Arjay, Terge, I'm completely in agreement that we have to much government and taxation. A quick reflection on public debate on tax cuts vs services will quickly identify why. There is very little public support for tax cuts (smaller govt) when services are threatened. In the previous sentence I am assuming that tax cuts do not equal deficit.

We need a cultural change before we will have smaller government or real tax cuts. Whole elections are won and lost partly on the basis of increasing the size of government (more services) then real tax will increase to go with it.

R0bert

If one side of politics were to promise real tax cuts and the other side didn't then I think the outcome would be assured.

The majority would do the sums in their own private time and all else being equal (ie foreign policy, monetary policy, personalities etc) they would vote for tax cuts.

The real problem is that neither party is going to elections committed to real tax cuts. They are all locked into the fiscal straight jacket that Costello and Howard have spent so much time crafting.

It is not the taste of the electorate that needs to be fixed. Its the menu that they are presented with that is lacking

The question I would like debated, is how tax can be raised, when it’s included in the CPI, and that is used as the basis for wage increases in our regulated labour market, which has still has the ability to achieve wage increases in line with inflation.
Inflation being, cost of good or service, plus the GST "tax”.

As I see it, the labour market gets the benefits of the social wage provided by the "tax" plus a wage rise.
This also means domestic business, without export competition an also price there G&S to achieve the same outcome, i.e. an income that rises with cost of G&S plus tax.

I have come to the conclusion, that it is DOUBLE dipping, and actually no consumable wealth is collected. I agree that "$"s is collected, but as the cost of G&S goes up with the tax, particularly tertiary services, the govt is actually in a net situation. This is because it has to “BUY” back the tax when it purchases “G&S”

Maybe this is the reason govts love the tax's that are not included in the CPI, like gambling, speeding fines, stamp duty. I see this as particularly revellent to those states without a large export sector relative to their total domestic economy.

Any modelling I have done shows a result of infinity, unless you “exclude” a section of the economy. (They pay all the tax then)

I have excluded any productivity improvement, as the benefit from this should be shared by all members of the community.

Maybe this should be the first reform, and it surly would it inflation on the head for a while?

Any comments or further information please.
I would particularly like a excel model if the above is achievable.