Increment financing not a new form of tax
The editorial "Putting right price on infrastructure" (AFR, October 13) is an insightful expose of the benefits of some more innovative approaches to funding infrastructure used in the US and Britain.
One important correction though. Tax increment financing is not "in effect a new tax". In fact, one of its great benefits is that it does not fall into the trap of attempting to promote a growth outcome by taxing it more (never a great recipe for success).
Tax increment financing captures the uplift in tax revenue that occurs with supporting infrastructure investment and hypothecates this revenue stream into the financing of the project.
It effectively wraps part of the economic benefits of infrastructure investment into the revenue stream for a project using growth to fund more growth-inducing infrastructure. Not only has it been used for more than 50 years in the US, but a 2008 PwC study for the Property Council shows it could be adapted for Australian conditions.
First published in the Australian Financial Review 'Letters', 14 Oct 2015.