In some ways we have too much wealth for our own good.If all the wealth from the minerals boom is released into our economy through higher wages,it would be self defeating,since prices will only increase and the money would be taken from us in the form of higher interest rates.

There is a smarter way to carve up the ecomonomic cake equitably and reward ordinary people without adding to inflationary pressures.The Federal Govt now has all this wealth,it really does not know what to do with.

Why not give this wealth away in the form of infrastructure bonds to every Australian working or not,as a part of their superannuation package.The money won't add to inflation because it can't immediately be spent,but can be used now to improve our infrastructure.We all can own our piece of infrastructure.Improved infrastucture will have a multiplier effect and add to the national wealth.

When people retire their bonds can be cashed in to live a more comfortable retirement.Why should only Pollies and Fat Cats have a future fund?

This concept has two positive effects.It is the shortage of money that keeps an economy lean/efficient and rewarding every Australian with a more secure retirement will put a lot more minds at rest.This is also a better way of distributing wealth without huge bureaucracies absorbing half of it.

Now is there an economist around,who can blow a hole in my concept and tell me why it can't be done?

rj, this might be a good idea, but you don't need to be an economist to blow a hole in it.

oz is not a democracy. it is not run for the benefit of ozzies in general, but rather as an aid in getting re-elected. consequently, any idea that reduces the dependence on pollies is very unlikely to be smiled on by pollies.

in short, they're in the fish-handing-out business, not the fish-pole-handing-out business.

Well...I agree with both of you.

Arjay.. its a great idea, but Demos does have a point.

If only governments were actually 'about' the overall welfare of the nation, rather than "winning elections so they can divide the cake among themselves and their supporters".

Unfortunately, Arjay, you have targeted a very 'Biblical' approach to government :) "unselfish".

I read of the euphoria that enveloped the early Christians after Pentecost when:

Acts2:44
"All the believers were together and had everything in common. Selling their possessions and goods, they gave to anyone as he had need."

Yet just a few chapters later we read:

Acts 6:1

1In those days when the number of disciples was increasing, the Grecian Jews among them complained against the Hebraic Jews because their widows were being overlooked in the daily distribution of food.

So, even in the best of spiritual climates, selfishness can rear it's ugly head. The old 'self' is like those heads which pop up at carnivals.. you know..the ones you belt the daylights out of to knock them down.. and UP pops another....

In secular society, in contrast to a Christ centred fellowship, there is no corrective means (such as... the Apostles guidance/teaching/rebuke/counsel) except 'conflict' which usually manifests politically.

Hence we have Labor (Unions/Workers) and Liberal (business/Bosses)

So, if we could solve the 'human' problem, I'm all for what you suggest.

As I've long whined... "we need a government which is for the country, not just a segement of it"

What we HAVE of course is government for segments who 'window dress' in such a way as to persuade the gullable that they are doing stuff for the 'national' interest.
cheers

YES
The Lib/Nats have kept the lid on inflation by overtaxing us and socking away the excess money in the "Future Fund" (weasel words)and then sending that 50billion to the Americans to invest. Also buying 10bil in Spanish Ships ?? BIll$ in US "paper planes' etc.
NOW crunch time has come. How do you give back the wealth without causing inflation?
It depends a bit on weather you believe in supply or demand side economics.
SEE
http://www.commondreams.org/views06/0514-20.htm
QUOTE:"Demand Side economics, as we saw in the 1990s, while far from perfect, produces robust growth, budgetary surpluses, and broad based prosperity. Supply Side economics produces middling growth, soaring deficits, and broad based debt. Mountains of debt. And the mountains are growing."
AND
http://www.forbes.com/finance/2007/08/17/energy-congress-legislation-pf-guru-in_mm_0817energy_inl.html
OR
http://forums.hypography.com/social-sciences/13261-economics-free-market.html

I am sure if we put our heads together we could come up with some taxes that could be abolished that are inflationary and could be done away with. Petrol and Gas excise would be one, perhaps payroll tax?

What Government spending in our present minerals boom would not be inflationary?

Any other suggestions?

Of course Bush could solve the problem for us by stuffing the US economy with supply side economics, the sub-prime crisis and profligate military spending (Often benefiting US firms).
Too, most (90%)US foreign AID is tied to spending it in the US;
so while we give aid$ away the US stimulates its economy with it!

"We live in interesting time" is, an appropriately Chinese, curse? :)

michael2,
I like the idea of returning taxes!duh!
I have always thought taxing, thru excise on petrol, was self defeating
What now happens too often is petroleum companies take advantage in any way they can, LP gas is a great example, it is no advantage for any to be on LP gas.
If we were to retreat to price control on petroleum companies we may get somewhere by making excise redundant, I don't want the job of selling that idea, do you?
Controlled reduction in taxation is timely, unless our masters come up with another snowy scheme thats what should be done.
fluff4

Releasing the wealth is not self defeating. People just focus on inflation because so many people ahve a lot borrowed. A more important factor is the burden of government on the society and economy (mostly through tax). There is no need for the government to carve up the cake for us. We are perfectly capable of doing it ourselves.

Don't forget Freediver,most of this tax is company tax paid by the mining companies,so do you think it all should go to the shareholders and CEOs? Taxes under the Howard Govt have decreased,but the State Govts have not spent the GST to well.

I think it is a way for all Australians to share in the Nation's Wealth and building the infrastructure we desperately need.Rapid train systems to the regional areas for example,will take the pressure off house prices in our major cities.Efficient transport systems in our cities add greatly to productivity since we spend less time travelling and less on fuel.Sections of Sydney are often at gridlock.

With almost no wealth,we were in the past able to build the Sydney Harbour Bridge,Snowy Mt Scheme,and an extensive train system.In the last 50 yrs infrastructure has been ignored.We pay private companies to build our roads which are totally inadaquate before they are completed and pay a fortune in tolls.

Our Govts have become lazy and inefficient.The waste is mind boggling.If you get a Govt contract it is licence to print money.Just ask Therese Rein.

"Don't forget Freediver,most of this tax is company tax

How much exactly?

"so do you think it all should go to the shareholders and CEOs?

I'm not into punishing people for doing well and keeping big businesses running. Obviously not all of it though - the tax itself is fine. It's the total burden on society that matters most.

I agree with you about waste - first home owners, baby bonus, tank rebates etc...

About 9 billion comes from GST

About what it would cost to take the excise off petrol and gas.

Unfortunately you can't afford to tax companies and the rich too much otherwise they just move offshore.
(There is $2 trillion parked in British pounds off-shore for example. Taxing that would put the pound into free-fall as it would be moved to Switzerland (also with $2 trillion)or some other tax haven).

Singapore has been offering companies free land and no taxes for x years etc.,; If the companies make Singapore their SE Asian base.

Italy survives well without any income tax, just GST
The less income tax you have the more disposable income , therefore the more purchased and in turn more GST revenue. The Government wins every-time. (You do have to watch the National Debt but everyone seems to ignore that anyhow.)
I think the Government could probably make the tax free threshold $50,000 without loosing anything other than a lot of taxation department employees.

Certainly we should be getting rid of the more stupid State taxes such as Payroll tax. Why should Taronga Zoo pay payroll tax?

Now you've done it, michael2, you've mentioned Payroll Tax.

<open rant>

Payroll Tax, for those who have never run a business, is the tax you pay to the State Government for the privilege of employing one of their citizens.

Do you get a "thank you" for risking your hard-earned (and already-taxed) money in an enterprise that takes one more unemployed person off the street?

No, you get taxed.

The tax itself is based on total salary, plus super, plus grossed-up fringe benefits. If I employ someone at $60,000 p.a., I pay the tax on that amount, plus the mandatory 9% Super. So the State government gets around four grand for every $60,000 body I add to my staff.

When I first came across this, I queried its legitimacy. Because not all of that $60,000 goes to the employee, a big slice of it goes to the government in income tax.

In my naivety, I thought that it was not permitted for governments to impose a tax upon a tax, which this most clearly is.

"Oh no" I was told, "it's not a tax on a tax. It is just a convenient way of calculating an amount. If we didn't do it this way we would simply charge 10% on the net amount instead"

That's the way governments think. On those terms, the promise "no tax upon a tax" is a hollow log - every tax-on-a-tax can be excused the same way.

And the clincher? Payroll Tax was one of the bundle of State taxes that was to be swept away by the "never-ever" GST.

Did this happen? Of course not. I am sure their excuse now is that "if we didn't have Payroll Tax, "obviously" we'd have to charge 12.5% GST..."

Over the years we've let them believe that somehow our taxes are "their money". It's how they think of it, right down to the concept of the "government handout".

Our problem is not taxation, but the string of duplicitous, greedy, mendacious, self-centred politicians who treat us like a money tap that they can turn on at will.

</end rant>

A very nice rant
Suitable for James Valentine's (ABC 702 Sydney)Rant Hall of Fame.

Yes a stupid (double double) tax if ever their was one.

My personal rant is the double tax on fuel. In a country as vast as Australia a 38c a litre tax on fuel fires inflation everywhere, food production, distribution, manufacturing, imports, exports.
At the very least we should remove it from natural gas which we are drowning in; and from ethanol 'petrol' At least then, Queensland Cane Framers might make a dollar from it instead of Chevron-Mobil and other multi-nationals.

Another "pet" economic theory cum idea.
I rather like the Libs. concept of Future Funds. I think it could be better developed into something lasting, useful and initially non-inflationary
Say you give your favourite cause (Alternative energy technology, free dentistry, hospitals, science research,the ABC drama dept.) a 'stake' of $1 million to 1/2 to 1 billion $. You told them (whoever you gave it to-ABC Board etc.,) that they could only spend, in any one year, 50% of the investment income, the rest has to go back to the principle. Eventually the "Future Funds" would become self supporting (apart from the occasional accountant's flight to S.America). This is a way of getting rid of excess tax revenues, meeting election promised and future-proofing us against the end of the mining boom.
It would be nice to have a FF for Australian Venture Capital or even a $100,000 for my falling-down,brilliant, kid centred, local Conservatorium of Music.

Eventually we may do away with taxation all together if we don't run out of Western Australia to sell. (!?)

Petrol taxes do cause inflation any more than GST and other goods taxes. Income tax may cause less inflation, but you have less to spend anyway.

Petrol taxes need to at least cover the cost of building and maintaining roads. Not so much for cash flow reasons, but so that the government is not subsidising the road transport sector. Plus the price should go up more with carbon taxes.

Amazingly, (and diseblingly ?) GST has never been included in Inflation figures.

We need more railways than we need roads.

Petrol taxes add to the price bottom line of everything.

"Petrol taxes add to the price bottom line of everything.

So what? So does income tax. Only difference is that petrol taxes are far less evenly distributed. Even if they did add equally to everything, that's good from an economic perspective.

So what?
So we are tryring to look at taxes that are inflationary
The, 38c a litre, excise is one. made even worse by 10% GST on waht the final cost happens to be.
It is a tax conceived in a pre-GST-environment that needs to be done away with.
Do you have any better suggestions?

A friend just sent me this
> > The big lie of Liberal supremacy was economic management. In fact, they
> > knew how to generate income, but not how to spend it. We could have been
> > building what Europe built in this past decade - superb hospitals,
> > bullet trains, schools and training centres, low cost public transport
> > of luxurious quality, magnificent public housing. We pissed it all away
> > on tax giveaways and consumer goods. On bloated homes that we will not
> > be able to cool or heat, or sell, and cars we won't be able to afford to
> > drive. A party based on self interest may evaporate along with our
> > rivers and lakes, and have no role to play in a world where we
> > co-operate or die.
> >
> > Steve Biddulph is a psychologist and author.

Michael 2.The GST has never been included in inflation figures?I thought it had been.However inflaton would not have changed much anyway.We had state sales taxes of 20-30%.Remember that businesses over time absorb half the tax anyway.Many small businesses under extreme competition absorb all of it.

The best philosophy is to have small Govt,independant people who can look after themselves.In 1951 average income tax was just 11% of gross income.They could build things like the Snowy Mt Scheme with almost no money.Where have we gone wrong?

"So we are tryring to look at taxes that are inflationary

Petrol taxes are no more inflationary than other goods taxes.

"Do you have any better suggestions?

Yes, we should increase it.

"It is a tax conceived in a pre-GST-environment that needs to be done away with.

It's conception is not invalid. It internalises an externality.

No GST in inflation figures. I was told this and found it hard to believe myself. It seems the Reserve bank can pick and choose what it includes in inflation figures. Quite amazing really; but do you remember a sudden 10% surge in inflation when GST was introduced?

"changed much anyway.We had state sales taxes of 20-30%"
No this was not the case. Sales tax was levied on the wholesale price of some goods at c 12, 20 and 30%. It was always a Fedral Tax.
The GST was to replace this cumbersome, unfair system and also some State Taxes. The NSW Government and Costello were arguing at one stage as Costello would not give NSW 500mil PA in GST revenue that they were entitled to, because Costello said not enough NSW state taxes had been abolished. Suddenly NSW politicians went quiet about this so I am not sure what the outcome was. Perhaps NSW is owed a few billion in GST by the Feds?

I agree with you freedriver that all taxes add to inflation. But not all taxes do it equally, or with equal social & business fairness.
The Fuel excise was put on petrol when we were paying 50c a gallon for petrol. Different times demand different taxation mixes.

If our business people did not have to pay double tax on fuel their ability to compete in overseas markets would be greater. Farm produce would be cheaper, and the cost of transporting goods, here and overseas, would be cheaper.
We are not only a huge spread out country, we are along way from our major international markets. Taking the double taxation off fuel would help get our budget deficit down, by encouraging exports.

At least take the tax of gas, which we have lots of, and ethanol suplimented fuels, so the Queensland cane farmers can get some of the fat, multi-national, oil company's revenue.