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The Forum > Article Comments > Tax cuts and increased spending don't add up > Comments

Tax cuts and increased spending don't add up : Comments

By Tristan Ewins, published 23/11/2006

Kim Beazley's proposed tax cuts throw nation building ambitions into question.

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Unless you want to be paying close to 50% tax rate it would be impossible to have Australian social security mirroring Scandinavia. I was there last year and in Oslo I paid $17 for a cardboard box of pasta and a muffin at a 7/11 style store!

I think the Australian system is far better were you reap what you sow and those who do little are still looked after.

One thing that I think should happen is the GST should go up to 15% and cover everything including food. This would enable tax cuts for the lower and middle class and people would only pay tax on what they spend.

The IMF and the world bank are not the problem it’s the corrupt kleptocary that are. If this were not true why is Botswana doing so much better then Cameroon? They are similar in culture and both started from almost the same position. But one is democratic and the other is a dictator ship.
Privatizing is the best way the 3rd world can get western money and know how it to help them build there economies.
Posted by EasyTimes, Saturday, 25 November 2006 3:54:39 PM
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Tristan,

this idea of providing free aged care for all doesn't do anything for equity. Perhaps you haven't been looking at demographic data and wealth, but I think you'll find a fair proportion of elderly people are extremely asset rich (which is not surprising given that assets increase across a lifespan). By offering them free aged care, what you are effectively doing is getting potentially poorer people (who pay the tax) to subsidize them. Thus you have a Robinhood in reverse situation where the poor subsidize the rich. No doubt there are some poor elderly people who the government will need to look after, but with no means testing, you are simply creating a subsidy for the rich.
Posted by rc, Saturday, 25 November 2006 4:39:16 PM
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EasyTimes said: "Privatizing is the best way the 3rd world can get western money and know how it to help them build there economies."

Wholesale privatisation may have been trendy back in the 1980s, but the track record of the IMF and World Bank in the Third World has been far from impressive. I doubt even you would have the temerity to argue that the "Washington Consensus" has not been an adbject failure.

Poor countries require essential investments in health, education and infrastructure before they can compete internationally. The World Bank and IMF instead demand that nation-states reduce government support, and insist on pushing weak developing economies into markets where they have no hope of competing. The success of the East Asian Tigers aptly demonstrates that the state-led, export-driven developmental model is far more effective than the gratuitous deregulation and privatization agenda adopted in Latin America at the behest of the IMF and World Bank.
Posted by Oligarch, Saturday, 25 November 2006 8:32:20 PM
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re: private provision of infrastructure - yes it can be done - but is it more competitive? The Scoresby freeway shows a project that cost about 2.5 billion to build, yet will cost consumers $7.5 billion. The Vic County Court building, costing taxpayers over $500 million over 20 years, only cost about $130million to build, and will not even revert to public ownership. Cut out the middle men, the profit margins, the higher cost of private capital - and you're left with the fact that the public sector can finance infrastructure more competitively than the private sector.

Re: using superannuation funds - this is an idea I'm thinking a lot about lately - and I'm undecided. The CFMEU as suggested some kind of public finance corporation comrpising the combined capital of the Future Fund and super funds. This idea seems to have merit as a means of mobilising super funds for the public good - but once you factor in the cost of tax concessions is it still a more competitive way of financing infrastructure compared to issuing government infrastructure bonds? I'm writing an article right now - so expect to hear more from me on this. Certainly it's a better way than the PPPs we're used to.

The straw man of a 'static' Keynesian past is unconvincing. Goverment can still finance infastructure at a more competitive rate: and infrastructure is still essential for competitiveness and growth. Counter-cyclical expenditure, when necessary, still makes sense. A democratic mixed economy is the real alternative to neo-liberalism.

re: Aged care - we have a choice - between a quality universal system - and a two-tiered system where those who cannot afford to pay have sub-standard care, those in the middle are forced to sell their homes to get any care at all (my grandma's home was only valued at somewhere around $70,000 and still she was forced to sell), and only the wealthy are assured of securing quality care. This is worse than a flat tax, and is inhumane and barbaric.

about the GST next time - no more room.
Posted by Tristan Ewins, Saturday, 25 November 2006 9:19:30 PM
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Re Aged Care - I am not sure that wealthier aged persons get better care than the patients around them. The wealthier patients certainly pay double the weekly fees of other patients.

Hostel aged care costs are divided into 2 bits
- there is a deposit of say $100,000 paid to the owner of the building - this money should be refunded within 3 months of death (oops) moving out
- there is a weekly sum for board, paid to the operator for providing staff, food and care.

The weekly sum for board is about 80% of the aged pension, paid by persons whose annual income was less than $63,000 [2003]. Wealthy paitents pay double this amount.

In Victoria the average cost of a nursing home meal is $0.70 and its quite common for patients to loss weight upon admittance eg The Age reported that a woman was admitted weighing 60kg and 3 months later she weighed 40kg. When I took my elderly mum out to dinner I joked that old people in this state starved to death and she agreed as she tucked into her meal.

I have seen aged care providers miraculously find hostel beds when they realised that the frail gent had $60,000 in his bank account.
Aged day care service providers will grudgingly admit to a service having a spare day so that if the patient is disruptive they can be eased out of their 1 day a week and if they are co-operative then they can access more care.
Posted by billie, Sunday, 26 November 2006 8:25:58 AM
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TE “what does forcing third world nations to privatise their water “
I thought the biggest problem with third world countries was – they did not have “water systems” or much of any other system, for that matter.

And these sovereign nations you talk of. The IMF and World Bank do not have the authority to force them to do anything.

If I borrow money from any bank, that bank has a right to put conditions on the loan, like checking the quality of the security, checking my “credit worthiness”, arranging a repayment schedule etc. It is no different for nations.

Oh if these countries were really democratic, they would find raising funding a lot easier.

One of the attractions of Australia is a history of stable and responsible democracy, for us to borrow money we do not have the legacy, like say, Bolivia of 200 revolutions..

Now DI “90% of shares are owned by only 20% of the population - and 1% of the population hold 50% of all shares.”

I note you have not attempted to addressed the patent in equitability of double dipping dividend compared to interest income.

Instead you have applied the rhetoric of socialist small minds and envy.

I thought most shares were owned by superfunds, mutual funds, unit trusts and other institutional investors, who act in the best interests of their beneficial members (us).

Some private companies are owned by private individuals, I own 100% of one and 50% of two others. If DI was not there, I would pay myself a service fee instead of a dividend. The outcome is the same but dividends avoid me having to raise more invoices and consequential GST accounting (the inputs = outputs).

Actually the USA does not have DI but when I was doing my tax exams in UK, I recall some particular accounting for franked income, although not much of the detail now.

TE, before waxing lyrical about the implications of tax policy it is useful to have acquired some rudimentary understanding of the topic.

“Crass Ignorance” is no substitute for “good reasons”.
Posted by Col Rouge, Sunday, 26 November 2006 3:18:39 PM
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