Why Earth Hour is wrong

A percentage of people in Sydney 2% last year will turn off their lights for one hour.

The generators still run, even these people's fridges, hot water heaters, electronic devices still
run.
It is a bunch of people trying to feel good about themselves. They are supporting a idea which is trying to make the rest of us feel bad about ourselves and our current way of life.

Their underlining argument taken to the logical conclusion would be for noone to use electricity, no lights anywhere, not just in Australia but the entire globe. They would deny this but this mentality is anti-modern life, and for most people this means anti-human.
They want people to go back to the pre-modern times without electricity and without light (after dark).

Turn your lights off and go back to the stone age.
OR
Leave you lights on and enjoy your weekend.

I keep writing these rants as I believe in life, liberty and the pursuit of happiness!

1. Life: The sanctity of human life, no-one has the right to demand human sacrifice of any kind, physical, mental or economical.
2. Liberty: Freedom from the use of arbitrary force.
3. Pursuit of Happiness: Be happy as long as you don't violate the first two rules.
   

Have Fun

Paul

Housing affordability

Big issue in Australia, especially in large cities is the lack of housing affordability, and rents which are increasing rapidly.
Tonight the SBS insight program skimmed over the issue.

All interested parties are lobbying hard for the Government to step in and "make a difference".
The new PM ol' mate Kev says that is it the number one problem (amongst other number one problems) affecting working families.

By now you should known that I think getting the Government involved is a sure way to make it worse. We even have a classic recent example.
The First Home Owners Grant (FHOG) introduced, had the opposite effect. Damn law of unintended consequences...
Instead of improving the ability for first homeowners all it did was put a fire under the existing demand, $1 Billion per year, leveraged by the banks to 95% (with mortgage insurance) of course and you have $20 Billion dollars looking for a home in property.

But wait, in an unconstrained market, tonnes of entrepreneurs (and investors) would jump in and provide supply for all that extra demand... right?
Like MySpace and Facebook caused a huge increase in the number of social networking sites on the internet.

Housing has some characteristics (not an exhaustive list)

1. It is a long term durable asset.
2. Supply is illiquid due to a couple of reasons (see below)
3. It is reasonably expensive to build new or replace existing with higher density.
   

Why is supply illiquid?

1. Zoning laws and associated regulations. Mostly local government related.
2. It takes time to build houses and units.
3. New land releases are slow and in outlying areas.
   
4. Noone wants to live 2-4 hours commute from their job.

You must ask yourself who benefits from the existing setup. Cui Bono? Who benefits?

1. Existing homeowners: They are the ones wanting heritage listing, facade orders, height and density regulations. Anything which reduces supply when demand is the same or strong will increase the value of their primary asset (their house).
2. State Labor Parties: Political donations from big property developers help ease the pain of working in State politics versus the glory of Federal.
3. State Governments: Increasing house and land prices equals more stamp duty and more land tax!!
   
4. Local Councils: Increased house and land prices equals more rates. I am sure the power of controlling development goes to the head of some people as well.

No you scream, if you allowed every stinking property developer, never mind the couple with some kids who want to extend their house, a free for all on development we would have skyscrapers overlooking peoples pools, no park land, destruction of old (heritage) housing.

What should and eventually will happen in Sydney and Melbourne is what has already happened overseas. New York is a good example. Everyone wants to live close to work, densities increase and we have apartment blocks and skyscrapers where people demand to live!

At the moment we have everyone wanting to live with a enjoyable traveling distance of their place of work. Most work is concentrated in CBDs, so you can draw a radiating circles around it in terms of travel times and map reasonably accurately where free standing houses are a waste of space and need to be replaced by higher density housing.

You can join the mortgage treadmill or make your asset work for you and get the normal tax deductions of an income producing asset. Living elsewhere for the first 7-10 years of the mortgage is the best thing you can do. Mortgage interest is dead money as well.

The most interesting tidbit I got from the Insight problem was the Federal minister mentioning reviewing fair rental rates. This sounds like rent controls in disguise (similar to the NRMA and ACCC petrol price witch hunt).
Ask New Yorkers what rent controls have done to parts of New York City!

Guess what happens to supply if you limit or legislate the return on investment?

Have Fun

Paul

Abolish Capital Gains

I was reading a interesting article on Institutional Economics regarding capital gains on residental and investment property

Why not abolish capital gains tax completely on all assets. It is a tax on investment.
We increase our capital stock and maybe productivity will increase as well eh?
That would kill the stagnant productivity and lack of infrastructure problems with one stone.

Of course this will never happen, similar to having a flat income tax rather than progressive. People like the idea that rich people get taxed more, and pollies pander to popular feeling.

I have always hated the idea that as I build up a business, at some point the Government is waiting in the wings (if I sell any portion) to take their cut. On the understanding of course that I am currently, presently and until I sell any portion not already being taxed so that the Government can provide the necessary public infrastructure to enable my business to grow.

You could argue if my business are almost completely of an online nature, that somehow the Government is still providing my business with "soft" infrastructure in the form of education.

When in doubt refer to the tax office reports (I noticed they are dragging the chain on releasing new statistics).

The summary, Capital Gains Tax (CGT) made the government $7 billion in 2004-2005. That
is 7% of Personal income tax. 17.% % of Company tax and about the same for GST.

What would $7.9 billion mean in terms of new investment?

In 2004-2005 $79 Billion was spent on new assets, so the CGT was 10% of that. It is not likely all the money would have gone into new assets. That would depend on the companies Return on Assets (ROA). So either it would held as cash, invested or given back as dividends.


Capital gains tax

http://www.ato.gov.au/corporate/content.asp?doc=/content/81183.htm&page=36&H36

OVERVIEW

For the 2004–05 income year:

* net capital gains totalled $25.7 billion, and were reported by 974,284 taxable individuals, 18,657 taxable companies and 75,075 taxable funds
* CGT payable on the net capital gains of taxable individuals, companies and funds was estimated to be $7.0 billion
* 461,713 taxable individuals, companies and funds declared $56.4 billion in total current year capital gains on their CGT schedules. Around 62.3% or $35.1 billion of these total capital gains were sourced from shares.

Personal income tax

http://www.ato.gov.au/corporate/content.asp?doc=/content/81183.htm&page=31&H31

OVERVIEW

For the 2004–05 income year:

* 11.2 million individuals lodged income tax returns
* individuals had total income of $447.5 billion, taxable income of $423.7 billion and net tax payable of $103.6 billion
* individuals claimed $23.8 billion in total deductions, including $11.9 billion in work-related expenses
* 7.7 million individuals were entitled to tax offsets and credits totalling $13.6 billion
* 73.0% of tax returns or 8.2 million were submitted by tax agents, and 11.6% or 1.3 million were submitted using e-tax.

Company tax

http://www.ato.gov.au/corporate/content.asp?doc=/content/81183.htm&page=32&H32

OVERVIEW

For the 2004–05 income year:

* 707,455 companies lodged returns, a 3.4% increase from 2003–04
* companies reported total income of $1,638.8 billion, a 7.3% increase from 2003–04
* total company expenses were $1,486.8 billion, a 5.8% increase from 2003–04
* companies were liable for $40.5 billion in net tax, a 16.2% increase from 2003–04.

For the 2005–06 financial year:

* petroleum resource rent tax totalled $2.0 billion.


GST

http://www.ato.gov.au/corporate/content.asp?doc=/content/81183.htm&page=39&H39

OVERVIEW

For the 2005–06 financial year:

* total net GST liabilities (including Customs collections) increased by 5.3% to $37.3 billion, up from $35.5 billion in 2004–05
* wine equalisation tax liabilities (including Customs collections) decreased by less than 0.5% from the previous year to $663.0 million
* luxury car tax liabilities (including Customs collections) increased by 7.3% to $322.4 million.

ooohhh white flight from NSW public schools

Sydney Morning Herald front page lead with the digg bait heading "White flight leaves system segregated by race"

I am not going to even link to it. Google will find it for you.

It is a nasty little article, the aim to increase funding for public schools within NSW, re-remove parent's choice of schools and of course label all those white Anglo-Australians as racist.

Those parents are discriminating bastards! Parents are noting and observing the differences between schools. They are distinguishing accurately that one school is different from another. Of course they are discriminating. One school is crap and the other less crap or maybe even good!

The NSW government allocates (when I last looked at the NSW Education 2002 budget) around $6,500 per kid at primary and $8,500 for secondary. If parents want to spend their own after-tax money on sending their kids somewhere else it is their choice.

Of course there is always an "enlightened" elite who wish to make the choices for everyone.

Unfortunately they can't just rule outright, so have to raise thought balloons, shape opinion, guide policy makers, lobby politicans, setup Non-Government Organizations (NGO), institutes and think tanks etc etc.

Have Fun

Paul