The author mentions (on page 1) that "effective marginal tax rates (EMTRs) for many income support recipients can be more than 50 per cent"

On pages 2 and 3 she argues that the value of concessions for superannuation savings should be shifted towards the lower income sectors. (I agree, up to a point, but ...) She doesn't address an important issue which is often overlooked in this sort of discussion, which is that

(a) Increasing concessions/benefits for lower income people (or reducing them for higher-income people)

necessarily and unavoidably has the effect of

(b) Increasing EMTRs (ie reducing the incentive to work/earn more).

You can't talk about
(1) shifting benefits or concessions more towards lower-income people,
and
(2) keeping EMTRs to a modest level
as though these two issues are detached from each other - they cannot be.

1.
The author’s article is about making tax more fair and equitable, but she fails to establish what makes, or could make tax fair and equitable in the first place.

Taxation is a compulsory impost. By definition it involves forcible confiscation of property without the owner’s consent. If you don’t submit, ultimately a group of armed men with physically seize you and lock you in a cage where you are at risk of being further violated, and if you defend yourself with weapons as they bring, they will shoot you dead.

The effect is to expropriate from you the proportion of the time of your life and work that was spent earning that income or property.

Now if one takes under coercion one hundred percent of the labour of someone, there is no question that person is a slave. So where is the difference, pro rata, with taxation?

There is no distinction ethically between involuntary servitude and taxation. Slavery was legal in many places and times. Legalising it doesn’t make it ethically okay.

If twelve men and one woman vote whether to have sex, and the men vote for, and the woman votes against, does that make it okay? If they force her, can they say ‘It’s not rape, because the majority voted for it?’ Or can they say “It is rape, but there’s nothing wrong with it - it’s morally okay –because she was part of the group who voted for it?’

If majority opinion cannot justify what would otherwise be rape, for the same reason it cannot justify what would otherwise be the crimes of robbery or demanding money with menaces – taxation.

Similarly, the mere fact that you covet other people’s property, or would like to dispose of it for purposes you deem good, doesn’t make it fair or equitable to use force – the law - to get it.

Besides, the desire, and the social duty, to do good to the less fortunate is no justification of taxation as a method of funding it. If the people agree to such charitable provisions, there is no...

need for taxation to fund them, and if they don’t, then the government is not being representative of the people in making them.

What about utility? Suppose a state holds a third of its population in slavery, and uses the forced labour or the proceeds to provide a sewerage system, a water supply, and other public works. May the state argue: “This forced labour is necessary and desirable as the basis of a decent society. And the people who benefit need these amenities and therefore have a right to them at the expense of the freedom of these slaves.”?

Every dollar that the government takes through taxation is a dollar that society cannot spend for the same purpose, and there is no reason to think that funding such charity through taxation, nor administering it through government bureaucracy, is likely to result in any better outcome or process than would otherwise be available.

Thus the author has failed to establish that tax can be fair and equitable at all.

Though this critique is radical, so was the notion that slavery should be abolished, and so is the idea the good society should be based on freedom not authoritarian coercion.

2.
However there is a more profound reason why taxation is contra-indicated to achieve the goals that the author mentions. This is that there can be no justification in calling for government action to fix social problems, while ever it is governmental action that is itself the main cause of the problems to be fixed. And that describes all three of the author’s concerns.

There is no need to ‘make work pay’. It already pays. The problem is, if you subsidise poverty, then you will get more of it – but that is what the author is in favour of!

Similarly, it is laughable to suggest that taxation is needed to encourage people to save. Taxation is the opposite of saving: it is capital consumption. People will save all by themselves, if government stops stealing 70 percent of their income through taxation and deliberately diluting the value of their money through inflation.

“the adequacy of income support”

The last time I looked, private enterprise employed people to work and governments extorted taxes (Oh and regarding government workers… that’s just an oxymoron).

I see no merit in the notion that those who choose not to work, not to train to obtain work or not accept work which is available, should be subsidised by taxing those who do work.

Therefore the notion of “income support” is merely socialist metaphor for an abuse of the (any) tax system.

“making work pay”

if what you do for work don’t pay, go get some better skills to sell.

“taking a progressive lifelong savings approach to asset building.”

We can all do that. It is called personal budgeting. Some people do it automatically, others could nto do it even if they earned ten times what they earn now.

It is up to individuals to “get smart” and budget to live a lifestyle afforded by their income. No amount of government intervention or subsidy is ever going to make the profligate prudent or the inept smart.

I guess, having destroyed the three priorities for tax reform addressed in this article my job is done

I will not bother to read the rest of this third rate socialist drivel.

I will get about making more money for myself and the tax office

And maybe pay a tax accountant to work out some smarter way of minimising the amount of tax extorted from my efforts.

To the title “Making tax fair and equitable”

“Tax” is never fair.
“Tax” is never equitable,

nor will “tax “ ever be “fair” or “equitable”, whilst people continue to be diversified through the attributes of their genetic composition.

As Margaret Thatcher said

“…. once we concede that public spending and taxation are than a necessary evil we have lost sight of the core values of freedom."

........ NEXT.......

Good work Col.

Always a pleasure to read your posts.
I look forward with great anticipation in topics like this to hear your views.
hahhh Margaret.

Some here seem to believe that paying taxes/public spending/infrastructure are evidence of some kind of regressive evolution.

What is the alternative?

Mankind, in his wisdom will surge forward not through social cohesion, rather via ‘law of jungle’?
Can see that happening in a country like Afganistan, but here?

Also agree EMTR seem to have been designed to benefit the wealthier end of the spectrum.
I suppose that is how it goes when one has the power to write the tax rules. Advantage server.

From the Taxreview (EMTRs calculated for the real (inflation-adjusted) return):
Chart 8.4: Real EMTRs by asset type and financing arrangement

Banks/Bonds +75%
Rental +55% (not geared)
Rental +20% (geared)
Shares same as Rental property
Super -175%

http://www.taxreview.treasury.gov.au/content/Paper.aspx?doc=html/publications/papers/report/section_8-02.htm

Government will tax savings at 75%, and ‘tax’, or is that ‘untax’ wealthy contributors to super -175% (minus 175%).

Talk about regressive.

There's absolutely no moral argument for a flat tax system. What could possibly be more fair than that ? Earn a buck pay 20 cents tax. Be allowed to stipulate where 5 cents out of the 20 should be directed to.

For those who think all tax is theft...go to a poor African country and see how "law of the jungle" works in reality. We had 10,000 years of "perfect freedom" and it leads to animal behaviour and little progress. So is it ignorance of why government exists...or is human suffering OK when you get wealthy enough?
IMHO this attitude is for spoiled rich babies.
So the issue then is how to support folks without spoiling them. Public housing, public education and public medicine is *good* for the wealthy: Less crime, less corruption, potent workforce and less chance of dying from disease. You don't have to *like* the poor...but you should look after them for your own good. (Religion notwithstanding!)
Corporate theft is *much* more of an issue today: Have we forgotten that the "profits" of the financial industry are largely illusions and it is Joe Taxpayer that is funding the $Million bonuses now?
My father could work a middle paid job and support a family of 7. No way could I do that now! Since then company profits have soared, real wages have fallen, our currency is two-tier: consumer prices on one hand (RBA), home/living on the other (Chinese savings, fiat money). Real inflation has soared while "official" inflation stays low to stop the banks from tanking. Sure we should minimise welfare...but we should also eliminate corporate welfare as this is more expensive and without the benefits of supporting humans. (Millionaires really don't need assistance!)

Leela, “Some here seem to believe that paying taxes/public spending/infrastructure are evidence of some kind of regressive evolution.

What is the alternative?”

Maybe leave the supply of discretionary services, like transport, to private vendors instead of government pretending they understand the market and putting taxes into funding ventures which are delivered in a monopolistic regime.

Re “Mankind, in his wisdom will surge forward not through social cohesion, rather via ‘law of jungle’?”

"Survival of the fittest" is another alternative,

and one which will always beat

“survival of the inadequacies, predicated by socialism”

Regarding “From the Taxreview (EMTRs calculated for the real (inflation-adjusted) return):”

I am not sure what you are talking about but I am pretty sure you do not have a clue what you are talking about either.

Regarding your quote to ETMRs and that web page:

that is a notional discussion paper, written on the back of a host of assumptions and likely to contain errors of theory, errors of fact as well as political bulldust which favours the posture of the author.

So as a research document or basis for decision making, its usefulness does not extend beyond knowing how you fold it and how you wipe with it.

Individual – there is no moral argument to any form of tax,

The “moral” aspect is used by the left to fraudulently convince people that there is merit in the notion of big-taxing government, when there clearly is no moral basis for any tax of any sort.

As Peter Humes commented “Taxation is a compulsory impost. By definition it involves forcible confiscation of property without the owner’s consent.”

Which mirrors what dearest Margaret (Thatcher) said

“The larger the slice taken by government, the smaller the cake available for everyone."

It is not the opponents, but the proponents of taxation who appeal to the ‘law of the jungle’– that the strong may use force and threats to do what they please with the lives, liberty or property of the weak.

Did Jesus say “Get a troop of soldiers, go round to Peter the fisherman’s hut, threaten to bash his head in or crucify him if he doesn’t give you some of his catch or the proceeds, and then with the proceeds, do unto others as you would have them do unto you.”?

It only shows moral confusion to think that those who ask that their person and property not be violated, are aggressing against others!

“What is the alternative?”

It is good to ask this question, leela, but if you do it in a rhetorical sense, you are like ancient Romans, or antebellum Southern planters, who could not conceive how society could possibly exist without slavery. To avoid the risk of intellectual laziness, you should try answering the question yourself.

What is the alternative to rape? To get consent, isn’t it? What is the alternative to slavery? To offer to pay for people’s services what they are willing to accept, isn’t it?

If the people are willing to pay the agreed price for a service, there is no need to pay for it under compulsion. And if they are not willing to pay the market price for it, then they have no right to it under compulsion.

Those who think taxation is necessary because it provides them with a multitude of goods and services are fools who do not realize they are merely recovering a portion of their own property, which benefits, their overlords could not have provided without first taking it.

The unfair effect of tax deductions, favouring the rich, is in direct proportion to the progressive effect of income tax. Take Coles or Woolworths. Apparently they have a profit margin of only about two percent. So 98 percent of their income goes to costs. Obviously the government could not tax them on the 98 percent as well...

(cont.)

...or they would collapse; and so would the whole economy, leaving government nothing. So the richer unavoidably get tax benefits in proportion to the higher tax they are supposed to pay.

Thus it is the unprincipled grasping of the advocates of “progressive” (sic) taxation that is the direct cause of that unjust favouritism to the rich inherent in the tax system.

There is nothing about democratic redistributions that guarantee transfers from the poor to the rich, so the poorest often end up funding the rich eg wealthy farmers, middle-class tertiary education, and capital-rich retirees.

The “principle” behind democratic forced redistributions - that A and B can vote themselves C’s property, B and C can join to rip off A, and C and A can legally extort money from B - is obviously anti-social, immoral and destructive.

The main single cause of poverty is government interventions: e.g. taxing employment actively causes unemployment; occupational licensing causes unemployment and drives up costs; minimum wages laws protect higher paid workers and force the lower-paid into unemployment; tax reporting requirements make small business illegal for the less literate; there are hundreds of examples.

But in any event, the poor are not some kind of natural aristocracy, or priviligentsia, entitled to live at others’ expense, and have the whole society bend over backwards for them. They need to work like everyone else.

Given that
a) the advocates of taxation are unable to show how it could be distinguished ethically from extortion, robbery, or slavery;
b) redistributions are very often used to fund programs that forcibly take from the poor to give to the wealthy, and are morally unjustifiable in any case;
c) taxation and forced redistributions fund government interventions that are the main cause of institutional unemployment, poverty, favouritism to the rich, and privilege
therefore everyone has a social and moral duty to avoid and evade tax by every means, knowing that one’s own use of one’s property is better for oneself, one’s family, and the greater good, than government’s which is positively immoral, anti-social, and absurd.

Peter, basically agreeing with your summary points a – c.

However, I believe that as a socio-economy, we are going to travel a lot further, a lot quicker, if we keep ‘social’ in the equation.
Equanimity. Anyone ever been 'party' to that? It is priceless.

Col: looks like I disagree with your worldview on what is discretionary service. Transport - road, rail, ferry, would be discretionary if I owned a helicopter (but I don’t) or if I never needed to go to work or go anywhere (but I do, so they are not discretionary, at least not for me).

Agree with you that govt pretends to understand the market however.

Re another alternative being “Survival of the fittest": true, however, just ask anyone living in Somalia how good that feels.

Re “that is a notional discussion paper, written on the back of a host of assumptions” has ‘Source: Australian Treasury estimates.’
In this case I tend to believe Treasury figures.

Re “individual – there is no moral argument to any form of tax” that is true. There is no moral argument for anything really.
Nor is there really any moral argument against anything, as everything exists, and would not exist if some purpose was not served.

Philosophically we appear to agree, how about that? Cheers.

Leela I lived in London in the 1970:1980s when private enterprise was not allowed to provide competitive commuter services because British Rail operated a legal monopoly.

After decades of different “experts” of every hue and variety, trying to get some “efficiency” into and “value” out of the “rail network”, with no success at all, Margaret Thatcher came along and removed the railways “monopoly” status.

With the stroke of a pen, my daily travel costs from the commuter belt into Mayfair dropped to one third of what they were when the “monopoly” Fix was operating.

“Essential services”, I see only one, water (without it we all die). Everything else is discretionary, including the health service (another “sacred cow” of socialism) and education has always supplied on a pluralist basis, so cannot possibly be “essential” in the “socialist” context of a government monopoly.

“just ask anyone living in Somalia how good that feels.”

Using polemic examples illustrates a paucity of real argument, I suggest you smarten your posts a little. Somalia and most of Africa has turned into a charnel house of failed communist/socialist governments since the Europeans disbanded their empire colonies.

If you were to ask most Africans, they would sooner be a colony of a European power than an independent state run on African “Tribal” nepotistic lines, Rwanda, Uganda, the Congo being prime examples of failed experiments in socialist government.

One of the major problems of socialism is it relies on the central controls which become the opportunity for despotic tyranny.

As Lenin said “the goal of socialism is communism” and the Russian people suffered abuse for ¾ of a century as a consequence.

Regarding “Treasury Estimates” – exactly, and “Treasury” has never been that good when tested on matters of “probable accuracy”

And regarding believing ..

I believe there are “fairies at the bottom of the garden”, who produce more accurate fiscal estimates than Treasury.

“and would not exist if some purpose was not served.”

Using “tax” as the distributor of economic resource

is not a “purpose”,

it is simply an abuse of power