This is a potential classic of clear and elegant writing by economists James Galbraith and other members of the Economists for Peace and Security.  It opens with the statement that

“Let me begin by noting that the realized budget deficit is an economic outcome, not a policy choice. So long as the economy faces high unemployment, there is no fiscal formula — no combination of tax increases and spending cuts — that can make it go away.”

Wow!  Bet that woke them up.  The whole piece is wonderful, the height of reason and mature reflection.  But best of all is the bit I copy hear about the need for taxes on land and other ‘economic rents’.

Economists from Smith to Ricardo to Mill understood that fixed investments, however useful, do not generate many permanent jobs. What creates jobs is the revolving capital that supports payrolls. A tax policy aimed at supporting employment would shift the tax burden away from labor, and off of short-term capital, and place it instead on long-term capital accumulations. If this reduces the investment in fixed capital that is desired for other reasons — in particular, investment with broad public benefits — then that sort of investment should be done by public authority, funded by an infrastructure bank.

Thus as a general rule fixed assets — notably land — should be taxed more heavily than income. The tax on property is a good tax, provided it is designed to fall as heavily as possible on economic rents. This basic argument, going back to Ricardo, remains sensible, for it aims to not-interfere where there is, in fact, no public purpose to interfere with private decision-taking. Payroll taxes and profits taxes do interfere directly with current business decisions. Taxes effectively aimed at economic rent, including land rent and mineral rents, and at “absentee landlords” as Veblen called them, do not.
An important question is how best to treat the “quasi-rents” due to new technology and thus the incentives for innovation. These are presently held as long-term capital gains and they tend to escape tax to a very large degree, with the consequence that a small number of successful innovators (and patent holders) have become an oligarchy of never-before-equaled wealth.  (link to full article)

Our proposals for an annual SVT already takes into account homeowners in mortgage arrears and it already is geared to providing the bulk of local government funding.   Smart taxes is convinced that an annual SVT on all developed residential units and all zoned sites is a good start.  The second step, easily achievable is to replace commercial rates with the SVT.  Indeed this might even be possible for the outset with sufficient resources and priority as there is already a full property valuation in existence.  The third step is more problematic; that is a full land value tax (LVT) covering all land not already covered by the SVT.  The LVT should be based on the productive value of agricultural and forestry land as indicated by its rental value less its value as a commons or public good.  Smart Taxes is developign research briefs to take this development forward.  Watch this website for our progress..

As part of our fiscal strategy the new Government will:
• Keep the corporate tax rate at 12.5%; • Maintain the current rates of income tax together with bands and credits. We will not
increase the top marginal rates of taxes on income. We will reduce, cap or abolish property tax reliefs and other tax shelters which benefit very high income earners. We will also ensure the implementation of a minimum effective tax rate of 30% for very high earners;
• Consider, arising from the previous Government’s deal with the IMF, various options for a site valuation tax. Any site valuation tax must take into account the significant number of households in mortgage distress and provide local government with a reliable stream of revenue;
• We will limit the top rate of VAT to 23%; • There will be no increase in the standard 10.75% rate of employers PRSI; • We will review the Universal Social Charge; • We will ensure that tax exiles make a fair contribution to the Exchequer; • Re-prioritise capital funding for smaller projects that deal with specific immediate
problems. Smaller projects are more labour intensive and more likely to be carried out by local contractors increasing short-run domestic economic impact. Investment priorities will include education, health and science and technology;
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Government for National Recovery 2011-2016
• Undertake a full review of the Hunt and OECD reports into third level funding before end of 2011. Our goal is to introduce a funding system that will provide third level institutions with reliable funding but does not impact access for students;
• Bring in a range of measures to tackle the problem of welfare fraud. As part of this we will create a new “one-stop shop” Payments and Entitlements Service to process all major welfare and other entitlements;
• Conduct a Comprehensive Spending Review to examine all areas of public spending and to assess effectiveness of spending programmes and value for company;
• Establish a Tax and Social Welfare Commission to examine entitlements of self employed and the elimination of disincentives to employment.

(Download the full Fine Gael/Labour Party Programme for Government)