George embarked on a sell-out speaking tour across the world and spent several months in Australia spruiking his radical idea for shifting the tax burden to land and natural resources that benefitted from unearned increase in land value generated by public and social investment. His ideas were captured in his book, Progress and Poverty (1879), that sold millions of copies and laid the groundwork for a worldwide social reform movement.
This approach, to “untax labour and incomes, which discourage work and employment and instead increase taxes on land would alleviate the housing crisis”, says Catherine Cashmore, President of Prosper Australia, an economic think tank founded on these Georgist principles.
“Henry George’s theory was that we should untax labor and incomes, which discourage work and employment,” Cashmore says. “Instead, we should tax land and monopolies. Most taxes now fall on labor and wages, but land tax is the only tax that doesn’t destroy the economy.”
The Georgist approach, Cashmore asserts, would encourage more productive use of housing because property owners would want to use their holdings more productively to cover the cost of taxes. However, she concedes it is politically challenging with the vested interests in property values remaining high.
Yet the Federal Government is increasingly reliant on taxing workers’ incomes as other sources have diminished. Both state and federal governments are struggling to bridge the gap as demand outstrips housing supply.
Land speculation encourages land hoarding
Cashmore believes the current system encourages speculation and land hoarding at the expense of housing affordability and economic efficiency.
“We have the most concentrated banking monopoly in the world,” Cashmore says. “It ends up running the economy. Banks cannot allow land prices to drop below certain levels, and we need policies that make land prices cheaper to take away speculation.”
Prosper’s vacancy report, now in its 11th iteration, uses water usage data to identify properties that appear to be unused for extended periods. The findings paint a picture of widespread “land unemployment” in prime locations, where properties sit idle while many Australians are priced out of desirable areas.
“There’s a lot more properties vacant than you see in short-term statistics,” Cashmore says. “If you don’t have debt over a property and get to keep the capital gain, then there’s no impetus to rent the property out.”
This phenomenon is particularly pronounced in areas that experienced construction booms in recent years. “A lot of prime city land is taken up by structures likely sitting empty and vacant,” Cashmore says. “These could be used for short-term accommodation or renovated to meet housing needs.”
Prosper’s work has captured the attention of policymakers, influencing how governments measure and address property vacancies.
“In 2017, the Victorian government called us to talk to public servants in Treasury,” Cashmore says. “Now the Australian Bureau of Statistics looks at vacancy through water, electricity, and gas usage data, forming their own vacancy rate estimates.”
While some jurisdictions have introduced vacancy taxes, Cashmore believes these measures often lack effectiveness. “Victoria introduced a vacancy tax in January 2018 based on self-reporting, but they didn’t issue any penalties and didn’t check compliance,” she says. “A vacancy tax is useless if you’re not following it up.”
Instead, Prosper advocates for a broader land tax applied to all properties, ensuring that land is employed productively to address the causes of the affordability crisis. A more efficient use of urban land could lead to more equitable access to opportunities and services rather than a system that rewards land speculation over productive use and community benefit.
“We need to start shifting tax off incomes and onto land,” Cashmore says. “It’s the only way we can all prosper.”