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Keep socialist blog En Passant going - donate now
If you want to keep a blog that makes the arguments every day against the ravages of capitalism going and keeps alive the flame of democracy and community, make a donation to help cover my costs. And of course keep reading the blog. To donate click here. Keep socialist blog En Passant going. More... (4)

Sprouting sh*t for almost nothing
You can prove my 2 ex-comrades wrong by donating to my blog En Passant at BSB: 062914 Account: 1067 5257, the Commonwealth Bank in Tuggeranong, ACT. More... (12)

My interview Razor Sharp 18 February
Me interviewed by Sharon Firebrace on Razor Sharp on Tuesday 18 February. http://sharonfirebrace.files.wordpress.com/2014/02/18-2-14-john-passant-aust-national-university-g20-meeting-age-of-enttilement-engineers-attack-of-austerity-hardship-on-civilians.mp3 (0)

My interview Razor Sharp 11 February 2014
Me interviewed by Sharon Firebrace on Razor Sharp this morning. The Royal Commission, car industry and age of entitlement get a lot of the coverage. http://sharonfirebrace.com/2014/02/11/john-passant-aust-national-university-canberra-2/ (0)

Razor Sharp 4 February 2014
Me on 4 February 2014 on Razor Sharp with Sharon Firebrace. http://sharonfirebrace.files.wordpress.com/2014/02/4-2-14-john-passant-aust-national-university-canberra-end-of-the-age-of-entitlement-for-the-needy-but-pandering-to-the-lusts-of-the-greedy.mp3 (0)

Time for a House Un-Australian Activities Committee?
Tony Abbott thinks the Australian Broadcasting Corporation is Un-Australian. I am looking forward to his government setting up the House Un-Australian Activities Committee. (1)

Make Gina Rinehart work for her dole
(0)

Sick kids and paying upfront

(0)

Save Medicare

Demonstrate in defence of Medicare at Sydney Town Hall 1 pm Saturday 4 January (0)

Me on Razor Sharp this morning
Me interviewed by Sharon Firebrace this morning for Razor Sharp. It happens every Tuesday. http://sharonfirebrace.com/2013/12/03/john-passant-australian-national-university-8/ (0)

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Want a surplus and decent public services? Tax the rich

In light of Wayne Swan’s admission that the Budget would not be in surplus in 2012/13, the fetish that Budget surpluses show good bourgeois state economic management will get a huge work out in the coming days, weeks and months.

Already Tony Abbott has been arguing that the surplus backdown shows the Gillard government has failed ‘to understand any of the fundamentals of economic management.’

This is humbug. It looks as if the predicted surplus a few weeks ago of $1.1 billion will become a deficit of up to $15 billion. Running the capitalist state, with an economy with GDP of about $1.5 trillion, isn’t about producing a surplus or a deficit. A $15 billion deficit is about 1% of GDP. This is nothing.

The precious markets weren’t worried by the news. The stock market ended up higher on the day. Most economic commentators and business organisations applauded the government for finally having the guts to admit the obvious. Standard and Poor’s said Australia’s triple A sovereign debt rating will continue.

The Australian Council of Social Services and the Greens both welcomed the admission and the commitment from Swan not to attack tens of billions of dollars in spending in an effort to achieve a surplus. Swan feared doing that would increase unemployment and cut profits across the country.

The Treasurer didn’t want to Newmanise the rest of the economy. Since the Newman Government won office earlier this year in Queensland it has cut government spending and sacked tens of thousands of public servants. Unemployment has skyrocketed from 5.5% in May to 6.2% in November and is now 0.9% higher than the Australian average.

So if you want to know what an Abbott government would be like economically have a look at the Newman Government in Queensland and spread that doom and gloom across the country. Queensland times six is what Abbott and Hockey have planned for Australia if they win Government.

So why isn’t the Gillard Government going to achieve its much promised and therefore politically important surplus?

Contrary to old Hockey mouth, it isn’t because the government is spending too much. Government spending as a percentage of GDP in Australia is low by international standards. This Government’s spending as a percentage of GDP is lower than that of the Howard Government. It is in fact a smaller spending government than the Howard Government.

The reason is because cash payments – tax receipts – have collapsed. October is the month in which business pays its estimated tax for the July to September quarter. Cash payments are down $4 billion on estimates.

Revenue is down almost $4 billion on predictions. It looks as if the resource rent taxes -the Minerals resource Rent Tax and the Petroleum Resource Rent Tax brought in some money but there is no breakdown about which tax brought in what.

The Treasurer said that profitability was down significantly across the economy, in all industries. This explains the fall in company tax collections.

So the Government will wear a small deficit contrary to its incessant proclamations of the last few years and will put up with the banshee wailing from the Opposition about poor economic management and possibly more dangerous, broken promises.

Abbott and Hockey will hammer this change of tune from the government to paint Gillard and co as dishonest, marrying the broken surplus promise to the no carbon tax pledge to paint a picture of a dishonest and untrustworthy government.

What the banshees won’t tell us is where they would cut $15 billion from to fund their surplus.

The money is there. Labor could tax the rich and business more. Contrary to all the BS from both Labor and the Liberals, Australia is a low tax country and as a consequence a low government spending country. Why? Because the Howard Government cut tax rates for the rich when in Office.

As The Australia Institute says:

One of the reasons Australia is such a low-tax country is that the Howard government gave away much of the then budget surplus in tax cuts for the wealthy. In the years 2003-11 those tax cuts gave someone on average weekly earnings $26 per week while someone earning five times that received a tax cut of $367 a week.

A look at the Treasury Tax Expenditures Statement gives us many areas for rich pickings. Here are a few.

Tax concessions for superannuation give the top 5% of income earners $10 billion in foregone revenue. Tax concessions for small business on capital gains cost the revenue $710 million. The general 50% CGT concession for assets held more than 12 months, a measure which favours the well off and business because they have more capital, costs the revenue around $5 billion. Not taxing the family home costs government round $36 billion, so taxing the family homes of the very rich could bring in some hundreds of millions in revenue.

These minor adjustments would hit the rich and business and recoup over $16 billion in revenue.

Further, taxing the rich on their wealth, their inheritances and increasing their income tax, as well as strengthening anti-avoidance rules, could easily add many more billions to that figure.

Taxing all economic rent, i.e. capturing the monopoly profits of miners besides those in iron ore and coal already caught by the pathetic MRRT, and other industries like banks and maybe supermarkets would yield tens of billions in revenue.

Business and others are pushing for company tax rate cuts – from the current 30% to 25% over the short to medium term in the words of the Henry Tax Review. The resource rent tax was supposed to help pay for that as a redistribution of surplus value from the resource monopolists and oligopolists to the rest of capital.

That plan fell over with the manic resistance of the mining maggots to a minor (bad pun intended) tax which would have had no impact on investment and employment decisions. Not that mining as a capital intensive industry is a big employer anyway, with around only 2% of workers in Australia employed in some way in the industry.

There is, according to the Australia Institute in an excellent paper by David Richardson called The case against cutting the corporate tax rate, no evidence that cutting company tax rates improves economic performance. Recent work by the US Congress supports this analysis. As Richardson says:

The US Congressional Research Service has recently reviewed the empirical evidence that might or might not support claims to the effect that lower company tax rates increase economic growth, boost employment and the like. It generally debunks the notion that lower company taxes are beneficial in the ways usually suggested.

Further Richardson argues:

The marginal condition (invest until returns just equal the cost of capital) is unaffected by the company tax rate. In principle that means the company tax rate can be increased substantially without altering corporate behaviour.

The debate about company tax to date has been one sided – all about how much to cut the rate and when. Let’s make the counter argument. Increase the company tax rate to 33%. On current estimates that 3% increase would improve tax revenue by about $6 billion. Increasing it to 39% would wipe out the deficit.

Australia also has a dividend imputation system which means that Australian sourced income earned by Australian companies is, if it has borne company tax, credited at the company tax rate of 30% against an Australian shareholder’s overall tax. This effectively means that company tax is taxed at the individual Australian shareholder’s company tax rate in those cases where the Australian sourced profit is distributed as income.

Another point is that were the taxpayer’s marginal tax rate is lower than the the company tax rate of 30%, they get a refund of the difference. Superannuation funds, with a tax rate of 15%, benefit markedly from this.

We could cut the imputation credit in half.

There is another aspect to this company tax rate debate. Much of big business doesn’t pay any income tax anyway, and if it does it does so at an effective tax rate much lower than the headline rate of 30%. It’s time that the 40% of big business which pays no income tax did.

If we had a government with guts and vision who were prepared to do just some of this this we’d have no Budget deficit and enough to fund real increases and reforms in public education, public health and public transport and still be able to afford the move to a totally renewable energy society by 2025.

Tax the rich and business to pay for better public services for all Australians and to fully fund a totally renewable energy society by 2025.

To have your say or see what others are saying hit the comments button under the heading. Comments close after 7 days.

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Comments

Pingback from En Passant » Want a surplus and decent public services? Tax the rich | Tax Attorney
Time December 21, 2012 at 1:44 am

[…] the original post: En Passant » Want a surplus and decent public services? Tax the rich Segnala presso: This entry was posted in Uncategorized and tagged again-saying, […]

Comment from John McRobert
Time December 21, 2012 at 8:37 am

What a dopey article. Soak the rich and the rich will either migrate either themselves, or their capital, or lose the drive to create more wealth. An old observation – ‘If you want less of something, tax it more’. The greatest impediment to employment is the tax on employment. Complicated, punitive and heavy, it is the lead in the saddlebags of productivity and motivation.

Comment from John McRobert
Time December 21, 2012 at 8:51 am

What a load of rubbish. If you want less of something, tax it more. Taxes which discriminate against any sector are corrupt in that they allow the thieves in charge of the treasury to buy votes from the favoured sector using money stolen from the victim sector. Complex and ever changing taxes on employment and on profit are the lead in the saddlebags of motivation and productivity. France is just relearning history, tax the rich and they migrate either themselves, or their capital, or both.

Comment from John
Time December 21, 2012 at 8:56 am

Where is the evidence for any of your assertions John McRobert? I assume you think the rich will be migrating to GFC stricken Europe or the US? Fat chance. The flow has been back to Australia for these self seekers. Or maybe low tax Singapore or Hong Kong? A few maybe, like Tinkler and Rinehart but there is not much evidence it is happening now or will in the future. What is the magic tax level at which capital and the rich won’t flee? Is it a 12.5% company tax rate, a la Ireland? That worked well didn’t it? What does tax it more mean? Do you mean return to 80s levels? Or 90s levels? Or even the early noughties? Those rates worked the, why not now? Maybe the 40% of big business which pays no income tax could begin to? Maybe those rich who have been rewarded by the Howard and Labor governments to the tune of hundreds of dollars a week in tax cuts could pay a little bit more for a healthier and better educated society, factors which make employees more profitable for them? And what tax on employment are you talking about? Do you mean payroll tax, which in fact is, like the GST, a tax on consumption, something I thought flat earth Lafferists supported.

Comment from Mary
Time December 21, 2012 at 9:04 am

The talk of surplus has been wasted on most people. With all the disasters at home and overseas the aid has to come form somewhere. The wealthy have means of avoiding tax they shuffle their resources and never pay their dues. Howard made it easier for them to do this. Now they all twitter about paying more tax with no thought for those who have to suffer the burden of the rise in the cost of living.Things like negative gearing has contributed to the rise in cost of living. Yet it continues to be policy. The Howard govt cut in aid for family planning has contributed to the need for more aid in many countries that suffer overpopulation.
Much aid is not directed at where it is needed -FAMILY PLANNING. A great deal of aid is wasted in corrupt governments that degrade women by giving them no rights or education.

Comment from michael william lockhart
Time December 21, 2012 at 9:37 am

Stopping the rich churches tax bludging scams would be a good start, and recouping the scandalous tax payer funded $100,000,000 given to the Catholic’s for that useless proper-gander party so called “world youth day” the number one sales man of that organization wanders about holding on to a cross that contains $40000 worth of gold while saying “pray for the starving children” and this is an organization that enjoys some of the most outrageous tax rorts ever contrived in the name of religion and they claimed they needed the $100,000,000 “to teach youth morals”. whilst we tolerate this hypocrisy we can not “tax the rich”.

Comment from Lorikeet
Time December 21, 2012 at 9:59 am

I tend to agree with John on most of what he says here.

As Shadow Treasurer, Joe Hockey has already foreshadowed an Asian Style Welfare System which will kick the sick, disadvantaged and poor into the streets. (Wayne Swan also had an interest in this until there was a huge public outcry.)

At the same time, the Coalition will implement their Paid Parental Leave Scheme which will give women earning $150,000 per annum 6 months off on an income of $75,000.

Instead of giving tax cuts to the rich, John Howard should have progressively raised the Income Tax Free Threshold to help those struggling to feed their families.

As soon as Labor raised the Income Tax Free Threshold from 6% to 18%, I knew they had no intention of achieving a Budget Surplus, since there are plenty of low income earners who are underemployed.

Howard brought in a GST to make even the most destitute Australians pay tax, while he cut taxes for high income earners.

Under a Coalition government, I think we can expect the GST to be raised to 20%. I think this will cause even more tradesmen to pocket all of the tax they would normally pay plus the GST, while telling customers they are giving them a 20% discount for doing business off the books.

Comment from Lorikeet
Time December 21, 2012 at 10:21 am

It seems to me that some have forgotten about the excellent charitable organisations that are run by the churches.

Comment from Hasbeen
Time December 21, 2012 at 10:32 am

Queensland has made a start, but did not go any where near far enough.

If you want a surplus, & a decent public service you need to sack about half of the bureaucrats straight off, & advise that another 10% are for the high jump, with the drones to go.

It is well known that every additional public servant adds an additional day to the time taken to get anything through the rabbit warren.

Lets face it, me & me mate, wot stayed at school, right thru to we was 14 could do it by our selfs, wiff our I’s clossed.

Comment from jack
Time December 21, 2012 at 1:21 pm

don’t forget to tax the McMansions, especially in Gleneagles.

Comment from John
Time December 21, 2012 at 4:09 pm

One brain cell Jack thinks he is being funny because he found a silly website which bags me out and debates where I live. Get a life boys and girls. Jack is so bereft of argument he has to repeat what they incorrectly say about my house, a house whose price would be well below the value even the Greens once suggested to tax. They once proposed an inheritance tax, including the family home, on estates worth more than $2m. About 4% of the population fall into this category. They have since replaced this with estates worth more than $5 million which would catch less than 1% of the population. I fall into neither category dear Jack. I may be comfortable but I am not rich and I do not have a McMansion. Keep it up one brain cell Jack.

Comment from John
Time December 21, 2012 at 4:12 pm

Thanks for your contribution hasbeen. All those public service sackings must explain why the Queensland economy is going gangbusters, well busters, anyway. I love the fact you make sweeping assertions without one shred of evidence. That is what drives right wing ideologues – a lack of facts mixed in with abuse of what they think are easy targets.

Comment from Lorikeet
Time December 21, 2012 at 5:27 pm

Around 50% of Queenslanders already hate Campbell Newman. His attacks on public servants’, cuts to community services, and proposed hospital and TAFE closures are attacks on the disadvantaged and those who wish to train or retrain for jobs.

Comment from John
Time December 21, 2012 at 6:53 pm

I thought the latest polling showed Campbell and the LNP well ahead.

Comment from John Cahill
Time December 22, 2012 at 6:36 am

I’d say John is a public servant, probably a school teacher, doesn’t invest in the share market, is a tree hugger, thinks Julia’s carbon policies are the answer to world tension and has never studied economics in his life.

Comment from Lorikeet
Time December 22, 2012 at 10:13 am

John, I think it is clear that Campbell Newman is on the nose, since he has had 2 MPs recently become independents, and 1 defecting to Katter’s Party.

http://www.gladstoneobserver.com.au/news/poor-poll-results-newman-spells-bad-news-coalition/1686808/

Comment from John
Time December 22, 2012 at 11:15 am

But the LNP would according to the latest polls win an election held now hands down. I suspect the reason for that is that the unions haven’t really mounted any ongoing industrial campaigns to defeat Newman’s mass sackings.

Comment from John
Time December 22, 2012 at 11:30 am

OK John Cahill, I was an academic teaching tax law, then an Assistant Commissioner in the ATO where I ran international tax reform, then after retiring I taught tax law as an academic. Now I am a student. No, I don’t invest in the share market. So you got that right. I did lose $7000 per annum from my pension because of my super fund’s investment in the share market during the GFC. I have an economics degree from the ANU. I am not a tree hugger. I bagged out the carbon tax in the December 2011 edition of the Bulletin for International Taxation, but you need a subscription to get access to that. But you can read these articles on my site to get an idea of why I reject the carbon tax. And you could read me bagging out the Greens and the carbon tax here. So wrong on every important count John Cahill. But stereotypes are such wonderful things – they allow the truth to be ridden over roughshod or for those who hold them to ignore the substance of the debates, as you have done so far here.

Here are some articles that might enlighten you about my views on the Carbon Tax and the Greens.

https://enpassant.com.au/2012/08/28/the-greens-renewable-energy-fantasies-go-up-in-smoke/

https://enpassant.com.au/2012/07/01/the-carbon-tax-heaven-or-hell/

https://enpassant.com.au/2011/08/28/the-carbon-taxs-dirty-little-secret-gas-fired-electricity/

https://enpassant.com.au/2011/08/08/the-carbon-tax-locking-in-fossil-fuels-for-60-years/

https://enpassant.com.au/2012/09/05/the-greens-one-step-forward-and-two-steps-back/

And why the choice for humanity is environmental barbarism or socialism.

https://enpassant.com.au/2012/12/03/socialism-or-global-warming-barbarism/

Comment from Mick
Time December 22, 2012 at 6:14 pm

……..and to add to your links on carbon tax, here’s a link to my blog which contains several cartoons (mine) on carbon tax, which may or may not agree with either of the arguments here. You choose.

http://cartoonmick.wordpress.com/editorial-political/

Cheers

Mick

Comment from Mick
Time December 22, 2012 at 6:18 pm

Also , , , , an extract here from my blog in support of taxing the rick….

Thank God for Tax.

Many people are successful in accumulating wealth, and some are better than others. And a few are extremely successful. Then above them is the small group of ultra awesome accumulators.

Thousands join the hunt every day, chasing their little (or large) pot of gold.

But surely global wealth is finite. There must only be a certain amount available for discovery/development, unless it has been artificially created, in which case it is actually false wealth and does not exist.

So, if the majority of the world’s wealth is flowing to the minority (rich) of the population, then the reaction must certainly be an opposite flow of poverty to the majority.

And as these flows continue, they will increase at an exponential rate, until finally, all wealth is in 1 persons pocket, and the rest of us are starving and begging for food.

But have faith; we have been saved from this disaster.

Various governments around the world, in their infinite wisdom, have foreseen the possibility of this and counteract it with the only weapon they have. Tax.

A shrewd assortment of government taxes limit this flow and prevent that final concentration of all wealth.

Therefore, the more tax we pay, the less chance we have of poverty.

Government taxes, the ultimate defence against mass starvation.

I rest my case, it’s time for lunch.

http://cartoonmick.wordpress.com/

Cheers

Mick