Saturday, December 7, 2024

Productivity

Home Economics Productivity

This Tax To GDP Rate Is Mind-Blowing!

With the Commonwealth Budget due to be presented later today, Australians should reflect on the words of Winston Churchill, who wisely observed that “there is nothing government can give you that it hasn’t taken from you in the first place.”  Such clarity seems missing from our contemporary economic and public finance debates.

There is a myth, even an attempt at deception, perpetuated by the tax and spend industrial complex that Australia is a low tax jurisdiction.  (Hint – it’s not).  And, based on this myth, that there is capacity for further tax rises in Australia to fund existing and new programs.  (Hint – there isn’t).

In its recent report titled ‘Back in Black?’, the Grattan Institute presented a chart and commented that “Total tax collections across governments in Australia represented 28 per cent of GDP in 2019, about 5 percentage points lower than the OECD average of 33 per cent”.  The clear implication is that there is capacity for government to increase (tax) revenues.”

Sadly, for Australian taxpayers, this is not an accurate representation.  Once other State, Territory and local government receipts are added, Australia’s tax to GDP rate represents approximately 36 percent.  When further adjusted for superannuation contributions, as other countries tax for social security, then Australia’s effective tax to GDP rate is approximately 40 percent.  Significantly above the OECD average.

Add in the hidden taxes imposed by the massive and highly complex regulatory and compliance edifice that is pushed onto the private sector, and Australia’s tax to GDP rate starts to look very Scandinavian.  But without the competence and efficiency of the Scandinavian public sector.

Those advocating for more taxes to fund more spending seem blind to the consequences.  The more national resources are transferred from production to government and quasi-government activity, the lower will be productivity and economic growth.  Given the MASSIVE expansion of government in Australia over the past 20 years, it should surprise no-one that GDP per capita is flat to declining.  Just at the Commonwealth level, spending as a percentage of GDP has increased from about 18 per cent in 1972 to about 23 per cent in 2000, to just under 28 per cent in 2020.

What is required is a fundamental assault on Government spending, not new schemes to increase taxes. 

It can start at the Commonwealth public service which has a workforce of over 250,000 public sector employees, despite the vast majority not providing front line services.  That includes 10,000 employees within the Departments of Education and Health and Ageing  Departments, which do not operate a single school, university, hospital or aged care facility.

The wages and salaries of Commonwealth public sector employees totalled $24.5 billion in 2022 and would increase by $5 billion if the CPSU’s claim for a 20 percent pay increase is successful.

All eyes on team Chalmers and Gallagher today

Treasurer Jim Chalmers and Finance Minister Katy Gallagher need to embrace the legacy of Paul Keating and Peter Walsh and undertake the hard but necessary work to bring Commonwealth Government spending back under control.  Better yet, they should learn the expression Just Say No.

ANSWER: The Carlson-Shapiro Question

tonkin

I admit it.

There I was on 27 February 2023, making a little mischief with my article:

VOTE NOW! Tucker Carlson or Ben Shapiro?

Well, it was mischief-making in the sense that I like to sharply define the line between liberal and conservative and then, with all the goodwill in the world, provoke people to think and explore these differences.

There is a difference, you see.

So I posted a video clip between American commentators Tucker Carlson and Ben Shapiro. They had opposing views of how to handle inevitable job losses caused by driverless trucks. It illustrated the difference eloquently.

If you haven’t watched the exchange, click here.

Then I challenged you to vote whether you agreed with Tucker Carlson or, by inference from his question, Ben Shapiro.

The results are in:

  • 37% Tucker Carlson; and
  • 63% Ben Shapiro.

If you agreed with Tucker Carlson, you are a conservative.

If you agreed with Ben Shapiro, you are a liberal.

As I repeat ad nauseum, conservatives wish to conserve. Here, Mr. Carlson would be happy to conserve current industry development rather than advance it. He’d be happy to keep truck drivers in jobs for which technology has a more efficient solution, the driverless truck.

By inference from his question, Mr Shapiro would prefer to let the free market take its course, permit the technology and have truck drivers migrate into related freight work or even redeploy into other industries.

There’s a big difference in approach.

Liberals and conservatives are not the same.

You’re an optimist if you’re a liberal (or if you must, a classical liberal or libertarian, they all mean the same thing!) You believe in people, in their ability to innovate and in their ability to adapt to change. In the case of driverless trucks, you fully embrace this new technology and you want to encourage the creators of that innovation by allowing it to be unleashed on the market. No restrictions. And you have faith truck drivers, given appropriate notice, are more than capable of finding new work. You are confident they aren’t simply going to sit and bemoan the loss of one type of occupation. Rather, you know they’ll have to find other work to feed their families, as we all do.

You’re a pessimist if you’re a conservative. You believe, as Mr Carlson even said, that you don’t want high school educated men let loose on society without a job. He assumes that high school educated men would suddenly become helpless and even dangerous. That’s the inference.

Blimey!

Talk about loss of faith in our fellow citizens. It’s a nanny state attitude. What evidence is there for this? None that I can find. On the contrary, there is plenty of evidence high school educated men are adaptable.

Take 1980s Newcastle. A city bustling with blue collar men busily working the steelworks. Now look at 2020s Newcastle, a lifestyle, health and university town. What happened to these steelworkers? Was Newcastle ravaged by idle high school educated men wreaking havoc across the city? No. Some of these men were due to retire, some moved to the Wollongong works, some stayed in Newcastle moving into value-add niche industrial enterprises, some stayed in the large industrial companies but worked from home as the companies left, some started their own businesses using their skills in new ways, some simply moved into new industries altogether, some retrained, some took early retirement to enjoy life.

Take my grandfather. He grew up and apprenticed as a wheelwright at the tale-end of the old wooden spoke and hub horse-drawn carts. Then as his career developed, wood gave way to steel spoke and hub wheels. Then steel plates came in. What a transition!

Further, when a conservative says ‘let’s restrict technology’, what does that signal? It’s the same as saying to every inventor and innovator, every scientist and engineer, to every entrepreneur and free thinker that their fresh, new ways of solving old problems are unwelcome.

Do we really want that?

If we took that view, we wouldn’t have made these advances outlined in There Is Hope. Check This Out!

Further ….

We’d have no smartphones.

No Internet.

No wireless.

No medical imaging.

No open heart surgery.

No computers.

No electricity.

No refrigeration.

No cars.

No flush toilets.

No immunisation.

No fresh, high-quality food.

No sewerage works.

No social mobility.

No flowing, pure water to the bathroom sink.

No glass.

No books.

No steel.

No iron.

No bronze.

No wheel!

As I say, conservatism’s tendency to oppose change can be helpful. However, if that’s all we on the Right do is oppose and conserve, we end up sliding to the Left. Opposition and conservation are insufficient to fight the Left.

We must treat our innovators with respect and let them advance society. We must not be conservative and stand in the way.

We must treat our fellow citizens with respect, have confidence in them that they can cope with change. We should not mollycoddle them.

Don’t be a conservative like Mr. Carlson.

Be a classical liberal like Mr. Shapiro in this debate.

This is the way forward.