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The Forum > Article Comments > Debate on tax and 'small government' flares again > Comments

Debate on tax and 'small government' flares again : Comments

By Tristan Ewins, published 29/1/2015

The time has come to question neo-liberal shibboleths around 'small government' and 'the market'.

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Tristan what we need to do is get rid of 45 billion from the budget, not add it. That is before the projected expenditure that the redhead left as a booby trap for future governments of the NDIS & Gonski. They both have to be scrapped, after cutting that 45 billion.

Then we just may have a chance of not leaving our kids up to their necks in our [read Rudd/Gillard] debt.

There is a pretty fair chance that the Greeks will drop their austerity programs after their new government takes power. It will be interesting to see what they do.

They could precipitate the finish for the euro, & perhaps the EU as an entity. If that actually happens we will be in real trouble for quite a while. Fear would cripple markets & investment.

I would not be all that surprised to see our welfare, including the age pensions have to be seriously cut. That could be by sleight of hand, not actually cutting payments, but ripping quite a bit of it back in taxes & charges. I believe we are now at, or just over the apex of the ridiculous welfare society. As with Russia & China, the collapse will ultimately lead to something more sustainable, but it will be at a much lower level than now.

I think you should sit down & hold on, quite soon your world, & mine, will be upside down, & much poorer.

If we had not allowed the welfare community to get so greedy, we may have been able to maintain our conditions of the 70s for ever. Now it is unlikely we will end up that well off.

It has only been cheap energy that has allowed us to feather bed the welfare society. With the greenies, & ratbags like Obama trying to rob us of that energy, watch out the poor.
Posted by Hasbeen, Thursday, 29 January 2015 8:14:19 PM
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Hasbeen; I agree that the world could get messed up in a big way. But its not because of welfare. In part its because of private debt. US debt public and private is also a problem. But also there will be competition for the composition of the world order. China for instance is not going to passively accept a middling position in the economic world order. And GFC showed how potentially volatile the finance markets are - and that's not fixed yet either. On the other hand we will see the decline of the oil economy; and the rise of free and renewable energy.

The point of my article was not *only* to defend welfare. You suggest the welfare lobby is 'greedy' - but compare our welfare system with the Nordics and West Europeans... Welfare isn't the problem. Compare our economy with the Nordics. Active Labour Market Programs; intense lifelong learning and reskilling; active industry policies. By comparison Abbott let Australian manufacturing and especially auto wither on the vine. 50,000 jobs gone.

Also consider the potential benefits of a new mixed economy; including natural public monopolies and strategic (ie: not blanket)planning. As I argue in the article - consider the reduced cost structures - which benefit consumers, workers AND business... Resulting both from eliminating unnecessary duplication, as well as cheaper finance, and perhaps subsidies for the broader economy because of lower dividends.

And if there is going to be pain - why shouldn't the pain be fairly shared? Why should the disabled and job seekers be made to pay the price when we have millionaires having their retirements massively subsdised through the current superannuation concessions system? Why favour a regressive GST over progressive taxes? Why not have a fairer mix?

We already had one Great Depression. We almost repeated it with the GFC. Portugal, Italy, Greece and Spain have been in the kind of territory for a long while now. Straight austerity doesn't work. We need to dig ourselves out of debt as efficiently as possible. And that's via a full employment economy. NOT austerity resulting in massive, long-term unemployment.
Posted by Tristan Ewins, Thursday, 29 January 2015 9:22:30 PM
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Tristan and Hasbeen,

Nearly all money is debt; it is borrowed into existence and disappears when the debt is paid off. So there should be gradual, steady increase in the sum of public and private net debt. It's not a bad thing.

We're not up to our necks in public debt; at most we're up to our ankles. And our kids are NOT UNDER ANY OBLIGATION WHATSOEVER to pay it off.

Right now the private sector's reluctant to take on any more debt, so the public sector should be taking on more. Then the extra money the government puts into the economy will increase opportunity for the private sector, which will result in more private borrowing. When that happens it will be time for the government to cut back, but doing so sooner would be counterproductive.
Posted by Aidan, Thursday, 29 January 2015 11:35:07 PM
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Rhrosty, sorry for not reading your opening post earlier.

Negative gearing. Prior to NG, a land lord would not buy a house unless they could get a 10% return, simply because you could get up to 17% in the bank, although 6-8% was more realistic. So if NG was removed, sure house prices may come down to some effect, but fewer would be built and the banks would most likely revert to the 'don't bother applying unless you have a third deposit', which is how it was prior to the days of non bank lenders. So if houses dropped by say 30%, to say $300,000, buyers would need $100 K plus all legals, and that's just not possible simply because they cant afford 10% of $400K.now.

The other issue woukd be cost of land as it would be higher because developers would be less willing to land bank. Given the approval process is so drawn out, the out of pockets during this process, which are now funded by the tax payer, would then be added to the cost of the land.

Of cause if houses did come down to $300,000 for your average home, I can't imagine renters being in a position to pay $600 per week, and be able to save their $100K deposit.

So despite these issues, the building industry would collapse simply because even with commercial projects, the holding costs during construction are subsidized through negative gearing.

So I seriously doubt negative gearing will go.

What I do think may happen is a 'return to profit test' whereby any negatively geared asset has to be able to demonstrate a profit (become self funding) within a time frame, perhaps ten years. Of cause this would rely on growth, and given the lack of investors, and possible caution from the banks, this may not happen.

Sorry, negative gearing is here to stay in my opinion.

Continued.
Posted by rehctub, Friday, 30 January 2015 7:41:07 AM
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Continued
As for family trusts, I have a couple myself and each are audited and no family member can draw an income without passing the eligibility test, with the exception of minors who I think can draw less than $1000 per year. My kids are now adults.

I also think any assets held in trusts, then inherited, should attract inheritance tax.

As for super, our super should never have been opened up to the profit/risk takers because we would have trillions in cash by now and own everything including Testra and our bank.

The whole point is we in deep trouble and most of it has been caused from the waste and mismanagement from the past two labor terms.

While the GFC may have been the trigger for their stimulus, it most certainly did not cause the waste and mismanagement that followed, nor did it influence what will most likely go down in history as the worst blunder from a PM ever, that being K Rudds removal of our border protection laws that worked so well. And if it is the worst, a very clise second woukd be his insulation debacle.

So while Morrison (our next PM in my view) may have stopped the boats, we are still paying the massive costs at the expense of our own tax layers and previous tax payers.

We will most certainly see GST on everything moving forward, even if labor regains office and that's only due again to labors debt.
Posted by rehctub, Friday, 30 January 2015 7:51:55 AM
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It seems that whenever somebody wants more money for something they attack super. Tristan, along with many others, claim that super is just a big tax rort for the rich, but how much tax do we actually pay for super? I modeled it on a spreadsheet over 40 years and calculated tax as being 30% of your account balance at retirement.

Most people will have a much lower income in retirement and a 30% tax rate is totally unrealistic. While it's true that a few very rich do very well out of super, the average retiree has paid way too much tax. Any serious reform of superannuation tax would result in less revenue for the government, not more.
Posted by Wattle, Friday, 30 January 2015 10:08:04 AM
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