[Land-and-labor] Labor's History of Land for Public Revenue

[Lev Lafayette]

Origins and Early Days of the ALP

The last decades the nineteenth century was a turning point for the
Australian labour movement. The preceeding twenty-five years to the
crash of 1890 and the subsequent "bitter fight" had been one of relative
prosperity for Australian workers with an expansion in capital
investment. Trades Councils were formed through most of the colonies in
the 1880s with Intercolonial Trade Union Congresses held in Sydney,
Melbourne, Adelaide, Hobart and Brisbane. There was a strong move
towards a federation of union bodies, and historians note the influence
among the working class of books such as Bellamy's "Looking Backward",
Gronlund's "Co-operative Commonwealth" and Henry George's "Progress and
Poverty".

It is from the latter that this essay is based; for most who have even a
modicum of knowledge of Australian labour history, the distatesful
racism that permeated working-class organisations at the time is well
known. Consider the following motion put by one Mr. H. Barnett of the
Bootmaker's Union of South Australia at the 4th Intercolonial Trade
Union Congress in Adelaide in September 1886:


    "That in the opinion of this Congress the time has arrived when
immediate steps should be taken about the total abolition of Chinese and
Coolie immigration because - first, the competition of Asiatic against
European labour is entirely unfair; second it is well known that the
presence of Chinese in large numbers in any community has a very bad
moral tendency"



The fact that this motion was carried unanimously at that Congress
should serve as indication as the strength of opinion towards
"non-White" labour. It served as the first item in the "fighting" and
"general" platform of the Australian Labor Party in 1902, and was
repeated in the 1905 platform, through to the 1919 platform, the 1921
platform (where the "socialisation of industry, production, distribution
and exchange" was adopted) and so on, well into the 1940s and beyond. As
immigration minister, Arthur Calwell remarked in 1949: "We can have a
white Australia, we can have a black Australia, but a mongrel Australia
is impossible".

At the same time however, there is a less well-known history, one that
is far more noble. Returning once again to the 4th Intercolonial Trade
Union Congress of 1886 we find that there was another motion that was
passed unanimously, this time moved by Mr. A.G. Vagg of the Progressive
Society of Carpenters and Joiners, Brisbane:


    "That it is the opinion of this Congress that a simple yet sovereign
remedy which will raise wages, increase and give reminerative
employment, abolish poverty, extirpate pauperism, lessen crime, elevate
moral tastes and intelligence, purify government and carry civilisation
to yet nobler height, is to abolish all taxation save that on land
values".


The socialisation of land values was supported by a variety of different
organisations in different degrees; the Land Nationalisation Society of
the late nineteenth century and the Single Tax League being two obvious
supporters. As a means to more progressive changes, the Knights of
Labour also gave their support. When the Australian Labor Party was
established these values first saw their expression in item four of the
"fighting" and "general" 1902 platform with support for the
nationalisation of monopolies. In the 1905 platform this was separated
into support for nationalisation of monopolies as the second item and a
progressive taxation on unimproved land values as the fifth item;
notably this was the only element of the platform at the time which
indicated support for any sort of taxation - interstate tariffs were to
be determined by referendum.

In 1910 the Fisher Labor government introduced a Commonwealth Land Tax.
In the words of the Australian Tax Office:

    "In 1910 a land tax was introduced by the Commonwealth Government to
provide for the defence of the nation and to prepare for a major
increase in migration. The land tax was also introduced to encourage
large landholders to subdivide their land and sell it to settlers. Many
large landholders were wealthy Englishmen who would rarely visit or use
their land. Introducing a land tax encouraged them to sell to settlers
who would use the land productively."

In other words, the purpose of the land tax was precisely what Mr. A.G.
Vagg had intended some twenty years prior; to end speculation, to break
up the large holdings, to encourage productivity and therefore increase
wages and so forth. The influence of this idea was widespread; even the
opposition Liberal Party (as it was then called) lead by Alfred Deakin
remarked, quite correctly:

    "The whole of the people have the right to the ownership of land and
the right to share in the value of land itself, though not to share in
the fruits of land which properly belong to the individuals by whose
labour they are produced."

Initially it was widely considered that this would be the only tax.
Prior to that the Commonwealth gained finances through a customs and
duties, which contradicted the political objective of free trade between
the various states. For a few years it seemed that indeed this could
indeed become the case, as the Fisher government successfully
introducing a number of significant reforms such as the the first child
maintenance scheme, the establishment of a Commonwealth bank and a
Federal control of the money supply, and a citizen's militia.

However with the advent of World War I, the irrational loyalty to
British imperialism over German imperialism led to excessive
commitments. Now in opposition, Andrew Fisher infamously dedicated
Australia to "the last man and the last schilling", a bill that would
have to be paid in both money and blood - and eventually, with power as
military adventurists in the Party caused a split over conscription.

To make up extra income, in 1915 Commonwealth introduced personal income
tax and tax on company profits. The name of the Land Tax Office was
changed to Taxation Office to reflect the wider sources of public
revenue, which was followed with an "Entertainment Tax" in 1916 - which
remained in force until 1953, and a War Tax on postage stamps, which
remained in force even after the legislation was removed in 1920.


Forgotten Promises

Labor's opportunities to continue or expand this policy remained rare
after the split during World War I; indeed there was no real opportunity
at all. Conservative forced ruled throughout the second half of the
1910s, and throughout the 1920s. There was the brief Scullin government
of 1929 suffered not only the effects of the Great Depression, but also
the political fall-out which saw the Party split into three directions,
with the entire New South Wales branch under the leadership of J.T. Lang
being expelled, and the former Labor treasurer, Lyons, leading the
conservative United Australia Party. Labor was in opposition for another
ten years after that only again to regain power in the midst of the most
terrible war the world has known. Again there was little opportunity to
further something so supposedly prosiac as a land tax on site values.

Opportunity did exist after the war of course, and during that period
the Labor government engaged in a series of substantial reforms; such as
physical infrastructure investment such as the Snowy Mountain Scheme,
social infrastructure investment such as the free medicine program,
national unemployment and sickness benefit. Whilst the attempt to
nationalise the banking monopoly - carried out after a Royal Commission
determined that the private institutions did not engage in any serious
competition - contributed significantly to the downfall of the Chifley
govenment it is notable at no time did Labor even consider to remove its
commitment to a Commonwealth taxation on unimproved land values.

As Labor lurched in crisis in the 1950s, the ever cunning Prime Minister
Menzies took the opportunity to give the landlord class a free gift and
remove land tax from a Federal to state jurisdictions where they could
compete among themselves for the most appropriate rate - and thus also
provide interstate landlords the ability to acquire multiple properties
acorss different states each below the individual state threshold for
taxable values. Arthur Calwell was provided the opportunity to respond
to the Menzies' government decision in parliament and in his thirty
minute speech he condemned the government, reasserted the right of the
people to own the land and swore that Labor would return a Commonwealth
Land Tax when elected.


    "We of the Australian Labor Party have always believed that the land
is the patrimony of the people and that nobody has a complete and
absolute title to it. ...The land belongs to the people, and its use
must be safeguarded and protected at all times... We have always
believed in the land tax, and when happy days come again we shall
restore the measure imposing the tax to the statute book of this
country."


Devastatingly, it was the Labor Party itself which removed this
commitment. In the 1961 Platform, whether by administrative incompetence
or malice, the sixty-five year committment of the Australian Labor Party
to a commonwealth land tax on site values was removed, without the
deletion ever being taken to Conference for approval.

Some however were not so easily fooled. With the election of the Whitlam
government in 1972 there was perhaps the first opportunity for decades
for a Labor government to act without the pressures of an
all-encompassing war, post-war reconstruction or economic depression.
Clyde Cameron, Minister for Labor, raised in the very first pre-budget
meaatings the need to introduce legislation to collect the economic rent
of land instead of direct and indirect taxation on labour and capital.
The following year he wrote to Frank Crean, then Treasurer, again for
the introduction of Calwell's promise and a Labor platform item that had
never been defeated on Conference floor. It was, of course, conviently
forgotten with the the crisis of the Whitlam government in 1975.

With the election of the Hawke government in 1982 the opportunity once
again arose to lift the tax burden from productive labour and capital
and shift it on the use of resource holdings. Of course, Cameron had
long since retired and there were no strong advocates in the
parliamentary party who could advocate such a position. Economic
problems causes by monopolistic acquisition of resources don't go away
however and the Hawke government introduced a Capital Gains Tax which at
least partially mitigated against the most obvious rent-seeking
incentives. It was strongly opposed, of course, by the conservatives at
the time, but not reversed when the Howard government came to power.
Indeed the former Prime Miniser once wrote: "I do not deny that all
taxes, with the exception of those on economic rent and inherited
wealth, have some [adverse] employment and economic growth effects."

Of course, a capital gains tax is a far cry from a site rental. Land is
a different factor of production to capital, despite the attempt of
vulgar neo-classical economists and equally vulgar Marxists to conflate
the two. Stocks and bonds, collectible artworks and antiques are not the
same as natural resources. Not surprisingly, capital gains tax also
comes with a deadweight loss insofar it restricts trades (a "lose-lose"
situation), and increasingly comes with significantly administrative
losses as well with a collection of some 52 Capital Gains Tax "events",
a slate of exemptions and semi-exemptions, and variations in calculating
the amount owed.


Practical Effects

There are real and practical effects to creating an incentives to
acquire natural resources both in a fiscal sense and in a physical and
social environmental sense. Neither of these can be said are
particularly good for the Labor Party, let alone society as a whole.
Regardless of tinkering and the piling of complexity (and transaction
costs) a general principle can be stated; if you tax an item, you create
a disincentive for it to be produced or acquired. Thus, if the relative
taxation of natural resources is low compared to labour and capital,
then there will be a tendency towards monopoly as (a) it is fixed in
supply and (b) demand (or rather requirement) is relatively inelastic.
This itself contributes significantly to a boom-bust cycle, as
investment is encouraged in areas which do not result in the provision
of goods and services, leading to a crash in real estate prices, which
is gradually rebuilt.

On a fiscal level, if production is distributed between rent, interest
and wages (P = R + W + I) then wages and interest must suffer in
proportion as rent increases. This relative impoverishment creates a
public demand for government intervention to assist those at risk, but
when the private expropriation of resource rents has already been
accepted politically, taxation on wages and interest are required, which
further suppresses economic activity due to deadweight losses in trades
and compliance costs. According to the Land Values Research Group, since
1972 the total loss to the economy as a whole since 1972 has been $1
trillion further "[u]nder existing taxation arrangements, labour and
capital fight over the 40% of GDP remaining from earned incomes after
28% of GDP has been taken from them by taxation and after 27% of the 32%
of GDP comprising publicly generated resource rents has been creamed off
by private interests."

These destructive fiscal effects have a very real effect on Australian
demographic culture. The quest for economic land, or location, drives up
land prices and reducing housing affordability. Working people then
retreat to the suburban fringe, places which are notorious for their
lack of community and physical infrastructure. In splendid isolation an
"us and them" fortress mentality becomes a norm which was most clearly
displayed in the 2001 "Tampa" election. Labor's surprising loss is
indisputably a result of swings against the party in the working-class
suburban fringe, which was most prone to racist fearmongering.

There are two schools of thought about what Labor should do about this.
One argues Labor must adapt to these circumstances and engage in
populist condemnation of asylum seekers, downplay commitments to
multiculturalism, the environment and so forth and, in general,
encourage and seek "aspirational voters" - whose aspiration is private
wealth and public poverty. The other body of opinion argues that Labor
should seek to change those conditions as they are destructive to both
the party and to the country. Trivial economic analysis over the past
elections shows that Labor's vote has been increasing where there is
existing social infrastructure and a relatively higher population
density.

But will the Australian Labor Party do this? Will they create the right
incentives to encourage cities to become more compact, with high quality
buildings and a high density of physical infrastruture, all of which
help develop a civic consciousness? Will Labor offer a massive shift of
the public tax burden away from the working class and on to the landlord
class? Will Labor ever re-instate its sixty year policy of a
commonwealth land tax on unimproved site values, so that those who hold
a resource must pay the community the privilege of that exclusion?

Sadly, I believe it may be some time before this occurs. As the famous
American civil libertarian and rights lawyer Clarence Darrow wryly
remarked:

"The single tax is so simple, so fundamental, and so easy to carry into
effect that I have no doubt that it will be about the last land reform
the world will ever get."