tip off

Productivity needs a shot in the arm — why not a GST boost?

No tax provokes as much irrational trepidation among our political leaders as the GST. The federal government and opposition have ruled out changes. Even the relatively academic Henry review wasn’t allowed to broach it.

Admittedly, Australians did not exactly embrace a tax on goods and services. Paul Keating’s comprehensive consumption tax — known as Option C at his 1985 tax summit — was strangled at birth. John Hewson boldly advocated a GST from opposition and lost the “unlosable” 1993 election. John Howard took a GST to the 1998 election and just scraped back in to office, losing the two-party preferred vote. An economically illiterate Senate then mangled it, insisting “fresh food” be exempt, for instance.

But more than 10 years on, few complain about the GST. Indeed, which surveys find a majority of Australians would like the GST repealed and their income tax jacked up? None that’s credible.

Drawing conclusions from three data points is foolish. Keating’s tax was thwarted by a timid prime minister. Hewson’s advocacy was no match for Keating’s relentless rhetoric, and Howard’s earlier undertaking to “never, ever” introduce a GST hobbled his campaign. By contrast, across the Tasman, John Key’s government last year increased the rate of GST by 2.5% to 15%, and cut income tax, with little protest.

Keating, Hewson and Howard were not political masochists, they were trying to inject commonsense into Australia’s tax policy. They wanted a tax system that would make Australians more prosperous. Our income tax did, and still does, severely penalise saving. For example, a worker who chooses to forgo some mindless consumption and save instead has his income taxed twice — when he earns it and the income it generates when he saves it. That savings income should be compensation for inflation and a reward for patience.

Taxing saving is not only immoral but economically damaging as well. The Henry review reckoned raising income tax causes about three times as much damage to welfare as lifting the GST, quite aside from the absurd level of complexity that income tax fosters, from which a vast cadre of rent-seeking lawyers and accounts hang.

So the political class’s beloved “working families”, perhaps about 10 million voters, would in fact be naive to reject a GST-for-income tax swap — assuming every dollar of extra GST revenue were used to cut marginal tax rates, especially the lower 15% and 30% rates. The shift only needs clear political advocacy and will.

The best GST reform would be to remove the exemptions on food, education, health, etc, and not increase the rate from 10%. A round figure is not its only virtue: a tax’s economic damage is roughly the square of the rate, and the existing exemptions distort consumption patterns and add complexity. Removing them would probably raise an extra $15 billion a year, enough to make substantial cuts to lower marginal tax rates.

The welfare lobby will bleat regardless — what about “the poor”? What about people “on benefits’?

It’s true that in general people on lower incomes will spend a larger proportion of their incomes on food, although not necessarily fresh food that is GST exempt — look at how obesity rates and junk food consumption correlate with income. Nevertheless is it fair that poorer people who prefer to dine out be punished, whereas the uppity family who prefers “organic” home cooking benefit?

It is absurd to try and tailor every tax to ensure progressivity — especially as blunt an instrument as a consumption tax. The carbon tax, tobacco and alcohol taxes, car rego and train tickets all fall disproportionately on people with lower incomes too. Income tax will still exist to maintain progressivity in the overall system. It is better to collect revenue simply and efficiently and then debate how best to redistribute it.

The only opposition to sound GST reform is the welfare lobby (which is weaker to the extent fewer people are on welfare). But even it should reconsider its position. If it were genuinely concerned with low-income groups, it would agitate for tax reforms that enhance the economy’s long-run prosperity, which benefits everyone. This includes levying efficient taxes, which encourage saving, investment, job creation, and fewer public servants.

Today, in a political climate where people are craving leadership, and Australia’s productivity needs a desperate shot in the arm, advocating a tax swap should be opportune.

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  • 1
    Tom Jones
    Posted Tuesday, 18 October 2011 at 1:48 pm | Permalink

    What is not stated here is the regressive nature of the GST and the impact on poor families is far greater than on the rich. What is being argued here is that the poor should subsidise the rich. Income tax is fairer as it means that people pay tax in accordance with their means. Expecting higher levels of GST will not be compensated by lower income tax for those who don’t reach the tax free threshold such as age pensioners. Of course the writer would probably argue that pensioners should be encouraged to work and to stop being a drain on society.

    Food is about survival and rightly fresh food was left out of the equation in the first place and people will rightly reject the self serving arguments in this piece of class warfare demanding that they pay more GST and have it on food as well.

  • 2
    Perry Gretton
    Posted Tuesday, 18 October 2011 at 2:08 pm | Permalink

    @Tom Jones: You’ve summed it up well. It’s not just pensioners but self-funded retirees, part-time workers who barely make a living wage, and those on welfare who are more adversely affected by goods and services taxes.

    The Howard government progressively reduced the tax rates for high earners, and there’s much to be said now for raising the upper thresholds to provide a more equitable contribution by wage and salary earners.

  • 3
    Modus Ponens
    Posted Tuesday, 18 October 2011 at 2:19 pm | Permalink

    Lets restore the capital gains tax to tax the entire profit, and remove negative gearing concessions and use that money to reduce taxes on income in the 15-30% range.

    If we still want to reduce taxes that punish income and (moderate) savings, then we can talk about expanding the GST, but it shouldn’t be the priority.

    And Tom Jones you are wrong in assuming that income tax is fairer - it is the rates that make it either fair or inequitable. When lower income earners (mothers or unemployed moving into part time work) face effective tax rates of 60 cents in the dollar while those earning over $180k only pay 45% on all income OVER $180k - you have got a distortion.

    If you push up the higher rates and pull down the lower rates with money raised through a wider GST base, it would be a fair trade off, but there are fairer ways of raising revenue.

  • 4
    mattsui
    Posted Tuesday, 18 October 2011 at 2:35 pm | Permalink

    Here we go again.
    Where is the link between tax rates, particularly sales tax and productivity?
    Is it really necessary to include remarks about “the uppity family who prefers “organic” home cooking” (everyone knows “organic” foods are cost prohibitive any way so the point is moot) while pretending to advocate for low income diners (wtf?).
    The Author completely ignores the position of the states (remember them?) in his race to tax spending. GST revenue is intended to be returned to the states and any tampering with GST Federally will cause much nashing of teeth at COAG meetings.
    I agree that the GST should be part of any tax reform discussion - it’s not untouchable. But the suggestion that an increase in the basic cost of living through an increse in consumption tax is somehow a gift to low income earners?
    Typical of the disingenuous rogues at the CIS.

  • 5
    David Hand
    Posted Tuesday, 18 October 2011 at 3:54 pm | Permalink

    It has often made me wonder why politicians of all persuasions shy away fron any change to the GST when it is such a key stream of revenue that operates in such and efficient (for the ATO) way. Tom’s contribution puts it all into perspective. Politicians would be in for a deluge of left elite hand-wringing about the regressive nature of the tax and Wayne Swan simply doesn’t have the stomach for those “hard decisions” that pepper his rhetoric but not his policies.

    Every rent-seeker from book lovers, to academics to union hacks to organic food marketers wouls march the streets in passionate defence of the poor and disadvantaged should a change to the GST be contemplated. If that doesn’t knock it on the head then emotional articles by people who are “ashamed to be Australian” or “ashamed of the selfishness of Australians” would appear in organs like Crikey.

    So I understand Wayne’s timidity.

    I will just make this point. Our society needs to have enough people generating wealth in order for it to be redistributed to the disadvantaged and though this leads to inequality, it is the only proven way for our society to function well. Taxation policy needs to be designed for the middle 80% of us - those who pay the most tax and generate most of our GDP. If you try to design it for the bottom or the top, you mess the whole thing up. The best thing for the low income set are special measures such as benefits and allowances not a distortion of the whole system to everyone’s loss.

    A consumption tax like the GST should be as broad as possible in order to play its part in the revenue mix the governments need. I’m not sure about the connection to productivity but I am confident it would incentivise people to work harder in a way that pushing up the marginal income tax rate would not.

  • 6
    Ed
    Posted Tuesday, 18 October 2011 at 4:02 pm | Permalink

    Another load of crap from the CIS. Why crap? Because any article by a so called research fellow that uses “welfare lobby” and “bleat” in the same sentence deserves no better. Why is it the disingenuous who always resort to the poll tax/consumption tax to raise revenue? Personally I would not mind an increase in the GST if it was accompanied by removal of negative gearing on residential property, removal of tax breaks on unearned income, removal of family trusts as tax avoidance schemes and increase of capital gains tax to income tax levels.
    But wait on. If we removed all those tax breaks for the financial elites we wouldn’t need to increase the GST.

  • 7
    Sean Doyle
    Posted Tuesday, 18 October 2011 at 4:15 pm | Permalink

    @MATTSUI: Presumably by “poorer people who prefer to dine out be[ing] punished”, Creighton refers to the brutal price hikes soup kitchens patrons suffered when the GST was introduced.

    As pointed out by others, cuts in income tax to compensate for GST rises aren’t actually very generous for people whose income is under the (rising) tax free threshold. As for this:

    Um, actually we as a society do try to tailor such charges/taxes to ensure progresivity by having concession public transport tickets and different car rego arrangements for people on lower incomes. Far from absurd, I think there should be a fair bit more of it. The carbon tax will fall hardest on those who use the most carbon, which tend to be well off people who can afford to operate high carbon emitting objects in the first place.

    Nice of you to conflate tobacco and alcohol taxes with public transport and car rego too. Some people recognise that alcohol, and in particular tobacco, aren’t exactly an essential of life and costs society far more than it benefits, therefore justifying the government’s efforts to recoup some of the expenses these drugs force upon it. But I guess we’ve got to keep the sponsors happy, eh Andrew?

    Really now Crikey, I’m all for diversity of opinion that challenges my own stances on issues, but given that this article is little more than assertion driven bollocks, I demand that any such future articles of similar ilk be published through the filter of a FDOTM cartoon.

  • 8
    Sean Doyle
    Posted Tuesday, 18 October 2011 at 4:15 pm | Permalink

    Oh feck, someone fix the luddite’s HTML code please.

  • 9
    Perry Gretton
    Posted Tuesday, 18 October 2011 at 4:20 pm | Permalink

    The best thing for the low income set are special measures such as benefits and allowances not a distortion of the whole system to everyone’s loss.”

    @David Hand: On what objective basis is it best? Recent experience shows that “special measures such as benefits and allowances” are directed to the middle class. Someone obviously thought that was “best” for the middle class.

    There is no natural state of taxation, direct or indirect. Systems are designed to collect revenue sufficient to meet policy needs without encouraging too much in the way of avoidance. They may also have a social objective in ensuring that the burden is shared equally according to the capacity to pay. However, it’s very difficult to “incentivise people to work harder” via taxation. Apart from the nexus between productivity and taxation being questionable, productivity is affected by other factors, not the least being investment in new equipment.

  • 10
    John Bennetts
    Posted Tuesday, 18 October 2011 at 4:38 pm | Permalink

    Tom Jones is dead wrong to assert that GST is regressive and that income tax is fairer.

    Can’t he read?

    Quote: “The Henry review reckoned raising income tax causes about three times as much damage to welfare as lifting the GST.”

    This is pretty plain to me. He’s arguing against his own team in this debate.

  • 11
    davidk
    Posted Tuesday, 18 October 2011 at 4:41 pm | Permalink

    What a thoroughly nasty piece.
    “The bleating welfare lobbbyand pesky poor people and those on benefits.Tey all eat rubbish food anyway so we might as well taxthe fresh stuff too. Why not tailor every tax to ensure progressivity? Much better than tailoring them to maintain the status quo I would suggest.

  • 12
    Terry O'Loughlin
    Posted Tuesday, 18 October 2011 at 4:58 pm | Permalink

    whereas the uppity family who prefers “organic” home cooking benefit”
    I find this appalling. Does he mean the better-off are per se “uppity”?
    Nasty indeed.

  • 13
    mattsui
    Posted Tuesday, 18 October 2011 at 5:03 pm | Permalink

    The better off are uppity food snobs - Fact!
    Financially vulnerable families live on junk food - Fact!

    CIS - Taking the think out of think-tank.

  • 14
    Liz45
    Posted Tuesday, 18 October 2011 at 5:36 pm | Permalink

    @ADAM C- It’s true that in general people on lower incomes will spend a larger proportion of their incomes on food, although not necessarily fresh food that is GST exempt — look at how obesity rates and junk food consumption correlate with income. Nevertheless is it fair that poorer people who prefer to dine out be punished, whereas the uppity family who prefers “organic” home cooking benefit?

    Taken a look at Hockey, Clive Palmer and Gina lately? Just to pick on 3 who readily come to mind? What sort of food can they afford, and what sort are they eating? There’s lots of people on moderate/high incomes who are either overweight or obese! Your comment is plain stupid! Perhaps it’s too much expensive wine? Long lunches? Laziness!

    I’m a pensioner. I do not have any money in savings nor do I receive any money from super etc. Why should I pay the same for essentials and utilities as a person on heaps of money. Your concern re people being able to save is another bit of discrimination. I pay some on electricity, gas and phone each fortnight in order to avoid big bills. The ‘service fee’ on these accounts is at times higher than say the gas I use - in summer? This is unfair! Being able to save is a dream. I don’t buy rubbish food or drinks etc and the last time I had dinner out my future daughter in law paid for me! My budget only runs to a sandwich and a coffee - once a fortnight perhaps? I raised three sons and never brought rubbish food or soft drinks.

    The GST was the first instance where pensioners and others on low incomes are taxed unfairly. You don’t seem to bother about us. Perhaps we should be dispensed with - at a certain age?

    After Howard introduced the GST he then went on to remove the surcharge on about 600,000 incomes above $100,000 to the tune of $2.3 BILLION. It could be argued that the pensioners and low income earners are contributing to this ‘gift’ to the wealthy at our expense! (Daily Telegraph 2005).

    And you’re advocating raising it! What’s your income? How much are you worth?

  • 15
    David Hand
    Posted Tuesday, 18 October 2011 at 6:09 pm | Permalink

    Perry,
    I too can’t quite see the connection between taxation and productivity. I think the writer may have had in mind the huge chunk of an extra dollar earned that goes to the tax man when you are on the top marginal rate.

    Successive governments have reduced this by both reducing the rate and increasing the threshold where it kicks in and this has the benefit of reducing the incentives for tax avoidance and minimisation. I also agree with Ed’s point about tax lurks for the well off that damage government revenues. I’m no fan of negative gearing.

    My point about benefits and alowances for the poor was more to do with the distortions that would flow through the whole economy if GST is tailored for the poor. It’s better to charge GST on milk and then give a pensioner free milk than keep milk exempt. The middle class welfare you refer to is a red herring.

  • 16
    Perry Gretton
    Posted Tuesday, 18 October 2011 at 6:20 pm | Permalink

    The reason food is exempt from GST is that it’s an essential. Personally, I’d add utility bills to that, as they disproportionately affect the poor.

    I don’t like the free milk approach because the potential recipients would be treated as welfare beneficiaries, which many are not at the moment. And welfare comes at a cost, too.

  • 17
    AR
    Posted Tuesday, 18 October 2011 at 9:43 pm | Permalink

    I was esp bemused by the claim the exemptions on food, education, health, etc, … distort consumption patterns. Yeah, definitely coz spending on food, health etc is entirely discretionary, only fat, rich bastards need to eat and then be treated for obesity.
    VAT/GST or MoM, - consumption taxes arose on the Continent, specifically the Latin countries where tax evasion on INCOME is a normal as breathing.
    I think that it was F. Scott Fitz, living it up in ante bellum Paris who wrote, ”the rich are different” to which Hemingway replied, “yes, they have more money”.
    A dead cert proof is coz they SPEND it so tax it and let the rate compensate for lying about income.
    Unfortunately that’s not what we got here, income remains (also in UK post VAT).
    I would happily pay a higher rate of GST, maintaining exemptions for fresh food (an esp. nasty little aside about the poor & uppity diets but what else would one expect from a reptile of the CIS) assuming every dollar of extra GST revenue were used to cut marginal tax rates, especially the lower 15% and 30% rates.
    Make that ONLY the lower two rates AND increase the rate above $150K and I’m all for it.
    Easily done by also removing negative gearing, the greatest iniquity of the whole taxation system, giving to those that have and taking from those that have not.

  • 18
    StrewthAlmighty
    Posted Wednesday, 19 October 2011 at 12:05 am | Permalink

    David H

    Your point is a good one. Getting rid of the exemptions and making a compensating increase in pensions, low income offsets, welfare etc would also do the trick.

    Just to clarify….

    A consumption tax is not actually a regressive tax. It is a flat tax.

    It can be regressive with respect to income but only to the extent one assumes that the higher earner saves more (which might be true “on average” but is certainly not always true - there are plenty of high income earners living well beyond their means).

    The person that does pay a “penalty” rate of tax is the over-consumer (poor or rich or in-between). Personally I think this is a good thing since it counter-balances the tendency of Governments and consumers to live beyond their means.

    When our Govts can save and our population has a tendency to massively in-debt itself the last thing we need is a tax system that encourages borrowing and consuming rather than saving and patience. You can add things like “negative gearing” into this silliness - a specific tax concession for borrowing and consuming - the only one who argued this was a good idea at the tax forum was the property spruiker!

    In fact if we could eliminate the existing incentives in the tax system for people to over-consume perhaps we would find we don’t even need a carbon tax at all to reduce our CO2 emissions?

  • 19
    mnenomic77
    Posted Wednesday, 19 October 2011 at 12:27 am | Permalink

    Centre for “Independent” Studies as usual they only seem to be able to read from the neo-liberal bible. It is absurd to argue that welfare recipients will be better off by having less disposable income, which inevitably is the result of an increase in GST. Next they’ll be saying that the poor will benefit from the abolition of the minimum wage because it will “improve” productivity. When neo-liberals use a broad brush and say the “economy” will be better off what they really mean is the the average wage will increase, but inevitably the income gap will to, and the poor end up worse then they were, with the rich even richer, creating the convenient illusion that “average” income is rising. Want to raise tax revenue, bring in a robin hood style tax, tax bank transactions, bring in a super-wealthy tax, bring in higher resource taxation. But please don’t impose imposts on those who are struggling.

  • 20
    David Hand
    Posted Wednesday, 19 October 2011 at 9:37 am | Permalink

    George Orwell wrote with great insight about the use of language in a totalitarian society and it is interesting how such techniques are used today. Specifically, I refer to “Neoliberalism” so beloved by the left elites. “Neo” is designed to create the impression that it is a new unwelcome phenomena, whereas the underlying principles modern economic thinking have existed for thousands of years. It is the social elements of economic management such as Keynesianism (much of which I agree with) that has only been around for about 70 years that truly deserves the title “Neo”.

    Could someone who uses the term “Neoliberalism” explain what aspects of it are new? After all, free markets were not invented by Margaret Thatcher.

  • 21
    Peter Ormonde
    Posted Wednesday, 19 October 2011 at 10:03 am | Permalink

    Strewth …

    A consumption tax is not actually a regressive tax. It is a flat tax.”

    Did anyone else notice that? Oh dear. Where does one begin?

    Otherwise an interesting discussion…

    I had this strange silly notion that the GST distribution deal we worked out with the states was supposed to lead to all these absurd archaic State taxes on economic growth being swept away. Was I dreaming? What happened?

    Rather than urging the government to commit political suicide, why isn’t the CIS fella focusing some energy on getting the States to live up to their side of the deal and get off the back of economic growth and activity. Yet now we see them pulling swifties on mining royalties and clinging like a tick to the economy.

    The Commonwealth pushes the accelerator, the States slam on the brakes. Henry Parkes - you bastard!

  • 22
    Tim Vernum
    Posted Wednesday, 19 October 2011 at 10:22 am | Permalink

    If it were genuinely concerned with low-income groups, it would agitate for tax reforms that enhance the economy’s long-run prosperity, which benefits everyone

    Only if you’re so blind an economist that you believe money => happiness.

    Income disparity is as much of an issue for low-income groups as raw purchasing power. Once people reach a certain level of income, such that their needs are well covered, and they have enough control of their financial position to not be in fear of destitution, their issue becomes one of social inclusion and cohesion.

    If you live in a community where everyone can afford food on the table and roof over their heads, and a couple of drinks at the pub on Friday night, then everyone is generally happy with their economic position, despite the fact that they can’t afford 65” TVs or overseas holidays.

    However, if some members of the community become more prosperous, and start to be able to afford the TV and holiday, it sows discontent. And when it gets to the point that 80% of people have those things, and only 20% don’t, then those 20% start to have issues. Yes, we can cast that as envy and coveting, but we can also cast it as community members feeling as though their are not receiving a fair share of the wealth. And it’s not always TVs and holidays. It’s could also be music/sports lessons for their kids, private schools, private health insurance, etc.

    Simply increasing the overall economy’s prosperity, without doing anything to reduce income disparity, is not necessarily a benefit to the poor.

  • 23
    Perry Gretton
    Posted Wednesday, 19 October 2011 at 10:38 am | Permalink

    My take:

    Neoliberalism is a political rather than an economic concept. It combines generally socially progressive (i.e. liberal) views with an emphasis on economic growth.

    Neoconservatism is focused on returning to traditional values, i.e. those that preceded the post-war liberal views.

  • 24
    Posted Wednesday, 19 October 2011 at 12:28 pm | Permalink

    Books weren’t exempt from GST, despite many arguing at the time they should be, and now look many major book retailers are still about in Australia…

    Sure, it was a technological shift which caused bookstores to decline, but you can bet your balls that if books were GST-free people would have taken longer to consider shopping online at Amazon or the Book Depository.

  • 25
    David Hand
    Posted Wednesday, 19 October 2011 at 12:53 pm | Permalink

    Hey, Perry,
    What do you think the difference is between “Neoliberalism” and “Liberalism” and what do you think the difference is between “Neoconservatism” and “Conservatism”?

  • 26
    Peter Ormonde
    Posted Wednesday, 19 October 2011 at 1:00 pm | Permalink

    Crikey..

    I will try yet again…

    I stuck a post on here at 10.03am. As a small test I called the Father of Federation Henry Parkes a B*st*rd… not an utter B*st*rd or a proper B*st*rd which would have been insulting. He was just a silly B*st*rd. That post is still awaiting moderation.

    When I saw this annoying little moderation message on the post, I wrote a second message for the consideration of your good selves. It was not offensive or rude in any way and it made a couple of decent points.

    It ran something like this: Now yesterday on Crikey I was called a pederast by one of your anonymous abusive trolls. This went straight onto the site without a blink - I use my real name here. I am publicly identified.

    But use that most irreverent of Australianisms - the B word - and the post is swept up into the arms of Sister Mary Moderation for a moral evaluation.

    This reflects the American origins of this closed holy order of moderators … a moralistic culture where the B word is regarded with alarm and where, I might add, your old veiled reference to the Lord Redeemer (Crikey) would be hauled before the good mod-bot sisters for a full cavity search.

    You are thus lending the yanks a helping hand in grinding the rough edges off our public discourse … trimming off the uncouth bits and shoehorning us into the American mold. Top job.

    That second post - making the very legal points outlined above - has been deleted in its entirety.

    So now I am adding this addendum:

    Not the mainstream meeja perhaps … but mainstreaming the public language is apparently quite OK. So apparently is calling a nice old bloke like me a pederast.
    Apologies all round for all of it please.

    I expect both this post to be published and the publication of the now legally requested apology. Pronto.

  • 27
    Policeman MacCruiskeen
    Posted Wednesday, 19 October 2011 at 1:09 pm | Permalink

    Ello, ‘ello, ‘ello boi jayzuz do I smell the hint o’ a breach of the law with even tha possibility o’ a breach o’ the peace as well. This talk of’cavity searches and breaches has The Truncheon fair twitchin’. Up against tha wall Croikey and spread ‘em.

  • 28
    Perry Gretton
    Posted Wednesday, 19 October 2011 at 1:24 pm | Permalink

    David, the difference between neoliberalism and liberalism is the emphasis on growing the economy as a key feature (like New Labour in the UK). Neoconservatism differs from classical conservatism in its radical nature.

    These definitions are how I believe them to be. Others far more versed in political science may challenge, refine, or refute them.

  • 29
    David Hand
    Posted Wednesday, 19 October 2011 at 2:06 pm | Permalink

    Perry,
    Thank you for your comment. It is possible that modern economic and political thinking differs from more traditional views.

    The other possibility of course is that the term “neo” is simply a construct of the left elite to isolate the current enemy, the economic leaders of the free world, into some sort of radical clique that can then be demonised without resorting to awkward parallels with the past. After all, if modern economics is based solidly on long established principles such as those articulated by Adam Smith, it is harder to oppose than if it is some flaky idea invented yesterday.

  • 30
    David Hand
    Posted Wednesday, 19 October 2011 at 2:08 pm | Permalink

    Hey Peter,
    I share your pain. I was moderated completely out of the discussion following Bolt’s court case.

  • 31
    Peter Ormonde
    Posted Wednesday, 19 October 2011 at 2:28 pm | Permalink

    David,

    Thanks for sharing the pain of Sister Moderation’s probing inquisition. More lubricant next time Sister.

    One of the significant distinctions between historical/traditional liberalism and the so called neo-liberals/neo-conservatives, is their selective interpretation/ re-writing of Adam Smith.

    Smith was anything but a slave to profit and the sort of self-interesting thinking that gives us “trickle-down” economics. In fact if you have a read of him he would be considered today as a slavering bolshevik by the Tea Party, the Abbotts and the like.

    Here’s a few of my favourites:

    As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce.”

    Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.”

    To feel much for others and little for ourselves; to restrain our selfishness and exercise our benevolent affections, constitute the perfection of human nature.

    and lastly,

    The real tragedy of the poor is the poverty of their aspirations.”

    No mere laissez faire, flat tax, trickling-down rich man’s friend this Smith fella.

  • 32
    Perry Gretton
    Posted Wednesday, 19 October 2011 at 2:42 pm | Permalink

    If my memory serves me properly, Smith also passionately opposed the idea of monopolies.

  • 33
    Sean Doyle
    Posted Wednesday, 19 October 2011 at 3:03 pm | Permalink

    @PERRY GRETTON@1:24pm

    Surely ‘conservative’ is an antonym of ‘radical’ whether it has ‘neo’ in front of it or not. I’m not wanting to have a go at you since these odd definitions are part of the popular discourse and so therefore have to be referred to, but there is a contradiction that the likes of Waleed Aly could drive a truck through (and more power to him to do so, I say!).

    Neo (new?!?!) conservative is a blatant contradiction in terms. Even if it was to refer to someone who wishes to revert society to a glorified past, this is not conservative but radical since is by definition involves changing the current society. It certainly seems an odd way to describe politicians like Thatcher and Reagan, for example, since their economic policies were anything but conservative towards society. It’s a façade in many ways, like how McDonald’s sells “coffee”. The problem is as much trying to use the English language consistently as it is trying to categorise political beliefs.

  • 34
    Peter Ormonde
    Posted Wednesday, 19 October 2011 at 3:08 pm | Permalink

    Perry…

    Monopolies … creatures of Satan as far as Smith was concerned … and who’d be arguing with that?

    A couple more pertinent and pithy Smithisms:

    Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.”

    And my all time favorite:

    People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty or justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.”

    Remember that next time you hear some mouthpiece from an industry association frothing on about the national interest.

  • 35
    Perry Gretton
    Posted Wednesday, 19 October 2011 at 3:11 pm | Permalink

    Sean, I didn’t invent the terms. Personally I think prefixing neo- to conservative is pretty radical in and of itself.

  • 36
    Peter Ormonde
    Posted Wednesday, 19 October 2011 at 3:19 pm | Permalink

    Perry and Sean ….

    Nothing “neo” about greed and self interest I’m afraid… in marketing it’s called rebadging, repackaging and is all about product placement.

    But nothing - none of it - is to do with Adam Smith or any other serious theoretical economic analysis …. after all what’s there to say about Me! Me! Me!!!

    Neo cons and neo libs owe far far more to that other source of “inspiration” the 2 dimensional “philosopher”/moralist Ayn Rand. And what a boring, turgid read they were.

  • 37
    Peter Ormonde
    Posted Wednesday, 19 October 2011 at 4:10 pm | Permalink

    Ah…

    It looks like anything I might want to post is now attracting the swooping ministrations of the Sisters of Moderation.

    I am now closely approaching an annoyance threshhold regarding your selective moderation.

    I require an apology in writing for Crikey’s publishing, or allowing the site to be used for publication of, a malicious libel, and publication of all my previous posts on this matter which you have deleted without good reason. Pronto.

    A simple statement of regret will be sufficient, published on the relevant page. A commitment to doing something about future abuse on your site would be both welcome and prudent.

    No hiding behind the desk. I do not want to involve lawyers nor do I want to cost you money - just pride.

  • 38
    Policeman MacCruiskeen
    Posted Wednesday, 19 October 2011 at 4:18 pm | Permalink

    Peter Ormonde m’boy so it’s talk o’ lawyers now is it? In which case let me recommend me cousins McVile, McVile and McKnuckle. They do a nice loin in visa consultations, debt recovery and diggin’ people outta from behoind desks when all as is needed is a civil response.

  • 39
    mattsui
    Posted Wednesday, 19 October 2011 at 4:20 pm | Permalink

    @ Peter Ormond. Love the quotes from Smith.
    They’re certain to curry favour with the mod’s. Who-or what-ever they are!
    The American Neo-con’s - as exemplefied by the Bush era war mongering of Chaney and co.
    Were so called because of their new approach to conservatism, which would certainly would have seemed hypocritical in an historic sense. To wit, actively persuing war on foreign soil - not a very conservative thing to do - supposedly in the interest of fostering stability at home.

  • 40
    Peter Ormonde
    Posted Wednesday, 19 October 2011 at 8:49 pm | Permalink

    Crikey … don’t worry … I’ll moderate it myself. 10 hours is a bit too slow…

    Strewth …

    “A consumption tax is not actually a regressive tax. It is a flat tax.”

    Did anyone else notice that? Oh dear. Where does one begin?

    Otherwise an interesting discussion…

    I had this strange silly notion that the GST distribution deal we worked out with the states was supposed to lead to all these absurd archaic State taxes on economic growth being swept away. Was I dreaming? What happened?

    Rather than urging the government to commit political suicide, why isn’t the CIS fella focusing some energy on getting the States to live up to their side of the deal and get off the back of economic growth and activity. Yet now we see them pulling swifties on mining royalties and clinging like a tick to the economy.

    The Commonwealth pushes the accelerator, the States slam on the brakes. Henry Parkes - you b*st*rd!

  • 41
    StrewthAlmighty
    Posted Thursday, 20 October 2011 at 12:27 am | Permalink

    PeteO

    Where does one begin? Well usually one begins by beginning!

  • 42
    Lady White Peace
    Posted Thursday, 20 October 2011 at 9:36 pm | Permalink

    I wonder if Adam Creighton would oblige us all, by researching his opinions a little further, and explain to us the benefit of a 20%GST. Remembering that the UK began with a 10% Vat then 15% Vat and now has reached 20% VAT and which could rise again at any time. I for one would not encourage any government to increase the GST for then they
    would not stop… and already they have their hands in our pocket taking whatever they want.
    could rise again at any time. I don’t think that Australians would benefit if this were
    to occur.
    The GST was not imposed in order to lessen the tax burden on income, it was introduced to eliminate the old system, which
    consisted of a wholesale tax then the profit margin that a retailer put on the product afterwhich there was a sales tax and then sold to the public.
    However not all items were taxed. At no stage were we advised that it would remove a portion of our income tax, when did this idea surface or is it Adam Creighton’s idea?

    The basic necessities of life should NOT BE TAXED, food, education, health and shelter are basic human needs and indeed
    human rights, consequently they should never be taxed. In fact I am appalled that books are taxed. Why a tax on knowledge?

  • 43
    StrewthAlmighty
    Posted Friday, 21 October 2011 at 12:00 pm | Permalink

    Lady White Peace

    You are largely right. The GST replaced the previous messy sales tax regime (although unfortunately thanks to the Dems it has never been as simple as it could have). Significant reductions in income tax rates will only come about with an increase in GST.

    The basic necessities of life (basic income) are taxed at the moment. It is just that we tax at the “earn” point rather than the “spend” point.

    In the current climate of concern over resource wastage and environmental damage it is kind of crazy that Australia has not embraced the idea of taxing consumption rather than earning. Even books require resources to be consumed to make them, transport them, dispose of them…

  • 44
    Liz45
    Posted Friday, 21 October 2011 at 2:47 pm | Permalink

    @LADY WHITE PEACE - I agree with you. I find it amazing that at time we here politicians lauding the positive influences of certain things, like reading for example, but then omit to even consider how this exciting and vital aspect of life is hampered by govt policies? It’s almost like they can’t put two things together at the same time - they’re kept in compartments - separate ones. There are many other examples of this. For instance, why not increase the gst on sugary drinks full of caffeine and calories, but remove it on other ones. Dumb!

    They should remove it altogether on utilities, particularly for pensioners and low income earners.

    Of course if those with wealth were taxed higher, lots of others could be removed. Unlike Venezuela, there’s no separate supermarkets for people on low incomes?

  • 45
    Lady White Peace
    Posted Friday, 21 October 2011 at 4:45 pm | Permalink

    @ Liz - Yes Liz and the Democrats Leader at the time Meg Lees was responsible for caving in on books! That was
    why the Aust Democrats got rid of her and replaced her with Natasha Stott Despoja. However the damage was done books where then taxed. Thank goodness they didn’t tax fresh fruit, vegetables, doctors, dentists etc.

  • 46
    David Hand
    Posted Friday, 21 October 2011 at 5:10 pm | Permalink

    The democrats didn’t get rid of Lees over books: they got rid of her over the GST, period. This was the death blow to the party, something I regret. It is a chronic problem of the socialist left that fairness is the only real imperative that drives policy views about tax.

    The socialist way is for low income earners to pay no tax of any kind and for high income earners to pay all the tax. This is a worthy and laudible sentiment with the pesky problem that it can’t be done. The result would be economic stagnation, the biggest industry in town would be tax avoidance and everyone - rich and poor- would be significantly worse off.

    The trick of effective taxation is to pull as much into government coffers without disincentivising citizens to create the wealth that generates the tax. The GST is good for this because it provides a broad based revenue stream that does not distort people’s economic behaviour too much. This is why it must be designed for the middle majority and not pander to the representatives of the poor and disadvantaged, who can be helped in other ways.

    The Democrats were destroyed by a socialist clique within it fundamentally opposed to a consumption tax and who were willing to burn the house down in order to get their way. Natasha Stott Despoja was the primary torch bearer.

  • 47
    Lady White Peace
    Posted Friday, 21 October 2011 at 5:16 pm | Permalink

    Hi StrewthA you have got me thinking. Let’s say that we remove salary tax …completely remove it.
    So if you are on $150, 000 pa currently that costs you in tax $43.450 plus the Medicare levy of $2250 so all up $$45.700.

    So take home pay is $104.000 or $2000 p.w. that is what you take home. However let’s now say that we have a new GST of 25% on everything??? But your take home pay is $150.000 …. can we figure out which would give the better
    result to the taxpayer?? Have we got a mathematical genius who can work something out!!

  • 48
    Lady White Peace
    Posted Friday, 21 October 2011 at 5:30 pm | Permalink

    @David Hand the Democrats got rid of Lees because she went against the wishes of the membership.She had strict instructions to not cave in to Howard and she did. She managed to get fresh food and a few other items gst free but didn’t go far enough, and… she had all the aces… and could have, but the power went to her head.

    The Australian Democrats was member driven party. The membership voted on the Policy not the other way round. It was the most democratic of parties…way ahead of it’s time…”NEITHER RIGHT NOR LEFT BUT WAY AHEAD” that because most members were academics and intellectuals who actually bothered to think things through.

    And excuse me David Hand , but you know not what you are talking about when you say “that it was destroyed by a socialist clique fundamentally opposed to a consumption tax and who were willing to burn the house down in order to get their way. Natasha Stott Despoja was the primary torch bearer.”

    In fact the party membership rose by 50% when Natasha Stott Despoja became leader. It was only a jealous Meg Lees and another Senator that I will not name… who eventually destroyed the party. And those rabid lefties that you talk about…. all left the Democrats and went across to the Greens. And that is the real story David Hand.

  • 49
    David Hand
    Posted Friday, 21 October 2011 at 6:39 pm | Permalink

    I stand corrected by someone who was on the inside. But the member driven party is still gone to the dustbin of history.

    I only read the newspapers and as I recall it, Lees negotiated the GST with the coalition and Stott Despoja voted against the GST when it passed through the Senate. She subsequently ousted Lees through a member initiated leadership spill. Whatever side you consider the good guys, it is a shame that such a sophisticated political entity could tear itself apart over a policy like the GST. I would have thought such people would understand the art of political and policy compromise.

    And if the Democrats were “academics and intellectuals who……. thought things through”, why were they so vehemently opposed to such a logical and effective tax as a broad based GST? And why did they so gratuitously destroy their own party?

  • 50
    Lady White Peace
    Posted Friday, 21 October 2011 at 8:40 pm | Permalink

    Ah David it is just too difficult to discuss and debate with someone whose opinion has been formed by reading the inglorious newspapers of OZ.

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