Despite our earlier concerns over Kevin Rudd's (mis)communication on the mining industry taxes, we are very impressed with the actual tax review as written by Ken Henry and his fellow economists.
In this report's chapter on natural resource and land taxes, Henry explains some of the basic principle of georgist economics. He proposes a land value taxation to capture economic rents, explaining in depth (including graphs) that this tax will not be shifted on to renters and will reduce land prices for buyers. Also, in the part about the mining industry he proposes to shift taxes to rent-based taxes and bidding systems that do not affect jobs and normal capital returns, but only capture the unearned economic rent and allocate the resources to their most efficient use. Henry is not even afraid to bring in moral arguments on top of technical elements when he says that "the community owns right to Australia's natural resources".
The Henry Review strongly stresses that productive members of society, including low incomes and small businesses, need to be released from high taxes, that taxing fixed assets is more economically efficient and that all citizens should enjoy a share of our common resources. As Georgists this sounds like music to our ears, of course. On the down side, we do not agree with the report on the matter of GST which is claimed to be efficient (GST is a tax on trade, is regressive and distortive!). Also, there is one important part of resource taxes missing in the report: Green Taxes. Eco-tax reform is unfortunately not mentioned anywhere, though extremely relevant at the moment, in order to stimulate a healthy, sustainable economy (also with respect to mining industry issues).
Now we can only hope that the Rudd government will have the courage and the intelligence to apply these resource and land tax principles as layed out in the report. Unfortunately Rudd has already communicated that the 'home owner' will not be taxed. If he however read Ken Henry's explanation carefully, he would understand that land value taxes will be beneficial for home owners, in the long run. He would also understand that the mining taxes as proposed in the report will not slow down WA's economy, but simply capture rents that belong to the community. Let us also hope that the federal government and state governments will be able to work together in tax reform and accomplish simplification whilst sustaining local autonomy.
Let's hope that this tax review might be the first step of a real 'paradigm shift'. Because even if this gets through, there would still be a lot of work to do. A great lot of work.