly than simply competing.

It comes down to this.  Poor systems lead to distorted outcomes.  Distorted outcomes lead to profitable opportunities.  Profiting from distorted outcomes results in parasitic loads on the community, and everybody suffers.

It has been estimated that the distortion in the real estate market due to the faults in the system we have cuts growth by somewhere between 1 and 2 percent a year.  Every year.  Not much?  That is a doubling in a generation.  And the changes being proposed to the rating system may well last that long or longer; we’ve had the current system for a lot longer than that.  Look around you and consider that if your parents had fixed the system when they were your age, the wealth of the community you are in would be double what it is now.

1 to 2 percent isn’t much.  Unless it happens year in, year out, as systems do.  Systems matter.

Rates and Rationales

The state government has recently issued a draft report into the rating bases in use in Tasmania; so recent that there isn’t yet a copy online.

I’m awaiting a copy myself, but in the meantime reports are that the state government is recommending that councils move from AAV to CIV, and not to SVR.

So.. a lot of acronyms and statistical hocus pocus in there.  What does it mean to you?  Surprisingly, even if you don’t own property, the differences matter.  So lets have a look at what they are, what they should be, and what preferences you should express to your local councillors.

AAV – Assessed Annual Value – important because this is the current system of assessing rates in 28 of the 29 councils in Tasmania.  Basically, every five years or so, the state government gets someone to wet their finger, stick it in the air, and pull a number out that represents how much your property would rent for.  In between times, this magic is performed without the wet finger; largely why people get a rude shock when rerating occurs.

CIV – Capital Improved Value – similar in many ways, but this time instead of representing how much your property would rent for, they hold it up a bit longer and have a stab at how much your property would sell for.

SVR – Site Value Rating – in this case, they wet two fingers and note the difference.  This is used to figure out how much your land would sell for if someone bulldozed the place and left it ready to build.

Actually, the people who do this have done it a lot, and are reportedly quite good at reading which way the wind blows.  Still, in many ways, how the magic happens is not particularly relevant.

So lets bring this back to a principled basis.  What do we want out of a rating system?  What do we not want?  Should rates be charged at all?  What’s the difference between rates and land tax?

I’ll summarise my answers here, and go into more detail over the next few days.

A rating system should:

• impose the greatest costs on those who receive the greatest benefits;
• provide a financial signal to council regarding how beneficial their decisions have been;
•  fully fund local government;
•  impose a natural limit on the expenditure of local government.

It should not:

• seek to provide welfare;
• tax wealth;
• advantage any group over another;
• allow individual advantage at the cost of the community.

Rates and land tax are both levies on the same resource.  Rates currently largely fund local government, and land tax currently funds a small fraction of state government.  The current variable imposition of land tax distorts the signals and impact of local government rates, and this distorting effect should be eliminated.