Pop the champagne corks because this week we’re free.
Free to finally start working for ourselves.
Because up to the end of last week, we’ve all been working for the government.
Every year I take a little time to calculate Australia’s Tax Freedom Day.
It’s the day in the year when we are free of the government tax burden. The day when we finish paying our dues and can start paying ourselves.
And it’s falling later very year.
Last year Tax Freedom Day blew out yet again, under a conservative government.
And this year the Liberal party is on track to become the largest tax and spend government in Australia’s history.
There’s just no stopping it, it seems.
Australians are led to believe that it is a Labor government that taxes them more.
But it isn’t true.
The facts don’t bear this out.
Take a look…
Australia worked a total of 137 days for the government
This year our burden is greater than ever, with Tax Freedom Day falling on 18 May.
From 1 January, the nation worked until 17 May, a total of 137 days, solely for the government.
And we’re the lucky ones. If you worked in the UK, you’d still be working to clear that debt — till 12 June in fact. In France they’re working for the government almost to August.
But there is a way towards reducing this burden.
The clues can be found in the origins of our nation’s capital, Canberra, if anyone wants to follow that through.
Our fathers of Federation wanted to build a new capital city, somewhere between Melbourne and Sydney.
But they knew once the location of the new capital city became known, insiders would buy up all the land in and around the location.
They had to find a way to thwart the speculators.
So our fathers of Federation chose to collect the land rent for our new capital city, a rent that naturally arises when we all come together to live.
Collect the full land rent and there is no land price to speculate in.
Not only that, the land rent could then be used to fund the building of this great new city.
That vision of our founding fathers never really came to fruition. It took decades to settle on a site for the capital and the personnel changed. The original vision was lost.
It was badly implemented, with site values only being assessed every twenty years. Which meant there was capital gains to be had, exactly what our founding fathers at Federation didn’t want!
But the original vision for Canberra opens your eyes to an alternative to taxing wages and business profits.
Governments could, if they wanted, start collecting the land value to fund services.
Could land value be the solution?
Potentially there’s no need to collect any taxes!
In one swipe, the size and the intrusive power of government would be massively reduced. Huge resources are wasted on the tax system, as it is now. The whole army of Tax Department officials, snooping into your private affairs could be done away with.
The great defect in our taxation system is that taxes fall heavily on the productive economy and leave practically untouched the increases in the community generated land value.
The mantra of conservatives the world over is ‘smaller government and less taxes’.
They know they could have that in an instant.
It wouldn’t require anything special to do. Here in Australia, in a sense, the infrastructure is already in place.
Your council rate bill has the land value on it. All that’s left is to charge the full yearly rental value.
Do that and you have no need for taxes, nor for big intrusive government.
The conservatives can have it all, but they just won’t go there…
I’m not trying to push a barrow with this, but you do need to understand this process.
Because once you do, it will make you a better investor.
When land is not taxed, and continues to have a price, people will speculate in it. Therefore, we must get the boom and then bust of the real estate cycle.
Knowing that is your investment advantage. Only the timing remains in question.
Finally, I hate ending on a down note and to be the bearer of bad news. Although I said you could relax this week and finally start working for yourself, that’s not entirely true.
For most of us, once we’ve worked hard for the government, we then start working hard for the bank, to pay off our mortgage.
I do hope we all get some free time to work for ourselves come October, November!
Now here’s something to think about.
Can you imagine how different your mortgage would look if land ceased to have a price?
Anyway, you can read the full Tax Freedom Day report, here.