Rich tax lands Westminster system in trouble

Unusual method of proclamation

The proposed new land tax on some family homes was proclaimed in a most unusual manner and, judging by the public confusion and lack of clarification, does not seem to have been thoroughly thought out.

The normal practise followed in the Westminster system of parliamentary democracy to impose a new tax on citizens, is for political parties to announce this before an election, so that that the proposal can be considered by the electors and roundly discussed. For in democracies it is electors who decide how they should be taxed, not governments.

In this case the tax has suddenly been tacked onto the budget to pay for government programmes without prior notice or public discussion. That method died with the absolute monarchs and their Old Colonial System which democratic Americans helped destroy when they threw tea into Boston harbour after the British government taxed it without their consent. When they left the Empire, they wrote a constitution which guaranteed the right of citizens to decide on taxes by way of parliament.

The constitutional changes wrought by rebellion in America were not confined to that continent. Intellectuals in Britain, which possessed more than its fair share of genius in the Age of Enlightenment that then prevailed, fashioned a new Westminster System for the Second British Empire it started with Australia, creating at the same time a new Family of Nations based on international laws designed to protect human rights and individual freedoms.

The Westminster System

The post-American Westminster System of parliamentary democracy which was transported to Western Australia, and became the envy of many in the world still under the sway of absolute monarchs and governments which regarded themselves and not the people as sovereigns, had set principles.

First, the people hold sovereign power. This power is exercised by parliaments which citizens elect or dismiss depending on whether they are satisfied with the performance of their representatives, one of whose duties is to carefully scrutinize tax proposals made by Cabinet which is made up of Ministers of the Crown and represents the Crown or monarchy in the Westminster System. Cabinets are not chosen and elected by citizens. They are selected by political parties which should make their taxing policy clear before they go to the polls.

Second, only parliament which has sovereign power by way of the people, can make laws or impose taxes. In Western Australia, parliament consists of two separate houses which are equal. These were created to act as checks and balances found to prevent ambitious political parties or leaders from taking control to impose totalitarian rule by one group. Cabinet will therefore have to wait for both houses to let them have their proposed tax which must be submitted to them as a tax bill. Taxes cannot be tacked onto a budget. Nor is it in order for Cabinet to assume parliament will do its bidding, and demand they comply, especially if the tax idea comes suddenly out of the blue. That way the government cannot claim a mandate as Howard did with the GST.

Cabinet has no legislative. It can suggest new laws, but its powers are confined to carrying out the laws passed by parliament. For Cabinet represents the Crown in the system of constitutional monarchy. If it demands parliament obey its will, or even describes how it will spend taxation before parliament has discussed it, that body which is sovereign, will belittle parliament and show disrespect to citizens who hold the original sovereign power. Charles I tried those tactics, engineering things to get his party in parliament to win the day for his revenues. Parliament’s axeman soon cut him down to size.

Third, there is another safety valve in the Westminster System. The Head of State, the Governor who represents all of the citizens, has the right and power to call an election to let the people decide if there is something untoward. But in Western Australia, that is rather theoretical for the Governor is appointed by Cabinet. It is, nevertheless, a residual power to which citizens, even those who have made good and become rich can look towards if they feel they are being discriminated against.

And that is one of the main points of concern about the proposed new tax. It is imposed on high priced freehold properties whose land values are assessed by a government officer. Whether or not local people who have made good, or live in the right or wrong place, or whether the tax is aimed at overseas investors who have moved into real estate, has not been made clear.

Threat to harmony

The only thing that has been made clear is that the tax is aimed at the rich, and that promises to be socially divisive, for it is little more than a revival of socialist class war, the timing of which is not good for Cabinet. For the tax on the rich was announced just after parliamentarians received one of their regular big pay hikes, and when Russia announced it was reversing the old communist policy of nationalizing land, to allow citizens to own private homes and properties.

Need to monitor Russia

It would pay to monitor what happens in Russia where there is a current fear that land values will rise, and that only the new rich will become house owners. The question is will Putin’s Russia dig out the old American gurus who had an influence when Lenin fashioned his New Economic Policy when “war communism” and class war ended under his leadership in 1921, to get the Soviet Union on its feet.

Origin of the proposed tax, Henry George

The idea of taxing the increase in the value of freehold residential plots can be found in Adam Smith’s Wealth of Nations , and as dealt with by John Stuart Mill when he wrote on “the unearned increment”. But the popular move for such a tax is the brain child of an anti-landlord, 19th century American publicist and orator Henry George who left school at 14 to go to sea, visiting amongst other places, Australia whose socialists he later influenced. After returning home and “swallowing the anchor”, he learnt typesetting and joined the American Democratic Party. This led to a variety of jobs including Inspector of Gas Meters. Using his new printing skills and considerable abilities, he opened and edited newspapers and wrote on economic reform with politics in mind.

He spent his time mainly criticizing David Ricardo, the noted economist who wrote on rent. George’s contribution is lightweight. His idea of research was to get evidence to support his ideas. The one which had a lasting influence on socialists in particular, was his policy on land tax. He presented this as a simple formula which creates the impression that it is scientific economics. He claimed “that as produce, that is the fruits of production, equals rent plus wages plus interest, therefore produce minus rent equals wages plus interest”. From this he concluded that the steady increase in land values led to land speculation, which in turn caused recurring industrial depressions. His remedy was to put a tax on land, disregarding the improvements on it. The move was directed against the rich owners of landed estates in such places as Ireland, he vilified in his works. This aspect was taken up by some socialists to use in the “class war” of which there is more than a little suggestion in the WA Cabinet’s divisive proposal. His ideas contributed to the policy in the ACT where there is no private land ownership and no land speculation. As land increases in price, the increment goes into the public coffers.

That is what George aimed at. He was opposed to people becoming instant capitalists because the land they lived on zoomed in price without their putting any labour into it.

But unlike the present WA proposal George did not oppose people getting rich, for he was no socialist. But these riches had to come from industry and thrift. These would be achieved by imposing a land tax and abolishing all of the other taxes to let industry flourish while at the same time giving people security in home ownership. For he believed a tax on land would stop land speculation and preserve family home ownership which he supported, and which became the cornerstone of life in Australia, the dream of a home on a quarter of an acre.

The proposed WA tax, which is an additional one, raises social and constitutional issues that will have to be addressed by citizens and need public debate.

The issues in Western Australia stem primarily from the fact that in the 1920s and 30s, coastal and riverside land was cheap and not highly sought after because many citizens then regarded living close to water as unhealthy. Blocks away from the river and ocean front where maintenance was high, were dearer. In wartime, the price of coastal blocks fell further. These precincts are now being marketed as prime locations. This is causing stress to the seniors who built or bought their family homes.

Social issues

These, so far revealed, include

* the fear by established owners including seniors and war veterans that they will have to sell up and move out, or sub-divide and sell their gardens to cut down the size of land.

* the fear of dying in debt which must not be underestimated. The older generation reviled debt. They paid off everything they owed in their lifetime, to die in peace as creditors. The sop offered by the Minister, promising the tax can be deferred until after death, ignores this deeply entrenched outlook.

*this is added to by the disturbing fear amongst older people that instead of leaving a bequest to help their children prosper, they will pass on a debt.

* more important, in the situation existing in Western Australia where vast amounts invested by self-funding retirees and others, have disappeared without ever being located by any of the investigating commissions, investors turned to real estate for betterment. That avenue could now cause worry.

* residents in the suburbs which were once harmonious like Cottesloe and are now tagged rich, are concerned about social engineering which could see places that formerly enjoyed a widely based community , become either suburbs for the privileged, or concrete jungles planted on mini-blocks.

Constitutional issues

Both the way the tax is being impose and the nature of the tax raises constitutional issues.

* Should Cabinets be permitted to tack new taxes onto budgets ? This is a serious matter when a new tax proposal is accompanied by a call to abolish the second house of parliament. The latter move would give political parties more control over citizens, and increased powers to tax them, or some of them.

*Should the powers of Cabinet and Ministers be clearly defined, so that they cannot make up their own rules as they go along. That is, should checks be imposed on executive style government which has increased from the WA Inc years, as the series of Royal Commissions which have had to be appointed, reveal.

* Should the Westminster System be better taught ? Knowledge of this has declined since the demise of teaching British history which is essential. Unlike America, Western Australia, being part of the Commonwealth which uses the Westminster System, has no written constitution. It is ruled by Common Law. This is being incorrectly taught at the WA Constitution Centre, and wrongly presented by Premier Gallop and the WA Governor when they talk about amending the constitution. The Acts they talk about are those which constituted, that is established WA. The word constitution is used as verb, not as a noun. WA has no constitution.

*In view of the fact that there is no written constitution, and that the power and prominence of political parties has risen, should the old idea of electoral constituencies be updated. Having members represent constituencies made sense in Saxon times when villages sent people to parliament, but they are now artificial and without social meaning. Having the whole state vote as one electorate could be more democratic. Smaller parties would get members into parliament in accordance with the percentage of the vote they won. This would give a wider representation, and less likelihood of a powerful party imposing taxes in the way they want.

*Most significant, has the government the right to tax freehold land owned by private citizens. This implies it could still Crown Land which it might not be. This situation, related to the principle of eminent domesne, together with rights over Crown Land and Forests which was highlighted by Norman William the Conqueror in his clash with Saxon England over “venison and vert” which gave rise to the Robin Hood legend, needs to b clarified together with the question of whether or not Cabinet has the right to sell public lands such as schools.

*The proposed tax, ostensibly on the rich, but which could spread to many, revives question previously posed by many citizens about the need for a new Bill of Rights.

Kipling warned about the danger of new monarchs appearing in the disguise of parliamentarians. But H. G. Wells well summed the present dangers when he said

“If people were meant to hang onto leaders and rulers, they would have had hooks on top instead of brains”

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