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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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Of course Negative Gearing has to go, along with other clever tax rorts and ripoffs!

Negative gearing was supposed to make housing cheaper and it might if it only ever applied to brand new, never ever lived in housing stocks?

And how can any inherently fair minded person, think that giving preferential tax treatment to millionaires super is anything but massively unfair!

And how many family trusts are actually true trusts, rather than completely opaque tax avoidance schemes?

Seriously, these schemes need to be jettisoned in favor of thirty year self terminating bonds.

Which should be the only tax free financial instrument in this country!

And as such, enable our 1.8 trillion dollar super funds to stay at home working for us, on our huge (thirty year) infrastructure deficit!

And given current budget deficits, there is a case for much smaller government.

I mean, can anyone really make a case for keeping a middle tier of double handling government/roadblocks in the path of progress, which only real effect is to make virtually all public service delivery, around 30% dearer?

[Which is what we'd likely save if we instead, opted for a direct funding model and much more local autonomy/voluntary unpaid regional boards etc.]

Seriously, we need more hospital beds, teachers and police persons; not double dipping, double handing, centralizing collecting and collating empire building fat cat public servants; bean-counters!

Better we eliminate potential waste with apples for apples comparative bench marking and best practice!

No one is owed a living, including the most powerful persons in the country!

And this official double handling comes at an annual cost to the taxpayer of around 70 annual billions, (management fees) and that is before so much as a single service is delivered, or legislation enacted.

We are, with just one exception, the most over governed country in the world!

Time to stop trying to justify it and the endlessly growing foreign debt burden it surely creates, and only for personal expediency?

[I'm alright Jack, the rest of you mug out there in Mugsville, can go visit the nearest taxidermist!]
Posted by Rhrosty, Thursday, 29 January 2015 11:39:04 AM
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Constitutional law expert, George Williams from the University of New South Wales, said the impact of the chaplaincy ruling was rippling through government.

"What the High Court has now made absolutely clear is the Commonwealth can only provide money for programs over which it has authority under the constitution,

The list of federal powers under section 51 of the Constitution "don't include the environment - there is no environment power, there's no general education power and health power".
He said it was possible the first tranche of Green Army projects was unconstitutional but it would require a challenge to prove.

Professor Williams warned the chaplaincy ruling "is going to have an enormous impact in a lot of areas".
"The Commonwealth was of the view for decades that it could spend money on whatever it wanted,

"It used that for a variety of legitimate through to pork-barreling reasons and moved into areas such as education and the environment, arts - all sorts of things without any visible power to do so. And now the High Court has hauled them back again, and this is a big problem for the Commonwealth."
Posted by 579, Thursday, 29 January 2015 12:06:28 PM
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there are any number of countries with small governments and low taxes.

Papua New Guinea, Lebanon, Ghana, Chad, etc.
Posted by Wolly B, Thursday, 29 January 2015 2:02:08 PM
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Wolly B’s observation makes an important point, though perhaps not the one s/he intended. In rich countries like Australia, talk of “big government” or “small government” is in really talk about government that is a bit bigger or a bit smaller than we currently have, often used as a term of abuse rather than an accurate description of a party’s position. No major Australian party has, or would, advocate taking government spending to levels seen in Nigeria, Bangladesh or Sudan (less than 15% of GDP); or indeed in Libya, the Marshall Islands and Tuvalu (more than 60% of GDP).

By and large, richer countries have a larger percentage of GDP spend by government than smaller ones, but the relationship isn’t rigid and the directions of causality are not straightforward.

Many countries with higher government spending relative to GDP than Australia are comparatively poor (Mongolia, Equatorial Guinea, Republic of Congo) while some comparatively rich countries have smaller government (Switzerland, USA). Factors such as culture, history and resource endowment can also affect the relative size of government. In emerging and developing economies of Europe, which are mostly former communist countries, government spending is a much higher percentage of GDP (40%) than Asian emerging and developing economies (27%).

In short, there is probably a floor below which government spending is definitely too low, and a ceiling above which it is definitely too high, but between these I don’t think the absolute level of government spending matters much. How money is raised and spent, and on what, are the key issues, along with prudent budget management.

Mainstream political debate on bigger or smaller government is primarily a matter of degree, and talk of absolute “big government” vs “small government” mostly rhetoric.


I do sometimes wonder if Tristan is a secret mole for the Liberal Party. I can’t imagine much at the moment that would cause the Coalition to win the next election, but a Labor policy to massively increase the tax on superannuation contributions might just do the trick.
Posted by Rhian, Thursday, 29 January 2015 3:16:43 PM
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I agree with most of what you say here, but not about the superannuation taxation. More than 35% of the benefits of superannuation tax concessions go to the top 10% of income earners, that is, the people who would save for their retirement in any case. This is not an effective use of public money.

Note that poorer people are little better off, and the people in the bottom decile are actually worse off because of the flat 15% tax.

Another problem is that there is no reasonable benefit limit, so that people can squirrel away millions of dollars in a self-managed super fund with only minimal taxation.

I would like to see a system where there is progressive taxation depending on how much an individual has accumulated in super, with a definite upper limit at which all concessions end.
Posted by Divergence, Thursday, 29 January 2015 3:46:44 PM
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Well Rhian then you're have to include Richard Denniss and John Quiggin as 'moles for the Liberal Party' as well - because they support very similar policies. Though I guess its tempting for those who want to impose a strict division of labour in the Party to see challenges from a rank and file level in that light.

The following are quotes I've provided in my PhD - concerning the fate of German Social Democracy in the interwar period. Relevant for what I see as the present conundrum facing the ALP and similar social democratic parties:

With “strict parliamentarianism”, “the well-informed parliamentary group and its view of policy was to replace the activities of the party as a whole” (Adler in Bottomore, pp 236-238).

Hence, Adler explains:

"Thus there was accomplished one of the most fatal changes possible in a living party, its outcome being the weakening in the mass membership of the readiness for action and responsibility. They were almost drilled to wait first for commands from above, so that they did not have a view of their own; and they regarded all those who formed their own judgements, or were critical, as destroying or splitting the party. (Adler in Bottomore, p 238)"

Rhian talks about there being little difference re: tax between economically advanced countries. So let's be clear what I'm suggesting. I'm suggesting progressive tax go up by 2.5% of GDP in the first term of an incoming ALP Government. 2.5 per cent. I'll explain more in the next post.... So from memory we're at about 30% of GDP going in tax and then to different forms of public expenditure... Compared with Sweden at about 50%... And I'm arguing to raise that by 2.5 per cent.
Posted by Tristan Ewins, Thursday, 29 January 2015 3:56:05 PM
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