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    Resisting centralist power – Part 2

    By
    Bob Day
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    0

    Following the Second World War, the most dramatic shift in the balance of tax power between the States and Commonwealth occurred.

    In 1942, under the leadership of John Curtin as Prime Minister and Ben Chifley as Federal Treasurer, all income taxing authority was handed over to the Commonwealth by the States for the duration of the war under the defence power of the Constitution. This was intended to be temporary and to last for a year after the end of the war. However, while the war ended in 1945, the role of the Commonwealth as the sole income taxing authority did not.

    For those concerned at the erosion of State rights through judicial activism, even worse was to come when, following the end of the Second World War, the High Court ruled that income tax collections could exist as an exclusive Commonwealth right under the normal powers of the Constitution.

    Australia has the highest level of vertical fiscal imbalance of any federation in the world.

    During the 1950s the State of Victoria mounted two legal challenges to the uniform tax legislation without success, and in 1959 at a Special Premiers’ Conference discussion of a return of income tax power to the States was on the agenda but could not be agreed. While there remains no legal barrier to the States exercising their right to levy income tax, there are practical (and political) reasons not to do so.

    In the post war era, the centralisation of power continued to be affirmed through decisions of the High Court including the Franklin Dam case in 1988, the Queensland Rainforest case in 1989, Mabo in 1992, and the Wik Peoples case in 1996.

    In speaking of the influence of the High Court and the threat to federalism arising from its decisions, Sir Harry Gibbs, former Chief Justice of the High Court of Australia said:

    “It is a basic rule in the interpretation of any written document and indeed a matter of common sense that the whole document must be looked at in order to ascertain the meaning of any particular part. It might therefore have been supposed that in deciding on the meaning of the paragraphs of the Constitution which confer power on the Commonwealth Parliament, the Courts would have resolved any ambiguity by interpreting the provisions in a way that would maintain the federal distribution of power which the Constitution so obviously appears to guarantee ….. However, since 1920 the High Court has consistently rejected an approach of that kind.”

    The struggle for power continued in the High Court in 2006 with the States challenging the Commonwealth over the validity of the federal WorkChoices legislation, which was enacted under the Corporations power. The High Court overwhelmingly came down in favour of the Commonwealth. While workplace relations laws, prior to the WorkChoices legislation, were a relic of a bygone era and desperately in need of reform, the rights of States in the area of industrial relations were now all but gone. For example, the 1999 decision of the High Court to allow SA State government public servants to be covered by a Federal Award undermined that State’s competitiveness.

    The ability of a small, low cost-of-living State to use its industrial relations system to create a competitive edge over the larger States is important. South Australia, for example, under Premier Sir Thomas Playford, used this strategy (in conjunction with tariffs) to build a manufacturing base in Adelaide in the 1950s and 60s. Likewise Tasmania may wish to trade-off high salaries for quality of life and a green and clean environment.

    The most dramatic shift in the balance of tax power between the States and Commonwealth occurred.

    Undermining the rights of States is also evident in the actions of a burgeoning and, at times, arrogant Federal bureaucracy where the controlling hand of the Commonwealth is exercised through the terms and conditions embedded in funding arrangements with State government agencies.

    Since federation the tax revenue balance has moved dramatically from the States to the Commonwealth. The imbalance that now exists, known as Vertical Fiscal Imbalance, has put the Commonwealth in an all-powerful position, able to dictate to the States how and where funds are spent.

    Australia has the highest level of vertical fiscal imbalance of any federation in the world. The Federal government raises over 70% of all general government revenues, much more than is required to fund its own operations. The States raise just over half what they require to fund theirs. The balance of the States’ financial requirements is met through Commonwealth grants. This gives the Commonwealth enormous economic power and influence, and is inefficient and inequitable. It has the effect of keeping States like South Australia and Tasmania in a position of mendicancy.

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    Ideally, the States and the Commonwealth should only collect taxes for their own purposes with taxpayers and consumers fully informed as to what is a State tax and what is a Commonwealth tax. Those who spend the money should have the responsibility of raising it. It is about accountability, and governments of all persuasions should be specifically accountable for the money they raise and spend.

    The use of Section 96 of the Australian Constitution, which empowers the Commonwealth to make grants to any State “on such terms and conditions as the Parliament thinks fit”, has been used by Federal governments to wield power over the States.

    The Commonwealth’s control over State borrowings has further served to erode the power of States and their capacity to control their own destiny.

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    Resisting Centralist Power – Part 1

    By
    Bob Day
    -
    0

    In 1901, when six individual British colonies came together as a federation, it was in an environment of extensive and, at times, torrid debate. While there was widespread acceptance that the colonies could achieve together what they could not achieve alone, there was also apprehension about the extent to which the power to govern would become centralised.

    The enthusiasm and sense of expectation surrounding the birth of a nation was tempered by concerns about the future autonomy of individual colonies. The smaller colonies were also apprehensive about the power and influence the larger colonies might exercise.

    As a consequence, the process leading to the formation of the Australian Constitution was both painstaking and torturous.

    One can imagine how much this would have helped the fledgling Commonwealth-State relationship.

    During the first of the convention debates in 1891, Sir Samuel Griffith, who would later become the first Chief Justice of the High Court of Australia, captured the essence of concerns saying:

    “We must not lose sight of the essential condition that this is to be a federation of states and not a single government of Australia. The separate states are to continue as autonomous bodies, surrendering only so much of their power as is necessary for the establishment of a general government to do for them collectively what they cannot do individually for themselves.”

    In uniting as a nation, each colony agreed to cede a portion of its powers so that the nation might become “one indissoluble Federal Commonwealth under the Crown.” It is clear, both from the Constitution and from the record of the Convention debates, that the Federal government was to have significant but well-defined powers. All powers not defined in the Constitution, known as the residual powers, were to remain the province of the States. However, the ink was barely dry on the Constitution before a growing appetite for centralised power emerged.

    Foundations of Power

    The powers of the Commonwealth were set out in Section 51 of the Constitution, and their scope described in 39 subsections known as a head of power. While the States retained the right to legislate on these matters as well, the Constitution provided that where any inconsistency existed between Federal and State legislation, the Federal legislation prevailed.

    The powers ceded to the Federal government were very wide and included interstate trade and commerce, corporations, external affairs, taxation, defence, quarantine, currency, pensions, banking and many more.

    Centralisation of Power

    As one might expect, the first issue on which the boundaries of authority between the States and Commonwealth were tested related to tax, with the High Court becoming the arena for argument. The gloves came off, the lawyers were primed, and the fight over money began.

    The first tests came in 1904 in Peterwald v Bartley where the High Court examined whether the Constitution prohibited the States from imposing excise duty. This was followed the same year with D’Emden v Pedder, in which the power of the States to impose taxes on Commonwealth activities was rejected. 

    In 1908, in response to the Constitutional requirement that any surplus tax revenues in the first decade of Federation be returned to the States, the Commonwealth enacted legislation to pay these surpluses into a trust account thereby avoiding payment to the States. One can imagine how much this would have helped the fledgling Commonwealth-State relationship.

    In 1910, the Constitutional obligation that not less than 75 per cent of the Commonwealth’s customs and excise revenue be distributed to the States came to an end. While the arrangement was mandated for only the first decade of Federation, the Commonwealth terminated the arrangement as soon as it was legally able to do so, much to the ire of the States.

    In uniting as a nation, each colony agreed to cede a portion of its powers so that the nation might become “one indissoluble Federal Commonwealth under the Crown.”

    Commonwealth government activity and bureaucracy then began to grow rapidly, fed by its growing tax harvest. The years leading up to World War 1 (1910-1914) saw increases in Commonwealth control of the economy and in social services. In 1915, following the entry of Australia into the war, the Commonwealth introduced income tax which co-existed with income tax applied by the States.

    Over the next few decades, both in the High Court and through legislation, the Commonwealth and States battled for territory in a number of areas including tax, defence and welfare services. So extreme was the discontent with the way the federation was heading that some States, most notably Western Australia, South Australia and Tasmania, contemplated secession. In 1933 a referendum was held in Western Australia.

    At the time there was a Great Depression and every State was struggling. Some believed the problems were a result of Federal government policies and actions, particularly in respect of tariffs imposed to protect the manufacturing and sugar industries.

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    The result of the WA referendum sent shock waves through the rest of Australia with 68% of West Australians voting in favour of secession. This was about the same number who had voted to join the Federation only 33 years earlier. The desire of West Australians to separate from the Federation was not fulfilled as the British Imperial Parliament refused to act, claiming that such an action could only be taken with the consent of the Commonwealth Parliament of Australia.

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    Welcome to Borroloola Land

    By
    Gary Johns
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    0

    Every failure in Aboriginal affairs creates an opportunity to offer a shiny new bauble to public servants and the journalistic cheer squad. Last weekend, in light of the failure of the Voice referendum, there were three baubles – naming an Indigenous state, renewable self-determination, and a new economic development plan. 

    The cost of the baubles is to put off the day of reckoning for the children in hundreds of remote communities in northern Australia who fail to learn to read, write and speak English well enough to get a job. Until they do, nothing good will happen. Any plan that begins without these needs fulfilled is doomed.

    Senator Malarndirri McCarthy, the new Minister for Indigenous Australians, is from Borroloola in Arnhem land, south of the site of the Garma festival. That small community has three preschool centres: one run by a charity, one by an Aboriginal corporation, and another by the education department, competing for a handful of children. And yet, too many children still fail to move through sufficient years of school. Perhaps Senator McCarthy could explain how she made it when others could not.

    Borroloola land will also require the grace and favour of taxpayers

    Bernard Salt, the demographer, suggested that one of the Australian states should be given an Aboriginal name. Perhaps he was inspired by Naarm, an Aboriginal state in miniature. I recently travelled into that city, formerly known as Melbourne, on the Skybus and was regaled by the welcome and acknowledgment and sovereignty-never-ceded meme. My fellow travellers were Asian and Indian, all with earpieces and mobile devices, blissfully unaware of the Victorian disease of hating progress – welcome to the state of grunge.

    If not Victoria, how about granting the Northern Territory statehood and naming it Borroloola land?

    One big man would get all the money and hand it out in envelopes in order of family preferment, the big man’s family first and so on. It sounds perfect, very post-colonial, and very Papua New Guinea.

    When he arrived at the Garma festival, the Prime Minister was undoubtedly busting to announce his brilliant initiative. Having disappointed the great and the good at Garma last time with a resounding loss in the 2023 referendum, he combined two precious icons of the left: saving the world with renewables, and Aboriginal collectivisation. 

    The Prime Minister’s renewables plan is for solar panel and wind turbine-led ‘self determination’. Gas would be better; the Northern Territory is floating on it, but that seems to disturb the green spirits. Imagine shiny rows of solar panels on ‘country’ and turbines on ‘sea’ as far as the eye can see. I guess Albo had to bung something in the speech.

    However, for the sake of his adoring audience and faithful journalists, here is what it takes to make a solar panel. Manufacturing is really about silicon production. Most of the energy required to make solar panels is consumed during silicon production, purification, and wafering. Silicon is produced from high-purity quartz, which is exceedingly rare. It has to be chemically reduced.

    Solar panels can only be produced with coal, oil, gas and hardwood. Coal is required as a reducing agent for making silicon and as a source of heat and electricity for the industrial process required to manufacture solar panels. These processes need a continuous supply of electricity, which renewables cannot provide.

    Australian states should be given an Aboriginal name

    The Prime Minister might also like to brief the First Minister of Borroloola land that the vast array of renewables must be decommissioned and disposed of. Fortunately, there is plenty of space in Arnhem Land for solar panel dumps. Wind turbines at sea can just be left to join the underwater songlines. But the average lifespan of the newest utility-scale solar panels is a fraction of the 25 years marketed. It is more like 15 years. Older solar panels used to ‘live’ longer but newer ones are optimised for the lowest raw materials and energy use so that after about 10 years, serious failures occur. Renewables are not renewable.

    Borroloola land will also require the grace and favour of taxpayers even though every skerrick of land outside the major settlements is owned or controlled by Aboriginal interests under various Land Acts or related agreements. To this ‘vast terrestrial estate’ and the Prime Minister’s renewables power delusion may be added Australian National University’s Professor Peter Yu’s dream of economic empowerment.

    Let me explain the Peter Yu economic development plan. There is no economics. The ‘plan’ is based on human rights rent-seeking. It recommends public servants be indoctrinated in the ways of the United Nations Declaration on the Rights of Indigenous Peoples. It promotes ‘cultural mapping’, presumably writing what Aborigines have carried in their heads for thousands of years. The reason is simple: to monetise that ‘knowledge’.

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    They plan to get their hands on ‘sea and water interests’ by extending the native title regime to get a bigger slice of what others produce. They recommend the same with ‘intellectual property’. They recommend ratifying the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization. The upshot would be that if access is sought to genetic resources on Aboriginal land, which is almost the entire state of Borroloola land, the terms of access would be negotiated with the big men. Any benefits from the subsequent use go to the community ‘according to the mutually agreed terms’ – rent-seeking.

    These wonderous rent-seeking developments in Borroloola land come wrapped in a nice bow with treaties supervised by, according to Peter Yu, the Makarrata Commission. McCarthy succeeded without these baubles. She should tell the children.

    Gary Johns is Chairman of Close the Gap Research

    This article was first published in The Spectator.

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    A Nation of Takers

    By
    David Leyonhjelm
    -
    1

    One of the many inequities of Australia’s welfare system is the exclusion of family homes from the means test. Recipients of age or disability pensions can own houses worth millions of dollars while remaining eligible for pensions funded by the taxes of people who cannot afford to buy a house at all. 

    In private, many politicians agree that excluding the family home leads to unfair consequences. However, neither side of politics is willing to change it. There are simply too many Australians who insist they are entitled to a pension. 

    It is much the same with the National Disability Insurance Scheme (NDIS). It is widely known to be extensively rorted, with scheme providers charging participants several times what they charge non-participants for the same service. It is also well known that many people on the scheme are only mildly disabled, if at all. And yet, even as the cost threatens to bankrupt the country, even minor reforms prompt screams of protest. 

    Australia relies more heavily on individual income taxes than other developed countries

    Also threatening the national budget is the cost of childcare. It is no longer sufficient to keep small children happy while their parents are at work; it is now early education. Advocates have created a narrative that children who remain home with their mothers are somehow deprived. Childcare is rapidly becoming yet another entitlement to be funded by the government.  

    There was a time when Australians liked to think of themselves as self-reliant and quick to help each other, while receiving welfare was an embarrassment and an indication of failure. 

    This has been replaced by a culture of entitlement in which there is absolutely no compunction about receiving money from the government. Many people insist they have a right to a pension simply because they have paid taxes, despite that never having been the situation in Australia. Even those who have never paid tax (apart from GST), or who frittered their savings away on gambling and ‘substance abuse’, demand it. 

    Some of this thinking is attributable to the fact that a proportion of immigrants originate from countries which have contributory pension schemes. They assume it is no different in Australia. But a far bigger factor is the entitlement mentality. If someone else can get a pension, I should also get it. If someone else is receiving benefits via the NDIS, it’s only fair that I obtain them too. In fact, if there is money being handed out for anything, I’m entitled to it. 

    There is no longer any disgrace in receiving government benefits. Indeed, a thriving industry of accountants and Financial Planners specialises in rearranging their client’s affairs to meet eligibility requirements for government benefits, especially pensions and the Commonwealth Seniors Health Card. 

    There is even intergenerational welfare, with extended families living on welfare their entire lives. This is particularly the case with certain indigenous communities, while “Lebanese back” is apparently sufficient to qualify for a disability support pension.

    Some admit that ‘government money’ originates with taxpayers, but it makes little difference. The sense of entitlement defies guilt, facts and reason, hence the reluctance of politicians to make changes for fear of losing votes. Even worse, many politicians use taxpayers’ money to buy votes. 

    The sense of entitlement owes it origins to the growth of the welfare state over the last half century, together with the rise in taxation that accompanied it. Although Australia has had an age pension for more than a century, disability assistance, childcare subsidies, unemployment benefits, medical benefits and many other handouts and subsidies are far more recent. 

    It has led to the perception of an all-pervasive government with unlimited resources. Moreover, if you go about it the right way, money can be extracted from it. 

    Also a factor is the level of income tax. Getting something back from the government to compensate for the amount of tax paid makes sense. Australia relies more heavily on individual income taxes than other developed countries, on average taking 25% of earnings. Plenty of people see little benefit for themselves. 

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    Obviously, this situation is unsustainable in the long term. As Margaret Thatcher once said, “The problem with socialism is that you eventually run out of other people’s money.” 

    Australia is already living beyond its means, with budget deficits year after year. It is also actively discouraging industries that support the economy – think coal exports, gas exports, sheep exports – while increasing energy costs. It obviously cannot last. 

    What the country needs is a government that encourages self-reliance rather than dependence on the state. Unfortunately, there is no sign of that.

    Got something to say?

    Liberty Itch is Australia’s leading libertarian media outlet.

    Its stable of writers has promoted the cause of liberty and freedom across

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    Olympic Dam’s Gold Medal Performance

    By
    Bob Day
    -
    0

    It is exactly 50 years since Western Mining first discovered the massive gold, silver, copper and uranium ore body at the aptly-named Olympic Dam in South Australia. A golden anniversary indeed!

    But discovering the ore was just the beginning. 

    The fight to allow uranium mining at Olympic Dam was brutal. 

    The ruling Labor Party, under then Premier Don Dunstan, was vehemently opposed to uranium mining and particularly opposed to uranium mining at Olympic Dam.

    One of the key opponents of Olympic Dam, calling it a ‘a mirage in the desert’, was one Mike Rann, an anti-uranium campaigner from New Zealand who had come to South Australia to work for Dunstan. Rann eventually became Premier of South Australia in 2002.

    The Liberal Party, led by David Tonkin and his deputy Roger Goldsworthy, won the next election and in 1980 set about implementing their proposed ‘Olympic Dam Indenture Agreement’, building both the mine and nearby township of Roxby Downs.

    Its final passage, through the SA parliament’s Upper House in 1982, came down to a single vote – Labor’s Norm Foster. A former wharf worker, Foster had sat on the select committee into Olympic Dam and did not agree with Labor’s position that uranium mining was an environmental or ethical scourge. 

    On the day before the final vote on the project Foster resigned from the Labor Party and, the following day, crossed the floor of parliament to give his vote to the Tonkin government thereby clearing the way for the new mine.

    For years following his actions, Foster was vilified by the ALP. However, his role in establishing one of South Australia’s most successful projects (and biggest earners!) was later acknowledged by the Labor Party and his membership restored.

    Fast forward to 2024, and Australia is experiencing a similar political challenge closely related to uranium mining – nuclear energy.

    The case for nuclear power has been well argued, but there are more than just economic and energy reliability reasons for embracing nuclear power. There could also be significant strategic benefits.

    First, if there’s one thing we learned from the pandemic, it’s the importance of self-reliance. 

    Australia has for too long been dependent on overseas supply chains – fuel and energy being no exception.

    Australia’s future energy needs are currently being assessed against three criteria – reliability, affordability, and emissions intensity. 

    Unfortunately, the laws of physics and economics do not allow all three. Two out of three yes, three out of three no. 

    As emissions intensity has pretty much been mandated, this leaves only reliability and affordability to choose from. Clearly, reliability has to win.

    No form of renewable energy generation yet invented or discovered is reliable enough to meet Australia’s base-load demand.

    Nuclear power is both reliable and emissions-free. 

    It is, however, expensive to build. Again, two out of three.  

    In addition, there is a fourth aspect worthy of consideration – regional security.  

    South Korea, Japan, India and Pakistan all have nuclear power. Indonesia, Thailand, Bangladesh and the Philippines are looking to develop it. 

    All have, or will have, spent nuclear fuel.  

    As Australia engages more with Asia, we bring a unique perspective and relationship devoid of the centuries-old enmities and history that exists between some of these countries.  

    We could be the Switzerland of the South.

    Australia could establish an Asia-Pacific office for the International Atomic Energy Agency (IAEA).  We could host conferences and bring the world’s best nuclear minds here.  

    We could bring together expertise on the ways in which other nations are storing their spent nuclear fuel.  We could, as the 2015 SA Nuclear Fuel Cycle Royal Commission heard, store that fuel in South Australia, and not have it stored within the borders of nations with fractious relations and/or unstable geology.  

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    “The International Atomic Energy Agency (the IAEA) could establish an Asia-Pacific office in Australia. We could host conferences and bring the world’s best nuclear minds here.”

    The countries whose spent fuel was stored here would have an interest in our security.

    And as well as the multi-billion-dollar economic benefits – abolishing Stamp Duty, Payroll Tax, Occupational Licencing charges and many other taxes, charges and levies – with the latest technology we may even be able to extract more recycled power from the spent fuel in the future.  

    The more we engage with the nuclear question, the more positive the opportunities arise.  

    But first we must remove the regulatory obstacles and legislated bans blocking Australia’s economic and energy independence. 

    Got something to say?

    Liberty Itch is Australia’s leading libertarian media outlet.

    Its stable of writers has promoted the cause of liberty and freedom across

    the economic and social spectrum through the publication of more than 300 quality articles.

    Do you have something you’d like to say? If so, please send your contribution to editor@libertyitch.com

    More Political Competition

    By
    Dimitri Burshtein
    -
    0

    According to Treasurer Jim Chalmers, increasing competition among supermarket giants will help deliver lower grocery prices: “If it is more competitive, more transparent and people are getting a fair go, better outcomes will be seen at the supermarket checkout“.  

    The ACCC also notes that competition encourages innovation.  

    But where enhanced market competition can lead to improved consumer outcomes, enhanced political competition can lead to improved citizen outcomes: the former through lower prices and better quality, and the latter through lower taxes and better services.

    And just as those in the commercial sector prefer less competition, so too do the players in the political sector; the dominant political parties frequently colluding to modify electoral laws to defend their incumbency.  

    The Albanese government, while pursuing a business competition reform agenda, is also surreptitiously running an electoral reform agenda which will have the opposite effect, reducing political competition.

    Australian states and territories used to compete on policy and tax rates, acting as “laboratories of democracy”

    In his 1776 magnum opus The Wealth of Nations, the father of economics Adam Smith wrote, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

    This quote is often used to describe the potential for anti-competitive behaviour within business.  However, with politics now more of a trade than a calling, Smith’s description equally applies to our elected class—a group that regularly meets, often for merriment, in a well-appointed building, to conspire against the Australian public.

    While Chalmers and Assistant Treasurer Andrew Leigh pursue new competition law amendments claimed to “make our economy more productive, more dynamic, and more competitive”, Special Minister of State Don Farrell is developing plans to make it more difficult for small parties and independent candidates to compete in the political marketplace.  Farrell even recently stated that “the Westminster system provides for a two-party operation.”  A duopoly that is.

    Recently also South Australian Premier Peter Malinauskas proposed to ban electoral donations.  Were such a reform implemented, it would further privilege and embed the major parties by making it exceptionally difficult for new parties to emerge.  Raised barriers to entry lead to reduced competition.

    Political parties are exempted from many important laws including privacy and the proposed mis- and dis- information laws.  This makes their perpetual assault on political competition and concentration of political power even more nefarious.

    At a time of declining support for the major parties as measured by first preference voting and polling, the major parties continue to work together to maintain their political duopoly.

    Although the latest electoral proposals are being driven by a Labor Government, the Coalition also has dirty hands.  In 2021, the Coalition government passed laws, with Labor’s support, to shorten pre-polling periods and force the deregistration of some minor parties.  As part of this the major parties confiscated the words “liberal” and “labor” from the political lexicon, perpetually vesting these terms in themselves.

    Even Gough Whitlam’s grand dream of fixed four-year electoral terms has received bipartisan support with both John Howard and Peter Dutton offering endorsement. Extended terms transfer power from the people to the elected with no recourse, such as binding citizen-initiated referenda (as occur in Switzerland) or recall elections (as occur in the US).

    It was not always thus.  Over recent years, our neo-professional political class has increasingly and incrementally colluded to raise the barriers to entry for alternative parties and candidates.  This has contributed to a homogenization of personnel and policy, making the differences between the average Labor and Coalition candidate barely discernible to the average voter.

    For all the talk of diversity, this homogenization has led to much reduced experiential, cognitive and policy differentiation among politicians.  Many members of our parliaments, irrespective of party, gender, race, sexual preference or religion, follow similar educational and pre-parliamentary career paths.  While elected governments may change, there is a consistent trajectory of permanent government expansion and price rises through ever higher taxes.

    Since the turn of the millennium, it has been bipartisan policy and practice to increase spending, taxes, and the volume of regulations to ever greater levels.  The assaults on civil liberties and the crowding out of civil society similarly continue unabated.

    But where enhanced market competition can lead to improved consumer outcomes, enhanced political competition can lead to improved citizen outcomes

    It is not just a reduction of competition at the political level.  There has been a long-term de-federalisation project to aggregate power in Canberra; a manifestation of the French “disease” described by Alexis de Tocqueville as the tendency to concentrate authority in central government; something Tocqueville believed to be detrimental to political and social health.

    Australian states and territories used to compete on policy and tax rates, acting as “laboratories of democracy”, a term coined by US Supreme Court Justice Louis Brandeis.  Death duties in Australia were abolished not through some fiat from Canberra but because of competition between the states and territories.

    However, today some 81 percent of total tax revenue is collected by the Commonwealth, leading to policy centralisation and standardisation.  Matters constitutionally the provenance of the states, such as health and education, are now increasingly directed out of Canberra; fidelity to the intent of the Australian constitution and of tax and policy competition be damned.  

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    Just recently, the United States celebrated 248 years of the signing of the Declaration of Independence.  Drafted by Thomas Jefferson, it included this famous sentence: “… Governments are instituted among Men, deriving their just powers from the consent of the governed, –That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government”.

    Just as politics is downstream from culture, policy is downstream from politics.  It’s time to change the way politics is done in Australia.

    Childcare – Why should you pay for it?

    By
    David Leyonhjelm
    -
    0

    Starting before they are born, our governments spend a lot of money on children. 

    The Commonwealth budget for education alone is $67 billion, and in NSW $24 billion. Add the other states and territories, plus health care, and as the saying goes, pretty soon you’re talking real money. 

    While our society obviously values children highly, it is rare that anyone questions why so much of their cost is socialised. Having children is, after all, a choice. Other lifestyle choices do not attract such taxpayer generosity.

    Among the taxpayers who provide the funds are many who do not have children themselves. Some are yet to start a family, while others have chosen not to have them. But there are also those who, for various reasons, would very much like to become parents but cannot. 

    A strong case is always necessary to justify spending other people’s money, but a particularly convincing case is required to justify compelling those who cannot have children to pay for other people’s children. It’s like obliging paraplegics to pay for the running shoes of the able bodied. 

    The government thinks there is a strong case for childcare. It wants women to return to the workforce as soon as possible, so they resume paying tax and contributing to government revenue. With state and federal governments all addicted to spending more than they collect, they have a strong incentive to increase taxpayer numbers. 

    The government also argues that the less time women are out of the workforce, the more they retain their work skills. This is presented as a benefit to the women, as women who return to work more quickly typically earn higher incomes. However, they also pay more tax. 

    For the mothers of the children, the case is not so clear. Some women are obviously career oriented and anxious to return to the workforce as soon as possible. However, there are many who would prefer to care for their children themselves, especially while they are small, rather than entrust them to strangers in childcare facilities. Motherhood is a powerful instinct, and most jobs are rarely more engaging than raising a child. 

    The government also argues that the less time women are out of the workforce.

    The key reason most do not remain at home is economic: single income families with children typically struggle to pay a mortgage or rent plus general living expenses, vehicle expenses and the rest. 

    The underlying cause of this is government policies, particularly high income taxes, excise on essentials such as fuel, and the regulation and taxes that lead to expensive housing. Remove these and it would be a lot easier to live on one income. 

    From the point of view of the children, the case for childcare is even less compelling. Mothers have been caring for their children for thousands of years and have not recently become incompetent. 

    But we are told that it is no longer sufficient to simply keep children safe, happy and entertained while their parents are at work; the children must now be educated by qualified early childhood educators. It is now known as early childhood education and care (ECEC).

    Moreover, whereas childcare workers were once just sensible, caring people, most with children or grandchildren of their own, they must now hold post-school – and sometimes even university-level – qualifications. Mothers who have successfully raised four children of their own cannot become childcare workers unless they have obtained the appropriate qualification, while those who have a qualification but no prior childminding experience are fine.

    There has also been a ratcheting up of regulation of the physical environment, the programs and routines offered, plus the ratio of staff to children in childcare centres. 

    For the most part this has been driven by middle-class parental guilt. That is, parents seeking to justify the decision to place their children in childcare are demanding standards that allow them to believe their offspring are receiving a better start in life than if they stayed at home. It makes them feel better about leaving the kids with someone else. 

    Unfortunately, there is no evidence to show that these standards are enhancing children’s outcomes. This was conceded in the Productivity Commission Inquiry Report into Childcare and Early Childhood Learning. The evidence indicates that the only children who benefit from ECEC are from dysfunctional households, such as those where substance abuse is an issue. 

    Furthermore, the ramped-up regulation and credentialism have made childcare seriously expensive. Even moderately well-paid parents baulk when the cost is almost as much as they can earn by going to work. For the poorest parents, especially single mothers who have a strong need to return to work, it is simply out of reach.  

    A strong case is always necessary to justify spending other people’s money,

    Childcare advocates, especially those with a pecuniary interest, are seeking to convince the government to implement a universal ECEC system, based on recognising early childhood education as a fundamental need. Naturally they claim this should be provided at minimal cost to parents, arguing it would give children the support they need to thrive into adulthood, while parents, particularly women, would be better able to balance work and care responsibilities.

    This is a profoundly elitist view, based on the assumption that virtually all women prefer to return to work, and that virtually all children benefit from early childcare education. As previously discussed, neither is true. Moreover, the cost of such a system, tens of billions of dollars, would be borne by taxpayers.

    What is never considered is changing the incentives so mothers do not feel so pressured to return to work. If income taxes were significantly reduced by, for example, allowing single income households to split their income between working and non-working parents, the pressure would ease. If the cost of childcare was tax deductible, it would help. If fuel excise plus GST did not take over half the cost of fuel, households would have more money for other purposes. If housing was not so heavily taxed and regulated by local, state and federal governments, there would be more houses at affordable prices. 

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    And if childcare was less regulated, with only those opting for early childhood education paying for it, the cost of ordinary childcare to mothers who genuinely need it would be more affordable. 

    As it stands, ECEC is a taxpayer-funded elite middle-class racket. Rather than hit taxpayers for ever increasing subsidies, the sector needs to be substantially deregulated.  Middle and upper-middle class families who expect gold-plated, diamond-encrusted childcare – with its university educated workers and low staff ratios – should pay for it themselves.

    Smoke ‘Em If You Got ‘Em

    By
    James Hol
    -
    0

    For those of us who still occasionally like to check in on what the mainstream media is doing, there has been a topic that has got chins wagging and jowls flapping lately: “the tobacco wars”. 

    While the mainstream media, in typical fashion, has sensationalised the story, it is true that black and grey market tobacco is abundant in the community.

    BLACK, WHITE AND GREY

    As a (recently quit) smoker, I see it everywhere. My smoker friends brag about the newest place they discovered, with even cheaper prices, while they pull a cigarette out of their fully branded pack. In fact, I can’t remember the last time I saw a drab-brown (plain packaging) pack of cigarettes. And I wouldn’t be much of a libertarian if I didn’t confess that I haven’t bought a pack of cigarettes through a shop compelled to display a “retail tobacco merchant license” in well over a year.

    The obvious appeal of black and grey market tobacco is the near-two-thirds savings. I can buy a 20-pack of Marlboro Reds for under $20, while an authorised tobacco merchant is selling the same pack for over $50 (which I had to look up because it has been that long). And as more shopfronts pop up, the price is pushed down – a testament to the free market. 

    Anybody serious about removing the illicit tobacco market

    Even your poorest friends can afford to smoke chop-chop, illegally grown roll-your-own tobacco, at 50c per gram – a sixth of the price compared to roll-your-own tobacco in the authorised market.

    ALL IS FAIR IN LOVE AND WAR

    Despite the fact that, I would guess, most smokers are paying less for cigarettes than they have in over a decade, there are serious concerns that accompany a rising illicit market for an addictive product. Bikies and organised crime groups are starting to muscle in on the market, aggressively extorting tobacco merchants (as opposed to the more passive extortion of tobacco tax) and violently vandalising competitors.

    Stories of tobacco shops being vandalised and torched are becoming a near-weekly occurrence. And while I have little sympathy for organised criminals, it is not only criminals being affected: legitimate tobacco merchants are in their crosshairs and innocent victims are inevitably caught in the blaze. So week-in and week-out, the mainstream media trots out some new “expert” on the matter who declares another hair-brained measure will solve this problem once and for all.

    One of the more popular new measures being touted is to implement a licensing system to regulate tobacco merchants, similar to booze. The one problem with that is it already exists and has done precisely nothing to stem the flow of illicit tobacco. In South Australia, where I live, we have a had a tobacco merchant licensing system for as long as I have been a smoker (15 years) and illegal tobacco – and the organised crime that comes with it – is thriving.

    Even your poorest friends can afford to smoke chop-chop, illegally grown roll-your-own tobacco

    STATING THE OBVIOUS

    At the risk of sounding like another idiot who has the solution for this problem once and for all, there is actually an incredibly obvious solution to this problem: lower the price of cigarettes. There is only one way for those “evil”, “scary” big tobacco companies to sell their products at a loss and for merchants to make pennies on the dollar: abolish (or at least significantly reduce) tobacco tax. Well over half the price of the average pack of cigarettes or pouch of roll-your-own tobacco goes to the government in tobacco excise alone. Tobacco, like petrol, is also double-dipped on tax with an additional 10 per cent of GST.

    So while even someone with a cursory understanding of economics knows the only way to combat this problem is to compete on price – especially in a market where almost all forms of non-price competition have been outlawed – the obvious remains unspoken. To even suggest we use the only realistic solution to combat the illicit tobacco market, while also removing the most regressive tax in Australian history, is complete heresy.

    UP IN SMOKE

    Instead, we’ll pile on more regulations, evaporating the few legitimate tobacco merchants left, and “crackdown” on illicit tobacco, as governments continuously claim to do for no avail. We have known for a long time now that prohibition never works, and now we know that a surreptitious prohibition, via ever-increasing prices, achieves the same result.

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    Anybody serious about removing the illicit tobacco market, preventing organised crime from gaining a foothold in another industry and legitimately saving the lives of those caught in the collateral damage, knows the answer to this problem. Now it’s time to say it out loud.

    GST is Better than Income Tax

    By
    Duncan Spender
    -
    0

    In my last article I argued that a flat and broad-based income tax is much the same as a broad-based GST, so we have little reason to hate the concept of income tax more than the concept of GST. I argued this by setting out an imaginary scenario with five citizens, one business, and no government.

    But there is an inherent difference between income tax and GST that makes GST better. I will argue this by adding an additional year to the imaginary scenario, and by honing in on three of the citizens – the three employees.

    Year 1

    In year 1 each employee earns a salary of $100,000, enough to buy 100,000 products at $1 each. 

    One employee is short-sighted and borrows $100,000 from another employee, who we will call the long-sighted employee. So in year 1 the short-sighted employee buys 200,000 products while the long-sighted employee buys nothing.

    Year 1 with no government

    Citizen…receives…and pays…
    The short-sighted employee$100,000 of salary, plus $100,000 borrowed from the long-sighted employee$200,000 for 200,000 products
    The long-sighted employee$100,000 of salary, less $100,000 lent to the short-sighted employeeNothing for no products
    The take-it-as-it-comes employee$100,000 of salary$100,000 for 100,000 products

    To extract the money it demands, the government imposes an income tax rate of 19.8 per cent.

    Year 2

    In year 2 each salary is $104,030, but this amount now buys only 101,000 products because the product price has risen from $1 to $1.03.

    The salary of the short-sighted employee is transferred to the long-sighted employee to pay off the previous year’s debt. As such, the long-sighted employee buys 202,000 products in year 2, while the short-sighted employee buys nothing.

    Year 2 with no government

    Citizen…receives…and pays…
    The short-sighted employee$104,030 of salary, less $104,030 paid to the long-sighted employeeNothing for no products
    The long-sighted employee$104,030 of salary, plus $104,030 paid by the short-sighted employee$208,060 for 202,000 products
    The take-it-as-it-comes employee$104,030 of salary$104,030 for 101,000 products

    Bring Out The Government

    Now imagine instead a scenario where there is a government, and let us assume the government’s taxation does not discourage the citizens from producing as much as in the absence of government.

    In year 1 the government demands enough money from the three employees to buy 60,000 products. The government could get the money via a 20 per cent income tax on the salaries of the employees.

    Year 1 with income tax

    Citizen…receives…and pays…
    The short-sighted employee$80,000 of after-tax salary, and $80,000 borrowed from the long-sighted employee$160,000 for 160,000 products
    The long-sighted employee$80,000 of after-tax salary, less $80,000 lent to the short-sighted employeeNothing for no products
    The take-it-as-it-comes employee$80,000 of after-tax salary$80,000 for 80,000 products
    Government$60,000 in tax$60,000 for 60,000 products

    In year 2, the government ups its demand, and now seeks enough money from the three employees to buy 60,600 products.

    If the government gets the money via income tax, it ends up taking more from savers compared to the amount taken from borrowers, and compared to the amount taken from those who neither save nor borrow.

    Consider the long-sighted employee, who lent $80,000 to the short-sighted employee in year 1, and who receives $83,452 from the short-sighted employee in year 2. 

    Year 2 with income tax

    Citizen…receives…and pays…
    The short-sighted employee$83,452 of after-tax salary, less $83,452 paid to the long-sighted employeeNothing for no products
    The long-sighted employee$83,452 of after-tax salary, plus $83,452 paid by the short-sighted employee, less $683 of tax on interest $166,221 for 161,379 products
    The take-it-as-it-comes employee$83,452 of after-tax salary$83,452 for 81,021 products
    Government$62,418 in tax$62,418 for 60,600 products

    The pre-tax income of the long-sighted employee in year 2 is $104,030 of salary plus $3,452 of interest, summing to $107,482. So the long-sighted employee has higher pre-tax income than the other employees, simply because of a deal struck between peers.

    There is an inherent difference between income tax and GST that makes GST better.

    To extract the money it demands, the government imposes an income tax rate of 19.8 per cent. The rate is lower than in year 1 because the government has dreamt up more income to tax than just salary income.

    The long-sighted employee pays more tax in year 2 than any other citizen ($21,261 compared to $20,578). The long-sighted employee ends up purchasing less than double what the take-it-as-it comes employee purchases, despite the long-sighted employee having gone without all purchases in year 1.

    This intrusion into the deal struck between the long-sighted employee and the short-sighted employee is how income tax punishes saving.

    Even if the long-sighted and short-sighted employees respond to the imposition of income tax by negotiating a change in the interest payment involved in their arrangement, this would just mean they share the punishment of deal-making meted out by income tax, a punishment that the take-it-as-it-comes employee avoids.

    As income tax penalises deal-making between savers and borrowers, while GST does not, income is inherently inferior to GST.

    The Myth of Speed

    By
    David Leyonhjelm
    -
    8

    We are constantly told that Australia has a huge road toll. Every holiday break and long weekend there are reports of how many people were killed, amid inferences that this is a major and growing tragedy.  

    Equally constant is the assertion that the underlying cause is speeding. There is a never-ending campaign, complete with gory advertisements warning of lifelong injuries, telling us to slow down. The message never varies – below the speed limit is safe, above the limit is not. Indeed, we are told that even 1km/hr above the speed limit increases the likelihood of serious injury and death. Vacuous journalists blame speed for almost every accident they cover. 

    And should we fail to heed the message there are speed cameras, aerial monitoring, highway patrols and double demerit periods to remind us.  

    In reality, driving on Australian roads is safer than it has been for over fifty years. Road fatalities, both absolute and relative to the population, have been steadily falling.  Whereas in 1970 there were 3,798 road fatalities, equal to 30.4 fatalities per 100,000 people, in 2022 there were just 1,194 fatalities, a rate of 4.6 per 100,000. 

    Nobody wants to increase deaths and injuries on the roads

    Most of the decline occurred prior to 2000 following the introduction of seat belts, improved road design, vehicle safety upgrades such as disc brakes and impact resistance, and limits on drink-driving. 

    But it has continued up to the present time: in the decade to 2012 the rate of deaths relative to population decreased by an annual average of 4.2%. In the ten years to 2022 it fell by an annual average of 1.9%. 

    The bottom line is, Australia’s road toll is a fraction of what it once was and continues to fall. Fewer people die in road accidents than from the flu or Covid. And yet, rather than celebrate this success, government perpetuates the fiction that things are bad and getting worse. Moreover, despite quite minor changes to speed limits over the period (slight increase on highways and slight reduction in the suburbs), it insists that excessive speed is the primary culprit.   

    All this while most of Europe, which has overall higher speed limits than Australia, has lower road death rates. That includes Germany, where there are no speed limits on major autobahns. 

    Responsibility for this myth lies with the National Road Safety Strategy, prepared every few years by transport and infrastructure bureaucrats from the Commonwealth, State and Territory governments. For many years it has led a crusade with the broad aim of significantly reducing road trauma, resulting ultimately in zero deaths and serious injuries (which it defines as anyone admitted to hospital, irrespective of seriousness or the length of stay), by 2050. 

    It argues speed is a key element in all crashes, and that this necessitates lower speed limits and additional enforcement. State governments, which collect tens of millions in speeding fines, dutifully go along with it. 

    Equally constant is the assertion that the underlying cause is speeding.

    While very high speeds can obviously lead to more serious accidents, the data shows that deaths occur at any speed. Indeed, achieving zero deaths and injuries from road accidents is only feasible if everyone walks (even then, some would die of heart attacks). That would clearly be unacceptable to the community, which implicitly accepts a certain level of deaths and injuries as the price of convenient travel.

    The elevation of speed limits to icon status is both dishonest and absurd. Those responsible for setting limits, road safety experts and traffic engineers in the public service, are determining the trade-off between convenient travel times and the road toll for the entire community. If speed is truly the demon we are led to believe, they are essentially deciding how many people should die.  

    If this all sounds familiar, with memories of recent events during the Covid epidemic, that is not surprising. The gross overstating of a public health risk; a determination to mitigate that risk without regard for economic or social consequences; an assumption that the public are not competent to make their own decisions about bearing that risk. It’s all the same. 

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    As with Covid, it amounts to a classic case of gross bureaucratic overreach. It is the public, not bureaucrats, who ought to determine the trade-off between travel convenience and the road toll. (There is even an internationally recognised method of achieving this, known as the 85th percentile formula.) It is the public, not public health bureaucrats, who should decide whether the road toll warrants greater priority than other causes of death and disease. 

    Nobody wants to increase deaths and injuries on the roads, but a risk-free society is not a rational public health objective. Road users are not sinful children and should not be viewed as a source of government revenue, and public health bureaucrats should not be allowed to play God.

    Hate income tax? You shouldn’t

    By
    Duncan Spender
    -
    3

    Some taxes are more damaging than others. But when working out which taxes are more damaging than others, you should not judge a tax by its name.

    The impacts of income tax and GST can be much the same, because income tax and GST largely tax the same thing.

    So a special hatred for the idea of income tax relative to GST is unjustified.

    Let me explain with a simplified scenario.

    First, imagine a country with five citizens and no government.

    One of the citizens, ‘the entrepreneur’, establishes a business by borrowing money from one of the other citizens, ‘the capitalist’. In the first year the entrepreneur pays the capitalist $100,000 in interest. 

    The business imports 500,000 raw inputs at $1 each, and employs three citizens at a salary of $100,000 each. 

    The business produces 1,000,000 products and sells half of them to foreigners and the other half to the five citizens of the country, all at $1 each. So the business makes $1,000,000. 

    The business pays $100,000 of dividends to the entrepreneur.

    Australia’s income tax and GST do not have identical impacts on purchasing power and do not have identical discouragement effects. 

    A scenario with no government

    ReceivesPays
    Citizen 1 – the entrepreneur$100,000 of dividends$100,000 for 100,000 products
    Citizen 2 – the capitalist$100,000 of interest$100,000 for 100,000 products
    Citizen 3 – an employee$100,000 of salary$100,000 for 100,000 products
    Citizen 4 – an employee$100,000 of salary$100,000 for 100,000 products
    Citizen 5 – an employee$100,000 of salary$100,000 for 100,000 products
    The rest of the world$500,000 for 500,000 inputs$500,000 for 500,000 products

    Now imagine instead that this scenario includes a government. The government demands enough money to buy 100,000 products. And for now, let us assume that this taxation does not discourage the citizens from producing as much as they would in the absence of government.

    The government could get the money it demands via a 20 per cent income tax on the salaries, interest, and dividend received by the citizens. In year 1 this would leave the five citizens with $400,000 instead of $500,000 in their pockets, and with the capacity to buy only 400,000 rather than 500,000 of the business’s products. The government would have $100,000 and the capacity to buy 100,000 of the business’s products.

    A scenario with income tax

    ReceivesPays
    Citizen 1 – the entrepreneur$80,000 of after-tax dividends$80,000 for 80,000 products
    Citizen 2 – the capitalist$80,000 of after-tax interest$80,000 for 80,000 products
    Citizen 3 – an employee$80,000 of after-tax salary$80,000 for 80,000 products
    Citizen 4 – an employee$80,000 of after-tax salary$80,000 for 80,000 products
    Citizen 5 – an employee$80,000 of after-tax salary$80,000 for 80,000 products
    The rest of the world$500,000 for raw inputs$500,000 for 500,000 products
    Government$100,000 in tax$100,000 for 100,000 products

    Alternatively, the government could get enough money to buy 100,000 products via a 25 per cent GST.

    The foreign supplier of 500,000 raw inputs would charge the business $625,000, send $125,000 of GST to the government, and, just like in the scenario without government, would end up with $500,000.

    The business would continue to sell half of its products to foreigners for $500,000, at $1 each, given that no GST applies to exports.

    The business would sell the other half of its products domestically for $625,000, at $1.25 each. The business would pay $125,000 of GST on these domestic sales, but would claim a $125,000 input tax credit, so overall the business would send nothing to the government.

    The government’s overall receipts from both the business and the foreign supplier of raw inputs would be $125,000, enough to buy 100,000 products.

    The business would continue to provide $500,000 as salaries, interest, and dividends to the five citizens, but this $500,000 would now only be enough to buy 400,000 products.

    The impacts of income tax and GST can be much the same, because income tax and GST largely tax the same thing.

    A scenario with GST

    ReceivesPays
    Citizen 1 – the entrepreneur$100,000 of dividends$100,000 for 80,000 products at $1.25
    Citizen 2 – the capitalist$100,000 of interest$100,000 for 80,000 products at $1.25
    Citizen 3 – an employee$100,000 of salary$100,000 for 80,000 products at $1.25
    Citizen 4 – an employee$100,000 of salary$100,000 for 80,000 products at $1.25
    Citizen 5 – an employee$100,000 of salary$100,000 for 80,000 products at $1.25
    The rest of the world$500,000 for inputs$500,000 for 500,000 products at $1
    Government$125,000 in tax$125,000 for 100,000 products

    Under these income tax and GST scenarios, the dollar outcomes differ but the real outcomes are identical. 

    In the income tax scenario, each citizen receives $80,000 that enables the purchase of 80,000 products.

    Regardless of which tax is imposed, foreigners are unaffected, and the purchasing power of each of the citizens is hurt to the same degree.

    The reason for this is as follows. In the GST scenario, the tax base is the difference between the business’s domestic receipts and its outlays on imported raw inputs. Yet this tax base is also the money the business pays to the citizenry as income. So the tax base for GST is also the tax base for income tax.

    Because the citizens’ purchasing power is hurt to the same degree under both scenarios, the discouragement effect of tax would be the same in both scenarios. Contrary to popular belief, there is no great difference in the discouragement effect of income tax compared to the discouragement effect of GST.

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    Now, in the real world, Australia’s income tax and GST do not have identical impacts on purchasing power and do not have identical discouragement effects. 

    This is partly because of inherently different impacts on savings, that I will discuss in a later article.

    But the main reason why our income tax and GST have different impacts is that they each have odd exemptions, and our income tax has various rates unlike the flat-rate GST. 

    In other words, a broad-based, single rate income tax would have much the same impact as a broad-based, single rate GST. 

    So the special hatred many feel for the concept of income tax seems unwarranted.

    The Tax Power

    By
    Adam Craig
    -
    0

    The Commissioner of Taxation has too much power. 

    Libertarians consider tax to be either theft or, at best, should be low and flat to cover bare necessities. It certainly shouldn’t be as complex as it is or run to thousands of pages. 

    Most mainstream tax reform proponents have grandiose visions that would only add complexity and likely raise the overall tax burden. Libertarians rightly oppose those ideas as they come. 

    However, there is an easy win that ought to be important to libertarians: we need to limit the Commissioner of Taxation’s powers. It’s not exciting work, like developing new systems, but it is significant. 

    First, the Commissioner has too much power to amend assessments. 

    Australia has a self-assessment tax system. That means we declare income and allowable deductions, which the Commissioner accepts but can then amend if he considers the taxpayer was wrong. 

    Libertarians can demand fairer amendment periods, a fairer burden of proof, and less funding for the Commissioner. 

    For individuals the Commissioner can amend an assessment within two years. For businesses, it is usually four years. 

    However, the relevant section of the law for income tax – leaving aside equivalent sections for other taxes – is around 3000 words– because it contains “ifs” and “buts” to protect the Commissioner. 

    For example, if the Commissioner makes a tax avoidance determination, he can have four years instead of two years to change an assessment. If the Commissioner believes there has been fraud or evasion, he has an unlimited amendment period. If the Commissioner believes a particular section of the tax law relating to trusts applies, he again has an unlimited amendment period.  

    These powers predate most of this century’s technological advances, which enable the Commissioner to work more efficiently and collect more data. Also, many amendments to the tax law in recent years have made it easier for the Commissioner to apply the law, including changes to avoidance laws favouring the Commissioner.

    It must be a libertarian position to reduce amendment periods. 

    Second, the Commissioner does not need to prove anything in litigation. The starkest example of this rule operating unjustly is when the Commissioner has amended a taxpayer’s assessment because he believes fraud or evasion has occurred. 

    The Commissioner need only believe there has been fraud or evasion. 

    He can form this opinion about any year – 2003, for example. And if he goes back to 2003, he will likely repeat that for many subsequent years, and he will apply penalties and interest. 

    Most mainstream tax reform proponents have grandiose visions that would only add complexity

    Suppose the matter is in the Australian Administrative Appeals Tribunal or the Federal Court of Australia. The Commissioner will not need to prove the truth of his opinion. Also, it doesn’t matter if the taxpayer proves the Commissioner’s opinion was wrong. The taxpayer’s task, two decades later, is to show that its accounting was correct. Not surprisingly, most people do not have records that go back that far. 

    It must be a libertarian position to oppose the power to simply deem fraud, and to demand a time limit on the exercise of the fraud or evasion power. The Commissioner should have an obligation to prove fraud or evasion has occurred before the taxpayer must prove its accounts. 

    Third, the Commissioner is emboldened to use his amendment powers through funding. The Commissioner receives substantial funding to run the Australian Taxation Office. 

    Libertarians would rightly want that funding limited. 

    However, there is also a perpetual cycle of giving the Commissioner additional funding to use his amendment powers, particularly under the auspices of tax avoidance.   

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    Libertarians would want that funding limited because it encourages the Commissioner to use his firmest amendment powers. It also raises questions about the management of public finances – should the Commissioner be “rewarded” with additional funding for things he should already be doing? 

    Libertarians can demand fairer amendment periods, a fairer burden of proof, and less funding for the Commissioner. 

    It would be hard to think that most taxpayers would not be libertarians regarding these issues.

    Too Much Government

    By
    David Leyonhjelm
    -
    0

    Expectations of the role of the government have been rising steadily over the last decade. They rose substantially during the eastern states’ bushfires in late 2019 and early 2020, and again in response to the floods that followed in NSW and Queensland. And they reached stratospheric levels during the Covid panic.

    Judged by the number of lives lost, those bushfires were far from the worst on record. Nonetheless, they were characterised as ‘unprecedented’ and prompted a chorus of demands for the Prime Minister to get involved. When it was discovered he had gone to Hawaii for a holiday with his family, he was accused of being negligent for leaving the country at such a time. 

    The Prime Minister did not leave the country when NSW and Queensland were hit by floods, but the opprobrium he attracted could hardly have been worse if he did. The floods were again described as unprecedented amid a chorus of claims the government should have acted sooner and done more. 

    The Covid schemozzle was obviously unprecedented and nobody could go anywhere. Once again, the Prime Minister and federal government were blamed – there were insufficient vaccines, the border should have been closed sooner, hotel quarantine was a failure, lockdowns were inadequate, plus a multitude of other perceived failures. All this despite the worst harm being done by state governments. 

    Thousands of kids were inspired to join the surf lifesavers, setting an example for the rest of the world.

    Perhaps it is not surprising that many people think of the Prime Minister and the federal government when they think of ‘the government’. Federal politics tends to dominate the news, while the public’s understanding of our system of government is pretty dismal. Much of the media is pretty ignorant too, although hostility to Liberal leaders is also a factor.  

    But what these narratives reveal is that the expectations now placed on governments, of any kind, are higher than they have ever been. Whether it is floods, fires, droughts, earthquakes, cyclones or disease outbreaks, there is a popular and growing view that the government should not only be there to pick up the pieces, but should have anticipated the calamity and done everything possible to head it off. 

    By any standard this is both ridiculous and contradictory. Government is, after all, made up of politicians and public sector bureaucrats. Neither are experts at how the real world works so cannot possibly know what to do.

    Most people readily acknowledge that governments are inefficient, bureaucratic and slow, yet somehow cling to the belief that next time will be different and more government will get it right. 

    In fact, Australia’s problem is too much government. From petty, intrusive local councils to authoritarian state governments and over-taxing, over-spending, ‘more money will fix it’ federal government, there is just too much of it. 

    The problem with this is obvious. The world is complex and changing – in social attitudes, world economics, geo-politics and of course technology. There is no way that politicians, public sector bureaucrats or regulators can hope to supervise or manage it. They are also often remote from the problems – how, for example, can a bureaucrat in Canberra possibly know enough to make a decision about a cyclone in Broome? 

    The famous economist Friedrich Hayek noted how difficult it was for people to fathom that local decision making leads to more efficient outcomes than central planning by politicians and public sector bureaucrats.

    “The curious task of economics is to demonstrate how little they really know about what they imagine they can design.

    To the naive mind that can conceive of order only as the product of deliberate arrangement, it may seem absurd that in complex conditions order, and adaptation to the unknown, can be achieved more effectively by decentralizing decisions.”

    Expectations of the role of government have been rising steadily over the last decade. 

    There was a time, not that long ago, when Australia was a proud volunteer society. Moreover, almost everything was local.

    Thousands of kids were inspired to join the surf lifesavers, setting an example for the rest of the world. Volunteer fire fighters saved whole communities. Dozens of charities, not just the Salvation Army and Red Cross, all volunteers, provided help and hope to those in need. 

    Indeed, prior to the emergence of the welfare state in the second half of the twentieth century, volunteer charities were involved in health care, childcare, education, unemployment and disability support. In the nineteenth century you would have been considered weird if you had predicted that most of these would end up being run by governments. These days you’d be called weird for suggesting volunteers might do them better. 

    Volunteers are still the first responders in many fire and flood emergencies as families, neighbours and friends rally around. Next are typically agencies such the State Emergency Service and Rural Fire Service in NSW, and their equivalents in the other states. Both are still volunteer based, although increasingly under the control of full-time public servants and subject to the inefficiencies of government bureaucracy. In Victoria, the sad decline of the CFA at the hands of the unions is an example of that.  

    A tragic example of the harm being done to our volunteer society was seen during the Covid pandemic when many volunteers were required to be fully vaccinated. Unvaccinated volunteers were turned away and not permitted to fight fires or rescue flood victims, even when working outside where infection was rare.  

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    Even after it became obvious that Covid vaccines did not prevent infection or transmission, the obligation to be fully vaccinated was retained. This was not only unscientific but also destructive. It seriously undermined the capacity of those organisations to help people. In NSW, RFS volunteers on the Central Coast fell by about 50% and in other areas SES volunteers left and some SES stations closed.

    It also led to increasing demands for the federal government to bring in the ADF. Obviously ADF members are not volunteers, but they are also not intended to be used as emergency workers. Indeed, using the ADF for anything other than the defence of the country undermines its purpose and reduces its capabilities. 

    While we sometimes hear governments claiming to honour volunteers, the trend is downhill. The more red tape, bureaucratic oversight and regulation imposed, the more volunteers bail out.

    The Rise of Citizen Journalism and Independent Media

    By
    Simon Anderson
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    0

    Shortly after 4pm on the 27th of March, the X account @churPanic commenced a live broadcast on a mobile phone from the streets of Gisborne, New Zealand. 

    Against a backdrop of community outrage at taxpayer-funded Rainbow Storytime in the local library, a pedestrian crossing had been whitewashed. Residents of this small North Island town were protesting at the repainting of it in the colours of the Rainbow flag. There was a heavy police presence manhandling the demonstrators and making arrests.

    Minutes earlier the livestream on Facebook from one of the protest groups had gone dark when police arrested the cameraman. It didn’t take long for the internet to discover the small @churPanic account on another platform: a link to his broadcast was rapidly shared and reshared, and hundreds of people tuned in. Two hours later tens of thousands had watched the footage. Shortly after midnight photojournalist Chris De Bruyne in Sydney published a subtitled remix of a clip someone else had cut from the original as a service to the deaf community. 75,000 people viewed De Bruyne’s version. It was one of many.

    Within a day hundreds of thousands – if not millions – had watched the footage in one form or another, most with no idea of  its origin. This is raw news, proliferating through the democratising process of the internet. 

    And it’s killing mainstream media.   

    4pm is too late in the day for the story to make the 6 o’clock news on TV channels. The first mainstream coverage was at 9 pm in online newspapers and late evening broadcasts. By the time the creaking legacy media fabricated a narrative fitting their editorial slant for consumption by a domestic New Zealand audience, the entire world had already seen @churPanic’s footage in one form or another and formulated their own interpretations. 

    Legacy media perceive the social media giants as the greatest threat to their business models.

    Blatant biases aside, the reason for the demise of the legacy media is their slavish devotion to antiquated businesses models that stymie innovation. In failing to evolve, audiences have abandoned them for more reliable sources elsewhere, and advertisers have shifted with them. 

    The legacy media isn’t going down without a fight though, and its death throes are interesting to observe. Far from reviewing their own approach, the legacy media have declared war on everyone else: social media corporations, independents, imagined disinformation programmes by shadowy international organisations, even their own audiences.

    The reality the legacy media refuses to accept is that We, The People, Are The Media Now. Where once it was said to be unwise to “quarrel with a man who buys his ink by the barrel”, the reality is that every person today has a video camera in their pocket with social media providing the capability to reach millions with the click of a button. In seeking out alternative information sources, the people changed the channel.

    Back to Chris De Bruyne. It’s mid-afternoon on the 24th of March and British author Douglas Murray is speaking in Sydney. Murray’s presence attracts a pro-Palestine demonstration, one of whom assaults a pro-Israel counter-demonstrator in full view of NSW police, who don’t intervene. The incident is caught in De Bruyne’s livestream which, as an experienced independent, he broadcasts with an embedded watermark. Realising the newsworthiness, he offers to sell the footage to the major Australian news agencies, all of whom decline. 

    Citizen journalists and independents are, after all, objects of derision amongst the great and good of legacy news desks. They are qualified to arbitrate content to the public while De Bruyne, in their opinion, is not. But they rip off his footage anyway. 

    At 9pm Rita Panahi introduces the story on Sky News with the watermarked livefeed, scraped from De Bruyne’s social media account. She’s doing him a favour; other channels broadcast his material with the watermark blurred out. 

    Against a backdrop of community outrage at taxpayer-funded Rainbow Storytime in the local library, a pedestrian crossing had been whitewashed. 

    Paying compensation for copyright infringement is relatively inexpensive on the rare occasions an independent has the financial means to sustain litigation. As a bonus, legacy media can avoid the operational costs of employing cameramen in the field while there is content to be misappropriated and independents who can be exploited.

    It happens to De Bruyne so regularly he keeps a spreadsheet.

    Legacy media perceive the social media giants as the greatest threat to their business models. Utilising their incestuous relationships with predominantly left-wing political parties, they’re forcing those platforms to pay compensation for disseminating local news content. In Australia it’s called the News Media Bargaining Code and in New Zealand, the Fair Digital News Media Bargaining Bill. 

    The irony of demanding fees to redistribute their content whilst they themselves habitually infringe the copyright of independent producers is lost on the legacy media. But the deliciousness of the irony is that it isn’t the social media platforms that are their enemy. Rather, it’s the people who utilise them. While legacy media are distracted by a war they cannot win with social media corporations, Chris in Sydney and some bloke who goes by the handle “@churPanic” in Gisborne are the people on the ground, reshaping the media landscape by delivering unvarnished news and enabling audiences to reach their own conclusions. 

    And they are one component of a much broader trend. Traditionally trained journalists such as Chris Lynch Media in Christchurch are increasingly going independent. Blogs such as The BFD in Auckland are evolving into fully-fledged media operations. Writers publish to their subscribers on sites such as Substack in the first instance and take offers from legacy media to republish. 

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    Desperate to navigate the new realities of a dying industry, NZME appointed a blogger  to head their NewstalkZB+ division. Alternative media operators have emerged with innovative business models as varied as The Platform, financed by old money, and RCR, with support from their audience. The Underground Daily provide platforms to deliver services enabling new talent. 

    Collectively these individuals and organisations comprise the new media landscape.  Legacy media no longer controls the medium. It is the independents that create the message because content is king and they produce it. Time will tell, and the market will decide, if these new players can develop revenue streams beyond advertising to sustain themselves. 

    But one thing is certain: the media landscape belongs to them and its future is theirs to determine.

    Free Markets Work Better for Energy

    By
    Nicholas Samios
    -
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    Energy is again front and centre in the news with the debate over the merits of nuclear energy becoming mainstream. But then last week the Prime Minister announced a new scheme to subsidise the manufacture of solar panels in Australia. One wonders whether this is to support industry or just to close down a debating point against solar – that only 1% of the hardware used in Australia is manufactured locally. 

    The push by governments worldwide to subsidise solar energy, under the banner of sustainable development and carbon neutrality, seems forlorn.  

    The truth is that free markets are more effective at capital allocation and problem solving than governments (assuming you accept there is a problem that needs solving). Free markets operate on profit incentives, driving businesses and individuals to invest resources where they are most efficiently used and valued, leading to innovation and optimal distribution of goods and services.

    The DeGrussa solar and battery project in Western Australia epitomises the sheer lack of commercial savvy possessed by government.

    Australia’s existing solar energy subsidies are an obvious illustration of the misaligned priorities and inefficiencies that can arise from government intervention. The Albanese government’s commitment to injecting $1 billion into domestic solar panel manufacturing, including in coal-rich areas like the Hunter Valley, is a classic example of the triumph of hope over experience.  

    Australia’s history is littered with government involvement in business sectors that wasted tax payer money through inefficiencies.   The proof of free market superiority was demonstrated when entities like the Commonwealth Bank of Australia was privatised (under Paul Keating), as was Telstra (under John Howard), and Qantas Airways (under Bob Hawke). Each became far more efficient and successful post-privatisation. 

    A particularly significant example is the case of Commonwealth Serum Laboratories, privatised under Paul Keating. Originally government-owned, CSL was started in 1916 to “serve the health needs of a country isolated by war”.  Fair enough perhaps.  

    The push by governments worldwide to subsidise solar energy, under the banner of sustainable development and carbon neutrality, seems forlorn. 

    CSL was privatised in 1994 and has since been transformed into a global biotechnology powerhouse. Post-privatisation, CSL significantly increased its operational efficiency, innovation capacity, and market reach, becoming a leading provider of vaccines and plasma products worldwide. CSL’s journey from a national vaccine manufacturer to a global biotech leader underscores the difference between how governments lose and free markets win.

    Albanese ought to learn lessons from Keating and Hawke on the superiority of private capital at solving public problems (banking, telecoms and aviation). Is energy so different?  And what does the Albanese government think it is going to achieve anyway with this $1bn investment?  How will Australian ventures compete with global giants, especially Chinese manufacturers which benefit from (ironically) cheaper electricity, lower labour costs, and economies of scale?

    The DeGrussa solar and battery project in Western Australia epitomises the sheer lack of commercial savvy possessed by government.   Funded in part (and thus enabled) by federal taxpayers, it is now being dismantled after just seven years, highlighting the precarious financial underpinnings of these subsidised solar ventures. This project, once a beacon for renewable energy in remote mining operations, became a financial quagmire, with the cost per tonne of avoided greenhouse gas exceeding market rates for carbon credits.  

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    The DeGrussa project serves as a cautionary tale.  There is a broader trend of hasty government interventions in the solar energy sector, driven by politics motives rather than economics. 

    While the drive towards renewable energy may be commendable (let’s buy into that for the sake of argument), the path to achieving it must be paved with prudent financial decisions and strategic planning – best executed by the free market. 

    None of your Business

    By
    Max Payne
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    1

    Housing affordability is a perennial issue that seems to be spilling over into the political domain in a way that is more divisive and acute than ever. And as usual, the political class is more interested in sounding like they are engaging with the issue than actually addressing it.

    Oddly enough it is the left side of politics that has shown the most interest in the critical supply side of the equation. The Liberals on the other hand appear poised to double down on demand-side solutions by rehashing their ‘super for homes’ policy – as if there wasn’t already enough money flowing into property! Meanwhile everyone else on the right merely points to immigration.  

    There is no question that the heart of this issue is the fact that there is not enough housing being built to keep supply in step with demand – I previously hypothesised that more atomised living arrangements could be at least partly to blame, Bob Day suggested land supply was responsible.

    Politicians never talk about the amount of misallocated capital which has resulted from government intervention.

    There are other problems too – government intervention during Covid brought forward demand and deferred builder collapses, aggravated by inflation of material and labour costs. The affordability of borrowing to buy a house has also tightened – with mortgage repayments rising significantly due to interest rate hikes. 

    There has also been a long history of demand-side grants, subsidies, policies and exemptions that have aimed to increase affordability while also maintaining high prices. That’s before we even talk about how much state and local governments rely on higher house prices, particularly via stamp duty and council rates.  

    But there is something more fundamental at the heart of the property market – the extent to which government intervention directs investment away from more productive investment involving genuine innovation. Australia is anti-business, and Labor’s changes to stage 3 tax cuts indicate the punitive attitude government takes towards higher income earners. 

    Politicians never talk about the amount of misallocated capital which has resulted from government intervention. People respond to incentives – and there is very little incentive to invest in innovation and business, but plenty to invest in property – notwithstanding the current constraints.

    The affordability of borrowing to buy a house has also tightened – with mortgage repayments rising significantly due to interest rate hikes. 

    Would you start a small business and deal with endless red or green tape, the highest nominal minimum wage in the world, the above median corporate tax rate, and spiralling energy costs? 

    Given the government’s policy settings you’d be more likely to buy an investment property, write off the interest payments against your taxable income, and claim a capital gains discount if you decide to flip it or sell up later. Perhaps you’d even build a property portfolio by leveraging equity along the way. 

    You’d benefit from the legislative protection of inflated prices that has resulted from real estate becoming such a large pool of private wealth and key source of state and local government revenue. You’d bank on local council opposition to new development, and large public infrastructure projects tying up resources to halt new housing supply coming to market amidst ever growing demand. 

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    Australian property has become such a safe bet that it is now even a well-known vehicle for international money-laundering! 

    Talk of new housing supply, development, upzoning or adjusting the rules around capital gains tax and negative gearing won’t change the fundamentals. Australia is anti-business and anti-innovation. Housing is the only way to get ahead in the lucky country.

    The Everyday Libertarian

    By
    Nicholas Samios
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    0

    In today’s politically charged atmosphere, evangelical libertarians often stray into polarising debates around topics like firearms or drug legalisation. Is there a subtler, more effective approach?  

    I suggest the “everyday libertarian mindset”. It involves reframing common complaints and concerns through the lens of smaller government and individual liberty.

    I often hear myself responding to complaints about government by saying “that’s why we need guns”.  When I say this, libertarians “get it”.  But this phrase causes our “normie” friends to switch off.

    Smaller government policies can foster the development of diverse and innovative energy sources, including nuclear power

    How about a more congenial conversational pivot:  “That’s why we need smaller government.”

    Picture this: A friend laments Australia’s low productivity. Instead of delving into a heated debate about employment policies, you respond calmly, “That’s why we need smaller government.” This simple phrase opens the door to a discussion about the role of government in the economy and the importance of prioritising individual liberties over interventionist agendas.

    Here are some instances where the everyday libertarian mindset shines:

    1. Healthcare costs: Rather than blaming the system for rising healthcare costs, discuss how government regulations inflate prices and limit choice in the healthcare market. Advocating for smaller government and increased competition can give individuals greater control over their healthcare decisions and costs. Would there be a shortage of doctors, hospitals, and other services if the government got out of the way? 

    2. Education quality: When concerns arise about education quality, highlight how government monopolies limit choice and innovation in education. By advocating for school choice and decentralising control over education, parents and students can access a wider range of educational opportunities tailored to their needs.

    3. Bureaucratic red tape: Encountering bureaucratic red tape or inefficiency? Emphasise the need for smaller government and streamlined regulations. By reducing the size and scope of government, individuals and businesses can navigate processes more efficiently.

    4. Personal freedoms: Discuss personal freedoms and civil liberties, emphasising the importance of limiting government power to protect individual rights. Smaller government leads to less intrusion into citizens’ lives and greater respect for individual autonomy.

    Rather than blaming the system for rising healthcare costs, discuss how government regulations inflate prices and limit choice in the healthcare market

    5. Publicly funded broadcasters: When discussing the publicly funded government broadcasters, such as the ABC and SBS in Australia, consider the implications of government involvement in media. Point out that taxpayer-funded media outlets compete with the private sector, which do not cost taxpayers anything. By advocating for smaller government and media independence, individuals can support a diverse and free press that serves the interests of the public rather than political agendas. Encourage exploring alternative funding models, such as private sponsorship or subscriber-based models, to ensure journalistic integrity and freedom of expression.

    6. Nuclear energy: Discuss the lifting of the ban on nuclear energy in Australia. Smaller government policies can foster the development of diverse and innovative energy sources, including nuclear power. Advocate for a free-market approach to energy production, where individuals and businesses have the freedom to pursue cleaner and more efficient energy solutions without burdensome government regulations hindering progress.

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    I find the phrase “that’s why we need smaller government” easy to apply to almost any situation.  Any mistake a government makes – “that’s why we need smaller government – less for these people to stuff up”.

    By incorporating these instances, we illustrate how the everyday libertarian mindset can be applied to a wide range of issues, promoting smaller government and individual liberty in everyday conversations. It’s about sparking thoughtful discussions and planting seeds of libertarian principles in the minds of others, one conversation at a time.

    The Missing Ingredient – Assimilation

    By
    David Leyonhjelm
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    When Al Grassby was Immigration Minister in the Whitlam government in the early 1970s, he announced that multiculturalism was to be Australia’s future policy. Assimilation was over. 

    There was a time when Australia actively promoted assimilation. It was the late nineteenth and early twentieth centuries  and applied to Aborigines, varied by state and location, involved the removal of vulnerable children from families, included an obligation to learn English, discouraged speaking local languages, and prohibited certain customary practices – particularly those involving violence. 

    But Grassby was not referring here to Aborigines or to policies from the distant past. Nor was it a reference to the White Australia policy, which the Whitlam government had officially ended. His comment was about new immigrants and implied that they had been subject to a policy of assimilation. 

    In the generally accepted meaning of the word, this was complete nonsense. What Australia had was a policy of promoting integration. And, as history shows, it had been remarkably successful. 

    The point is, values matter. Australia does not need multiculturalism.

    Mostly European and British, Australia’s post-war immigrants were referred to as “New Australians”. Although encouraged to learn English, they were never asked to disown their origins. There were free English classes for adults, and parents were required to send their children to school, like everyone else, where lessons were conducted in English. The kids often became interpreters for their parents. 

    Most immigrants became Australian citizens relatively quickly, the only negative being they had to renounce the citizenship of their original country; Australia did not permit dual citizenship until 2000. 

    If the immigrants themselves had mixed feelings, the second or third generations saw themselves as Australians first and their country of origin second. Immigrants married other immigrants, their children married other immigrant children, and many went on to be highly successful. 

    The Whitlam government also began to admit significant numbers of people from Asia, initially Vietnam and Cambodia. And while there were pockets of resistance to this, with Whitlam himself wary of accepting anti-communist Vietnamese refugees, these also integrated well. Later waves from places such as Sri Lanka, Mauritius, Hong Kong, Malaysia and India were equally successful. 

    But then something changed. Certain immigrants began to form enclaves and avoid contact with other Australians They also made minimal effort to learn English. The men often went back to their country of origin to find a wife, even if they were born in Australia, refusing to contemplate finding one locally. 

    Most importantly, they became contemptuous of Australian culture and values while demanding respect for their own. This was not about football, music or food, but core aspects of liberal democracy: equality before the law, presumption of innocence, respect, democracy, free speech, economic opportunity, and tolerance. This was accompanied by a major upsurge in violent crime and welfare fraud. 

    While it obviously reflects a failure to integrate, this is nonetheless multiculturalism. The culture of these people is maintained in parallel with Australia’s traditional culture. 

    If the immigrants themselves had mixed feelings, the second or third generations saw themselves as Australians first and their country of origin second.

    After several decades of this, Australia’s laidback ‘live and let live’ culture is now under serious challenge. 

    In a number of countries in Europe, the same issue has arisen. Several are now abandoning multiculturalism in favour of active integration. Perhaps it could even be called assimilation. 

    The Netherlands, for example, now requires most immigrants (including asylum seekers) to undertake a “civic integration” examination within three years of arrival. The examination tests knowledge of the Dutch language and society, and a pass is required to obtain permanent residence and citizenship. Certain classes of prospective immigrants must also pass a test even before they first enter the country. The pass mark is being steadily raised. 

    It is obvious that Al Grassby’s policy is no longer appropriate, if it ever was. Liberal democratic values are jeopardised when authoritarian, doctrinaire or anti-liberal cultures are given equal standing. The presumption of innocence took a major hit in the Higgins case, for example; equality before the law came under threat with the Voice referendum; freedom of speech faces yet more limits with the Government’s Misinformation and Disinformation bill; and economic opportunity is being squeezed by excessive taxation and red tape. Meanwhile, tolerance is challenged by cancel culture and antisemitism.

    None of these is directly attributable to a failure of immigrants to integrate, but they indicate a lack of national commitment. If traditional values are not defended, alternative values will inevitably gain a foothold. 

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    There are multiple ways to rectify this problem. Australia already has an integration test for citizenship, for example, but it could be made more like that of the Dutch. There are many sources of potential immigrants, so we could select those most likely to integrate (most of those refusing to integrate come from the Middle East). And we could also make it abundantly clear to prospective immigrants that they are expected to adapt to Australian culture, not vice versa.  

    The point is, values matter. Australia does not need multiculturalism.

    Forum Shopping for Native Title rights

    By
    Gary Johns
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    0

    The Rolling Stones were wrong: you can always get what you want if you are patient and the taxpayer foots the bill.  And if you forum shop. 

    So it was with a recent native title ‘victory’ at the High Court of Australia. The Court overturned a decision of the full court of the Federal Court of Australia.

    Native title holders at the Macarthur River in the Northern Territory wanted a say over a new tailings dam associated with the mining and transhipment of zinc-lead-silver ore. Fair enough. The McArthur River Project ore concentrate must travel 120 kilometres by road to the “Bing Bong” loading facility located on the Gulf of Carpentaria. It is loaded onto a bulk-carrier vessel for transhipment to larger ocean-going ships. 

    This part of the Gulf is shallow, and the bulk carrier must use a navigation channel, which needs to be maintained by regular dredging. The resulting dredged sediment is pumped onshore to a Dredge Spoil Emplacement Area, which has been filling up. In 2013, Mt Isa Mines applied for a new mineral lease under the Mineral Titles Act 2010 (NT) to construct a new area on a pastoral lease near the Bing Bong loading facility.

    This is the real agenda: further elaboration of rights and expanding power to extract more rent from mining. 

    The Northern Land Council sought to prevent the issue of the minerals lease and a declaration that the proposed grant of the lease was invalid because the procedures under their preferred section of the Native Title Act had not been followed.

    The High Court ordered that the Northern Territory Minister be restrained from deciding the application for the future act until the completion of the procedures under the Native Title Act. The High Court had to decide whether, besides freeholder rights, the native title claimants had a right to object under native title. It seems they did. 

    Imagine fighting all the way to the High Court of Australia: first the Federal Court, then appealing to a full bench of the Federal Court, and then to the High Court. The time and cost to Australian taxpayers are enormous. And for what?

    The victory was that the High Court resolved differing interpretations of the meaning of the phrase “right to mine for the sole purpose of the construction of an infrastructure facility… associated with mining” in the context of the 633-page Native Title Act 1993 (Cth).

    The key was whether native title holders had access to one ‘notification, objection and consultation procedure’ under the Native Title Act, or to another procedure under the same Act. It was either the same procedural rights as the holders of ‘ordinary title’ land or additional procedural rights to object to the future act and have those objections heard by an ‘independent person’. 

    If that wasn’t sufficiently indulgent, the applicants were entitled to processes under the Mineral Titles Act 2010 (NT), a right to negotiate procedure, and a right to be heard at the Northern Territory Civil and Administrative Tribunal, or have an Indigenous Land Use Agreement. Indeed, an ILUA was commenced in 2021 before the appeal to the full court of the Federal Court.

    You can always get what you want if you are patient and the taxpayer foots the bill.

    The decision by the High Court relates to one set of facts about what constitutes a mining operation. This may or may not provide a guide to any other disputes between native title holders and miners. At the outset there were six families involved in discussions on the mine. Three families were not directly affected but have now been drawn into the ILUA. The context is important; there are no other major economic bases in the region; the mine and associated works are it. Twenty three per cent of the workforce are Aboriginal.

    This matter started in 2013. The mine and its associated infrastructure began in 1992. The original applicant for the objection died before the courts resolved the matter. For whom is this a victory? 

    The Northern Land Council hoped this decision would prompt the mining company to ‘engage proactively and in good faith with the native title holders, through their … legal representatives, to obtain free, prior and informed consent before further disturbing their native title.’ There is no evidence it did not, but it probably spoke to the native title holders in preference to the NLC and its lawyers. 

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    The term ‘free, prior and informed’ is taken from the UN Declaration on the Rights of Indigenous Peoples. This is the real agenda: further elaboration of rights and expanding power to extract more rent from mining. If Aborigines keep playing this rent-seeker game, they will never escape poverty, and the culture that holds them in a state of dependence on public servants and land councils will remain.

    Gary Johns is chair of Close the Gap Research

    The New UAE Corporate Tax

    By
    Damon Hayhow
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    The United Arab Emirates (UAE) is famous for, among other things, zero tax. That ended this year. The UAE now has a 9% tax rate for all but a very few exempted industries.

    The implementation of a corporate tax is not because the UAE needs the money to build new roads, hospitals, schools or public facilities. The UAE is home to some of the most extraordinarily modern, effective and high-quality public utilities and infrastructure in the world. None of it required tax revenues. Nor was it all paid for with money from oil revenues.

    Similarly, the UAE is not implementing a tax regime to fund public services such as policing, rubbish collection, healthcare or education. Again, the UAE embarrasses high-tax countries when it comes to public safety, maintenance of public spaces, healthcare and education. People in the UAE cannot even conceive of being robbed, let alone mugged; or even seeing a homeless drug addict. The unparalleled safety and cleanliness of the UAE has not required tax revenues; nor was it all funded by oil revenues.

    The UAE has massive, diverse, revenue generating investments within itself, and throughout the world.

    The UAE is also not implementing a tax regime to fund a social welfare program. 89% of the UAE’s 9 million residents are expatriates. They must support their residency through work sponsorship or business profits, or else they have to leave. Technically, there is limited assistance available to the 11% minority of native emirate citizens. In reality, there is an unspoken positive discrimination applied to emirate citizens for various job positions. So taxes are not needed for welfare.

    The UAE is also not implementing a corporate tax to cover a ballooning government bureaucracy and out-of-control public indebtedness, like that seen throughout the “developed” Western nations, such as Australia. The UAE has massive, diverse, revenue generating investments within itself, and throughout the world.

    The idea that Governments need an instrument as crude as tax to monetise a national economy is as archaic as it is absurd. We live in a world in which some of the largest and most successful companies lose money on their core business in order to drive greater profits from tangential sources. Airlines, for example, knowingly lose money from the business of flying planes, because greater profits come from the financialisation of their frequent flyer programs. Google and Facebook also stand out as companies whose revenues exceed the GDP of entire countries despite their ‘core products’ being ostensibly given away for “free”.

    The UAE has attracted literally trillions of dollars of foreign investment, hundreds of thousands of companies, millions of residents, tens-of-millions of visitors each year, and built some of the most incredible cities on earth in scarcely a few decades; primarily, arguably, as a result of eschewing taxation. So why would the UAE change direction after achieving such success following a far more sophisticated business model?

    UAE is home to some of the most extraordinarily modern, effective and high-quality public utilities and infrastructure in the world.

    The reason the UAE is sacrificing the zero-tax brand it worked so hard to build, is due to political pressure from socialist, globalist, kleptocratic politicians in high-tax, western nations. That is, the same politicians responsible for the terminal decline and humiliation of the West – the exponentially increasing debt, monetary debasement, deindustrialisation, illegal migration, growing homelessness, increasing crime, energy shortages, insane ‘woke’ politics, military weakness, civil unrest etc etc etc – are demanding that other nations, like the UAE, follow their lead.

    Unfortunately, the last time the UAE ignored the bullying of Western politicians they were placed on a so-called international ‘grey list’ by the Financial Action Task Force (FTAF) for not doing “enough” to “fight money laundering”. Compared to the money laundering taking place in the US, the volume going through the UAE is a pittance. But the issue was never about money laundering; it was demonstrating fealty to the Western political cabal. The ‘grey-listing’ was to embarrass the UAE rulers. The practical effect was simply to increase the paperwork burden placed on UAE banks moving money to and from overseas. That burden has made routine banking more difficult and expensive for legitimate SMEs, while having virtually no impact on companies and individuals transacting large sums. 

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    So the embarrassingly incompetent boobs overseeing the decline of the world’s richest countries have finally forced the UAE to start penalising businesses for being successful. The question now is: what is the likely impact going to be? 

    In 2018, the UAE was similarly pressured into implementing a goods and services tax (VAT) that included precious metals. The new 5% tax caused a 75% reduction in precious metal trade. Just 6 months later the Government exempted precious metals from the tax, restoring trade to previous levels.

    So it will be very interesting to see what comes of the new UAE tax.

    The Misguided Quest for “Fair Share”

    By
    Nicholas Samios
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    0

    “Grab your torch and pitch-fork” was the rallying cry of the left in the recent debate over stage three tax cuts.  And so the mob was led to follow a trail of sprinkled money to the door of high income earners to rob them of tax relief. 

    In the debate over Australia’s tax system, the concept of “fair share” has been wielded like a moral cudgel. Advocates argue high-income earners should pay more under the guise of affordability. Yet when we examine the impact of progressive taxation, especially through the lens of real-life financial pressures, the narrative of fairness starts to show cracks. 

    Taxpayers deserve a system that not only is fair but also reflects a government that is accountable for its financial decisions. 

    Consider someone earning $200,000 annually. Contrary to the image of affluence often portrayed, they face substantial financial obligations: mortgages, rising living costs, and family expenses. Despite these challenges, they’re taxed at a rate significantly higher than those earning $70,000.

    Under the new “Stage 3” regime, the person on $200,000 pays $55,000, which is $45,000 more than the person on $70,000 who pays $10,000. That is, more than five times as much in absolute dollars. Fairness isn’t just about percentages; it’s about the impact on individuals’ lives. The dialogue around tax rates frequently ignores these actual dollars paid, masking the true disparity. (See graph).

    Furthermore, this focus on rates overlooks a critical issue: bracket creep. As wages increase over time, individuals are pushed into higher tax brackets without a corresponding real increase in their purchasing power. This is an insidious form of taxation that exacerbates the burden on middle and higher-income earners, eroding the principle of fairness the system claims to uphold. 

    Moreover, the strategy of progressive taxation, while politically popular, overlooks the broader economic implications. High tax rates for top earners disincentivize the innovation and investment that drive economic growth. It is a short-sighted approach that prioritizes immediate political gain over long-term prosperity. 

    As wages increase over time, individuals are pushed into higher tax brackets without a corresponding real increase in their purchasing power.

    But the conversation about fairness must also challenge the government’s role in fiscal management. Instead of relying on tax increases, especially through bracket creep, as a default solution for budget shortfalls, there’s a pressing need for government to exercise fiscal restraint. This involves cutting wasteful spending, prioritizing essential services, and treating taxpayers’ money with the respect it deserves. Taxpayers deserve a system that not only is fair but also reflects a government that is accountable for its financial decisions. 

    A fair tax system would mitigate the effects of bracket creep, ensuring that individuals are not penalised for nominal increases in income that don’t reflect real gains in wealth. Alternatives such as a flat tax could offer more equitable solutions, ensuring everyone pays their share in a manner that encourages economic growth and innovation. 

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    In advocating for a truly “fair share” we must demand comprehensive tax reform that addresses not only the rate of taxation but also the underlying issues of bracket creep and fiscal responsibility. The aim should be a system that encourages prosperity, treats every taxpayer with fairness, and holds the government accountable for the stewardship of public funds. The quest for fairness in taxation is not just about adjusting rates; it’s about crafting policies that encourage a vibrant economy, respect individual contributions, and ensure the government treats taxpayer money with the care it warrants.

    The Nation State

    By
    James Hol
    -
    0

    As another Australia Day passes, it gives us the opportunity to reflect on our national identity and what it truly means to be Australian with the number purporting to opt out of celebrating our national day increasing.

    CHANGE THE DATE

    26 January 1788 marks the landing of the First Fleet and raising of the Union Jack in Sydney Harbour. While it is true it has only been granted public-holiday status since 1994, the term “Australia Day” has been used to celebrate 26 January in all states and territories since 1935. In New South Wales, 26 January celebrations date back to 1808.

    While changing the date may sound like a way of keeping more people happy, in fact complaints about the date are nothing more than a facade for the true anti-Australian and anti-Western motivations behind the movement.

    History is replete with actions that we would find abhorrent in modern society – and some of the actions of Australia’s first settlers are no exception. Regardless of what new date we may find, the grievance industry would have absolutely no hesitation finding some historical injustice on that new date to complain about. Which is precisely the point.

    Australia has now become the global roadmap for Western tyranny.

    The true intention behind those campaigning to “change the date” is to abolish Australia Day in its entirety. In fact, these grievance professionals do not believe Australia, or its culture, is worth celebrating. They are the Australian subsidiary of the global grievance industry’s efforts to prevent the celebration of any aspect of Western culture, despite it being responsible for the most free and equitable societies in human history.

    A BROKEN CLOCK

    But what if they’re right? What if these grievance professionals have stumbled onto something, inadvertently of course? The irony is that Australia is the wet dream of the very authoritarians who attempt to suppress the celebration of any of its achievements.

    Contrary to the popular narrative of the laid-back Aussie, we are an incredibly orderly and compliant bunch. If Shakespeare was right and all the world is indeed a stage, Australia is the usher, dutifully ensuring the audience is seated correctly and quickly shushing those who dare exceed the permitted level of fun.

    And what do we have to be proud of? Let’s look to modern times. Having the world’s longest and harshest lockdowns? Excessive levels of taxation? Forced participation in the political system? A disarmed populace?

    “But we were once a great nation” all the boomers will cry! Perhaps we were; I was not alive to see, but I suspect that is nothing more than a nice comfort to cling to.

    THE LUCKY COUNTRY

    Our history suggests we were always orderly and compliant, inheriting our love for order from Mother Britian and never seeking independence from her. Like an overly dependent child and a helicopter mother: the mother fearful of the harms that freedom may entail, and the child comforted by a familiar dependence.

    The true intention behind those campaigning to “change the date” is to abolish Australia Day in its entirety.

    Australian liberty is no better summarised than by our closest encounter with homegrown rebellion: the Eureaka Stockade. It lasted a grand total of 15 minutes before the rebels were overrun by security forces.

    While the founding documents of the rebel miners proclaims that “taxation without representation is tyranny”, echoing the language of the United States Declaration of Independence, the Eureka flag now hangs in the offices of tyrants across the country.

    The symbol of our failed rebellion is captured by the tax collectors and tyrants it once opposed. All to the rapturous applause and adulation of the captive populace.

    GOLDEN SOIL

    Australia has now become the global roadmap for Western tyranny. American gun-grabbers point to “the Australian model” to disarm their populace. Global health bureaucrats gushed over “the Australian approach” to Covid tyranny. Regulators worldwide were inspired by Australia’s plain-package cigarettes and sky-high tobacco excise.

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    While the Australian economy was once described as “a farm on top of a mine”, it should now be updated to “an unrelenting bureaucracy on top of a mine”. By revenue, state government administration is now the biggest industry in Australia. And tyranny is our biggest export.
    And even though I celebrated Australia Day the most Aussie way I know how, in front of a barbeque, with a beer in hand and the cricket on TV, as the state-mandated bedtime approached, I couldn’t help but wonder: am I truly proud to be Australian?

    What should the Australian Defence Force do?

    By
    Duncan Spender
    -
    0

    Hint: the answer is in the name

    The Australian Defence Force (ADF) does lots of things it shouldn’t.

    Restrict the trading of others

    The Australian Defence Force (ADF) helps to enforce sanctions.  

    It contributes in varying degrees to efforts to enforce sanctions endorsed by the United Nations Security Council, like sanctions against North Korea, Afghanistan, Iran, Iraq, Syria, and various countries in Africa, as well as other sanctions like those against Russia, Myanmar, and Zimbabwe.

    Sanctions impede and redirect, rather than stop, trade involving the targeted countries.  They rarely bring about regime or policy change in the targeted country, and any impact in this regard is more often negative than positive.  Sanctions amount to a diplomat’s response to a call to ‘do something’ without the commitment of ground troops.

    Deterring and countering restrictions on our own trade

    Some say the ADF can and should defend Australian trade by ensuring the ADF can project power including through a long-range navy.

    This is wrong.

    The likelihood of any attempts to stop Australia’s trade is low, the likelihood of success of any such attempts is low, the impact of a successful attempt to stop Australia’s trade would be far from catastrophic, and the ADF can do little to deter or counter any of this anyway.

    Firstly, consider the likelihood of attempts to stop Australian trade.  Here are some scenarios, from less to more likely.

    • The United Nations Security Council agreeing to impose sanctions on Australia in an attempt to stop Australian trade.
    • An assortment of powerful countries defying the Security Council and attempting to stop Australian trade themselves.
    • One country, such as China, unilaterally attempting to stop Australian trade, including through war.
    • Pirates attempting to stop Australian trade.

    Each scenario is unlikely, except perhaps the risk of piracy, for which traders can arrange their own security.

    The federal government should not have supported this illiberal state policy

    Secondly, consider the likelihood of success of any attempts to stop Australian trade. As we see with current sanction efforts, and even at the height of the last world war, even the most sophisticated campaigns against a country’s trade tend to impede and redirect trade, rather than stop it.

    Thirdly, consider the impact of a successful attempt to stop Australian trade. Despite popular impressions that Australia is heavily trade dependent, Australia has a below-average reliance on trade.  We are more self-sufficient than you think.  So a successful blockade of Australia would cause some hardship, but any claims beyond this are hyperbolic.

    Finally, even in the unlikely event of a successful trade blockade against Australia, what would be the optimal ADF response?

    Nothing.  

    The point is, the cost of having a military powerful enough to counter such a blockade would be greater than the cost of living self-sufficiently.

    The ADF as foreign aid

    The ADF is building infrastructure in PNG, Vanuatu, Fiji and the Solomons, doing maritime surveillance to defend the fisheries of various Pacific Islands, and training military and police forces in various Pacific countries. 

    Such action may fail to deliver political stability and prosperity to the Pacific, and may fail to deter the establishment of Chinese military bases in the Pacific.  Moreover, Australians suffer little from instability and poverty in the Pacific, and Chinese military bases in the Pacific would do little to increase the risk of, or damage from, Chinese aggression to Australia.  

    The ADF’s actions in the Pacific are essentially foreign aid, the funding of which should not be forced on all taxpayers.

    Despite popular impressions that Australia is heavily trade dependent, Australia has a below-average reliance on trade.

    Other overseas operations

    The operations of the ADF beyond the Pacific are unwarranted too.

    The ADF is training Ukrainians to fight Russia and remains in a fight against ISIS in Iraq and Syria, with a current focus on training Iraqi forces. The ADF dons blue berets to police the borders of Israel and the Koreas and to provide security in South Sudan, having recently provided security in Mali.

    These are not our fights. Interested Australians should be free to engage in these conflicts if they so choose, without roping the Australian taxpayer in. The ADF’s engagement in these fights does not represent cost-effective training for defending Australian soil, which is best done through defensive exercises in Australian conditions.  And while ADF personnel are overseas, they are not defending Australia.  

    Enforcing obedience to state law

    During the Covid lockdowns, the ADF was used in support of state police to prevent travel beyond legally permitted limits and to keep state borders closed. 

    The federal government should not have supported this illiberal state policy, and the military should not have been tasked with law enforcement.  In liberal democracies, we train and regulate our military primarily for the exertion of force on enemies, and our police primarily for the service and protection of citizens.

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    Disaster relief

    The ADF is increasingly being used for humanitarian assistance following floods and bushfires. This is not its role; indeed, such activities are a serious distraction from its primary role of the defence of Australia. 

    State governments should bolster the ranks of volunteer organisations to provide humanitarian assistance.

    Don’t Pay the Pied Piper

    By
    James Hol
    -
    2

    More than anything, government is incompetent. It is staffed by people who, by and large, have been or would be unsuccessful in the private sector – whether the receptionist at your local motor registration office or the Prime Minister of Australia.

    Ultimately, we are aware of this. However, thanks in part to television programs such as The West Wing and House of Cards, we simultaneously believe the government is comprised of savant-level masters of psychoanalysis and manipulation.

    THE MARKETPLACE OF GOVERNMENT

    Perhaps one of the biggest tactical failings of libertarians and anarchists is the tendency to view the government as one cohesive and comprehensive entity. While it is true that most Western governments are behemoths, they are not homogenous. Rather, they are comprised of a number of disparate departments competing for their slice of tax revenue. 

    Good leaders should be able to admit their faults and avoid acting on emotion

    Both libertarians and authoritarians like to think that government departments work in tandem, sharing relevant information and working together to overcome an obstacle or bring down the ‘bad guy’.

    While they do undoubtedly work together at times, we should all be very hesitant to assume that is typical. Often, it is in the interests of the self-serving bureaucrats who lead various government departments to work against other departments. 

    What is better for the Department of Foreign Affairs and Trade (DFAT) than to prove the incompetence of the Department of Home Affairs? If you were a self-serving bureaucrat at DFAT, you could leverage that to demand more scope, which means more funding, a bigger empire, and perhaps more money in your pocket.

    INCOMPETENCE BEFORE CONSPIRACY

    Whenever we are presented with government inconsistencies, we should always consider incompetence before conspiracy. That is not to say that government conspiracies do not exist, but the level of expertise required to pull off many of the conspiracies posited is something that is simply not possible for the incompetent people who have comprised our governments for many decades.

    When attempting to determine the likelihood of a conspiracy theory being true, it is always worth examining:

    1. The number of co-conspirators required.
    2. The profit or benefit for the conspirators.
    3. The use of unfalsifiable statements and arguments.
    4. The deliberate misinterpretation of events.
    5. The excessive use of baseless arguments.
    6. The number of assumptions required.
    7. The false messiah.

    It is true that most Western governments are behemoths, they are not homogenous. 

    THERE BUT FOR THE GRACE OF GOD GO I 

    Even when we look at recent Covid tyranny, the most likely culprit is old-fashioned pride. While homegrown tyrants like Dan Andrews and Mark McGowan do not deserve to ride off into the sunset of retirement without facing the accountability of the people, that does not mean they were motivated by a global conspiracy to imprison their own constituents and usher in a social-credit-style system at the behest of the World Economic Forum (WEF). Occam’s razor dictates that their real fault was the inability to detach their own pride and ego from the policy they prescribed. We all find it difficult to reverse our instinctive position and admit that we were wrong. 

    This does not excuse tyranny; good leaders should be able to admit their faults and avoid acting on emotion, but it is important we recognise the banal origins of tyrannical behaviour. We are all capable of extreme tyranny.

    THE RABBIT HOLE

    All this is to say that there are some conspiracy theories out there that are ridiculous, yet refuse to die. Flat earth, reptilians, QAnon and fake moon landings are just a few that immediately come to mind. These theories are not only completely ridiculous, but dangerous. They serve to ideologically neutralise those who believe them: instead of directing their investigation towards actual, observable corrupt government and corporate institutions, they are too busy chasing shadows, fighting imaginary adversaries and worshiping false messiahs.

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    What have any of these conspiracy theorists actually accomplished? Have they created a thinktank that has shaped public policy? Have they run a successful candidate? Have they meaningfully gained influence and shaped culture? Have they captured a single reptilian? Have they found real evidence demonstrating the earth is flat? Have they proven anything? All they have achieved is increased sales of their “natural remedies” they advertise.

    Julian Assange and Edward Snowden showcased actual government corruption and exposed real conspiracies in their entirety. Meanwhile, when it comes to grifters like Ricardo Bossi or Q, the revelation is always “just around the corner”.

    Challenging narratives and thinking critically isn’t just about calling out corporatist media propaganda and government corruption, but also the grifters within our own movements.

    The Lure of Government Benevolence

    By
    David Leyonhjelm
    -
    3

    Why is it that in many countries, including Australia, governments consistently spend more than they collect in taxes, thus increasing the national debt? 

    Most governments understand that budgets should be balanced. They have seen what happens in countries that accumulate too much debt and cannot service it. And yet, the debt keeps growing. 

    The explanation is rather uncomfortable for many of us. It is, broadly speaking, our own fault. We keep electing governments that reflect our thinking.

    There was a time when we largely provided for ourselves. Prior to 1909, for example, there was no age pension; everyone was expected to save for their retirement, directly or via a mutual society. 

    The reality of socialism is universal poverty, but the illusion of unlimited, universal care remains powerful.

    Similarly, prior to 1910 there was no disability support pension. Privately funded charities and philanthropic organisations provided assistance for the disabled. 

    It was the same with health care; Medibank, the precursor to Medicare, did not exist until 1976. 

    University fees were a private cost until 1974. There were many scholarships on offer but those who failed to obtain one and whose family was unable to pay the fees would often delay or forego tertiary studies. 

    For women returning to work, childcare was typically provided by families, friends and neighbours, or by community organisations such as churches. Government subsidised childcare only began in 2000. 

    Most people would probably be disinclined to wind back the clock. And yet, most people also believe that they already pay too much tax and do not wish to pay more. And therein lies the problem. 

    In the five years in which I was a senator, I wrote hundreds of articles for newspapers and magazines. The subject on which I received the most hostile feedback was the suggestion that eligibility for pensions should take into account all assets, including the family home. It was inequitable, I argued, that the taxes of those who could not even afford to buy a home were funding the pensions of those living in multi-million-dollar houses. 

    I lost count of the number of people who claimed they were entitled to a pension because they had paid taxes during their working life. Many also argued that age pensions were justified because there were parliamentary pensions (although these were abolished in 2004). 

    It made me realise that Australians want to have their cake and to eat it too. That is, they want the government to pay for all sorts of services, but do not associate this with taxes. Money from the government is somehow different.  

    We keep electing governments that reflect our thinking.

    The outcome is that governments implement generous schemes such as the NDIS, age and disability pensions, Medicare, childcare subsidies and HECS, generally to public acclaim, without mentioning where the money is to come from. There are far more votes in spending money than collecting it. 

    This presents a problem for libertarians, who advocate low taxes and small government. How can they persuade Australians that the hugely expensive government-run schemes they consider to be a right are either not necessary or could be replaced by something that is cheaper and more effective, if approached differently. 

    This same problem is now facing Argentina’s new president, Javier Milei. Although Argentinians elected him with his libertarian agenda, he did not receive a majority of votes and his party does not have a majority in parliament. Argentinians, like Australians, have been told for decades that the government will provide. Like most Australians, most are yet to accept that their expectations are unrealistic. 

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    Unless voters can be persuaded that there is no such thing as free government money, and that personal responsibility yields better results at lower cost, there is little chance governments will implement policies based on that. Even in Argentina, which has defaulted on its national debt no less than eight times, the appetite for economic reality is low. Milei will require the wisdom of Solomon to implement his policies. 

    We must hope that he succeeds. The reality of socialism is universal poverty, but the illusion of unlimited, universal care remains powerful. 

    It Takes Two To Tango

    By
    Max Payne
    -
    1
    Jim Chalmers

    Australia’s centrally planned economy is failing – intergenerational wealth gaps are widening, economic prospects are waning, and the side effects from the Reserve Bank’s (RBA) medicine are becoming worse than the disease. 

    Inflation is a scourge, insidiously stealing wealth from those least able to protect themselves, and it benefits the least needy. 

    We hear all sorts of explanations as to why inflation is not the government’s fault: the RBA was too loose with monetary policy, AHPRA failed to regulate bank lending standards effectively; hell, even consumers themselves were blamed by former Governor Phillip Lowe.  

    But Lowe is gone now and the RBA board under Chalmer’s new darling, Michele Bullock, has continued to hike rates with a 25 basis point increase last week. It’s high time the government understood that fighting inflation is going to require some sacrifice of its own. As Dimitri Burshtein explained, more tax doesn’t make for better government; likewise, more government spending doesn’t curb inflation.   

    Dumb and Dumber

    The RBA effectively only has one instrument to fight inflation – and that is to increase the cash rate, the thinking being that if borrowing becomes more expensive then demand will be sapped from the wider economy. Australia is a land of high household debt, and it’s largely mortgage holders who feel the pinch when rates rise.

    Australia desperately needs synergy between the government and RBA on inflation

    What is truly disappointing about the current economic climate is the complete lack of synergy among our central planners – and their approach to the drivers of inflation. The Government seeks to relieve cost of living pressures with subsidies, welfare and spending, while the RBA is slamming the brakes on. We also cannot hope to tame inflation if infrastructure spending remains at record highs and the bureaucracy continues to grow (Georgia shows what must be done).      

    Where credit is due

    The ‘lender class’ are older Australians who have paid off their homes and are now seeking better returns on their investments – a higher cash rate delivers them higher returns (albeit reduced in real terms by inflation). Meanwhile, mortgage holders only see their costs rise as rates climb, squeezing their already tightening budgets. Downstream from this, renters are slugged as their landlords pass on higher mortgage repayments amidst low rental stock.  

    The ‘lendee class’ is getting smashed on two fronts – inflation on the cost of goods and services, while the RBA’s rate hikes squeeze them even more. 

    There has to be a better way.

    Government to the rescue

    The Federal Government needs to take three key steps to reduce the impact of inflation on the ‘lendee class’.  

    • Reduce or remove excise tax on fuel, alcohol and tobacco   

    Measures that decrease the cost of items are needed, not inflationary welfare that only continues to drive demand. Fuel excise is particularly important due to its impact on the transportation costs of goods. Meanwhile alcohol and tobacco excise disproportionately affect lower income earners. 

    • Reduce GST, or expand the criteria for exempt items

    The Goods and Services Tax disproportionately affects lower income workers as the tax applies as a flat rate on all eligible items, many of which are essential. This will impact state government revenue but with many household budgets at breaking point, they too will have to learn to live within their means.

    Inflation is a scourge, insidiously stealing wealth from those least able to protect themselves

    • Sensible energy policy

    A thriving economy needs cheap and abundant energy, with energy being a key input across the supply chain, not to mention household budgets. Australia must abandon its 2050 net-zero and 2030 emissions reduction targets. We should welcome investment in coal fired power and natural gas, which we have in abundance. Longer term we must embrace nuclear power. 

    Not only would these policies provide genuine relief for those suffering the most from inflation, but they would actually reduce the costs of production and business, helping the RBA rein in inflation. 

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    Australia desperately needs synergy between the government and RBA on inflation, and the attempts of Chalmers and co to direct public scorn onto the central bank in order to save face are a great shame. If Australian households are expected to do it tough for a while, it’s high time our government accepted the same responsibility. After all, it takes two to tango.  

    Other People’s Money

    By
    Dimitri Burshtein
    -
    1
    Ross Gittins, Sydney Morning Herald economics editor

    Philosophy #1: Living On Other People’s Money Is Unwise

    When reading the news and opinion, I am frequently mindful of the idea of other people’s money and the perceptive words of French economist Frederic Bastiat, who wrote that “The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else.”

    I thought of Bastiat when reading a recent opinion column by Ross Gittins, the Economics Editor of the Sydney Morning Herald.  There really needs to be a better lexigraphy to reflect the differences between the economic writings of Bastiat and Gittins.  After all, we don’t call plumbers aquatic surgeons.

    Philosophy #2: Exploiting Other People’s Money Is Good

    In Gittins’ latest, he again advocates for higher taxes, because “… paying tax is good and, for better government, we should pay more”.  Evidence be damned, that ever more expensive government has delivered ever worse outcomes – from education, to health, to defence.  But for some, it is axiomatic that we must tax other people’s money more. 

    Messrs Gittins and Keating: you are welcome to voluntarily pay higher tax.  But until you do, please don’t demand that others are forcibly required to do so.

    As long as it is other people’s taxes. The funny thing is that those who advocate higher taxes never seem to volunteer to pay higher taxes themselves.  No doubt, the ATO would accept voluntary contributions, but that is not the game.  Higher tax advocates don’t want to pay higher taxes themselves.  They just want other people’s money so that they can “live at the expense of everyone else” as Bastiat predicted.

    Call To Authority

    Gittins starts his case with a call to authority saying that “former top econocrat did something no serving econocrat is allowed to do, and no politician is game to do: he set out the case for us to pay higher, not lower, taxes.”  That former econocrat is Michael Keating (unrelated to Paul Keating) and he delivered his remarks at the Australia Institute’s revenue summit at Parliament House in Canberra.  That’s the Australia Institute that has never found a tax or regulation they did not like.

    Keating and Gittins are reflecting what is known as bureaucrat logic: that increasing input delivers better outcomes.

    Frederic Bastiat. Frugal with other people's money
    Classical liberal economist, Frederic Bastiat. He cautioned frugality with other people’s money.

    Permit some definitions:

    • Inputs are resources going in – such as dollars.
    • Outputs are things that are produced with the inputs – such as patients treated or students graduated.
    • Outcomes are the results – such as healthy citizens and kids who can read.

    But for some, it is axiomatic that taxes must be increased. 

    No Linear Relationship Between Inputs and Outcomes

    Bureaucrats, econocrats and many politicians seem to believe that, despite evidence upon evidence to the contrary, there is a linear relationship between inputs and outcomes.  Increase education spending and you get more literate kids.  Huge increases in Gonski funding delivering worse education outcomes is just a bump in the road.  Even more is required.

    Messrs Gittins and Keating: you are welcome to voluntarily pay higher tax.  But until you do, please don’t demand that others are forcibly required to do so.

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    As American writer Harlan Ellison said: “The two most common elements in the universe are hydrogen and stupidity.”  There seems to be a high concentration of both in Canberra.

    No Laffing Matter

    By
    Bob Day
    -
    3

    An Australian was on holidays in the south of France.

    Strolling along outside his hotel, the Aussie was suddenly attracted by the screams of a young woman kneeling in front of a small child.

    The Aussie knew enough French to determine that the child had swallowed a coin.

    Seizing the little boy by the heels, the Aussie held the boy up and gave him a few good shakes and out popped the coin.

    “Oh, thank you sir, thank you,” cried the woman.

    “You seemed to know just how to get that coin out of him, are you a doctor?”

    “No madam,” replied the man, “I’m with the Australian Tax Office.”

    In my last post, Prison Break, I spoke of rights and responsibilities.

    … when taxation rates are reduced revenues do not fall.

    Regulations that prevent people from working under terms and conditions which suited them, was, I said, an infringement on liberty, freedom and dignity. It violated a person’s right to get a job and their responsibility to provide for their families.

    I will now add a further hazard – it prevents them from paying tax to cover the many services the state provides to that person.

    Rights … responsibilities … and tax. They are all linked.

    Jean-Baptiste Colbert, Finance Minister to King Louis XIV of France, famously declared that “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”

    A modern finance minister might rephrase this as, “The largest possible amount of revenue with the smallest possible amount of economic and political damage.”

    Which brings me to a man called Arthur Laffer.

    I had the privilege of meeting the famous US economist in Parliament House in 2015. Dr Laffer was in Australia on a speaking tour.

    Arthur Laffer is of course most famous for his Laffer Curve.

    It is self-evident that tax revenue would be zero if tax rates are set at 0% (bottom left corner of the graph).

    Revenue would also, of course, be zero if rates were set at 100% (bottom right corner).

    Starting at 0%, as tax rates rise, revenue also rises until at some point on the graph it starts decreasing as it heads towards that 100% point.

    Eminent Australian and UK economist Colin Clark once said economic growth declines if taxation is more than 25 per cent of GDP.

    It’s also been said, “When the taxes of a nation exceed 20% of the people’s income, there is a lack of respect of government. When it exceeds 25%, lawlessness.” 

    In Australia it is close to 30%.

    Take one example of this lawlessness – the cash economy, currently estimated at 15 percent of GDP, one of the largest in the developed world. An underground economy of that magnitude requires the involvement not only of a lot of businesses, but also of millions of consumers.

    As we know, laws only work when people believe in them and clearly, they have no respect for our tax laws.

    It’s also been said, “When the taxes of a nation exceed 20% of the people’s income, there is a lack of respect of government. When it exceeds 25%, lawlessness.” In Australia it is close to 30%.

    Despite what many advocating tax increases would have us believe, the total tax take in Australia is quite high. They say that compared with other developed economies, Australia is a low tax country, and that workers and companies could comfortably pay more. Not so.

    When it comes to taxing incomes, Australia is up there with the Europeans and is way ahead of most of our neighbours in the Asia-Pacific region.

    A paper published by the Adam Smith Institute stated, “If you look at the experience of those who have introduced a single-rate flat tax, and also the tax reforms of the 1980s which took place in Britain and America, reducing tax rates causes revenues to rise.”

    As Arthur Laffer showed, and as has been demonstrated many times, when taxation rates are reduced revenues do not fall. When the Australian company tax rate was cut from 39 to 30 percent, revenues went up, not down. The famous Reagan tax cuts from 70% to 30% in the 1980s produced a $9 billion increase in revenue when a $1 billion shortfall had been forecast.

    When Sweden halved its company tax rate from 60 per cent to 30 per cent, company tax revenue tripled.

    Nobody enjoys paying taxes, but in the 1950s and 1960s relatively low taxation and a comparatively simple set of tax rules meant that most people paid what was due without too much complaint.

    Today, however, the Government and the ATO find themselves locked into a destructive relationship of repression and resistance with ordinary taxpayers.

    Where people can avoid tax by exploiting loopholes, they will do so; where they can’t eg PAYG taxpayers, they become resentful at the unfairness of it all.

    Full House?

    By
    Max Payne
    -
    1

    As Australia grapples with a crisis of housing supply and affordability, the ‘M’ word is rapidly re-entering the lexicon, this time from both the conservatives and progressives. Yet I can’t help but wonder whether and how much Australia’s current levels of migration influences issues such as housing affordability. I believe this is a red herring that has allowed proper scrutiny of resource allocation within Australia to be lazily sidestepped. 

    Everyone – from economists to politicians and everyday Australians – loves simple solutions to complex problems. The so-called ‘housing crisis’ is no different, and this time the primary culprit appears to be immigration. In the midst of skyrocketing costs and severe shortages of materials, new housing construction is far from meeting growing housing demand. 

    Not only do we have an unrealistic image of what type of dwelling or location we need to live in, but both taxes and regulation act as a disincentive to the type of nimbleness that a housing ‘crisis’ demands.

    The affordability of houses and land has long been an economic challenge in Australia and, as Bob Day pointed out, vested interests tend to keep it that way. High house prices are politically popular given many Australians own their homes, but they also form the backbone of state budgets through inflated stamp duty and land taxes. 

    There is another angle here too – Jobs and Skills Australia reported last month that a whopping 36% of occupations in Australia are experiencing a worker shortage. An economic vacuum exists that can only be filled in the short term by migration – yet apparently there is nowhere to house them. 

    Or is there? 

    Let’s take a look at a couple of graphs …

    What this shows is that the most common type of dwellings in Australia have three or four bedrooms, yet the most common household sizes are single or two occupants. There is also a trend towards rates of single and two person households that has slightly accelerated in recent years. Do we have a ‘housing crisis’? Or do we have a ‘misallocation of housing crisis’? 

    It sounded callous and out of touch when ex RBA Governor Phillip Lowe told Australians to rent out an extra room or move in with mum and dad if cost-of-living was beginning to bite. But perhaps he was right. Maybe it’s not a case of Australia lacking the space for migrants, but that we lack the capacity to house each single or two-person household independently in their own dwellings.  An attitude shift might be necessary.  

    This is highlighted by the fact that migrants on the whole – particularly the international students who anti-immigration economists have in their sights – are in fact adapting to the housing crisis much better than existing citizens. Housing researcher Dr Zahra Nasreen found that the majority of Sydney’s shared house accommodation was filled by international students and other migrants, along with young professionals. 

    Along with the drip-feeding of land supply, which artificially inflates prices, the difficulties in construction, the regulatory burden that stifles higher density infill, and the migration program, misallocation is a substantial contributor to our housing shortage. 

    Do we have a ‘housing crisis’? Or do we have a ‘misallocation of housing crisis’? 

    A major reason for this is stamp duty, which is an insidious block on housing mobility – punishing home-owners financially for up-sizing, down-sizing, or moving closer to employment opportunities. If we are to utilise our existing and future housing stock to its fullest capacity, we must abandon this tax. 

    Another reason is that family homes are not taken into account when assessing eligibility for welfare payments such as aged and disability pensions. This creates an incentive to remain in homes that, if sold for something smaller, would create surplus funds and threaten eligibility.

    So far governments around Australia, particularly in Victoria, have simply targeted landlords, holiday home owners, short stay accommodation providers and empty land owners with new taxes and regulations. It is about time we had a serious conversation not only about how to increase our housing supply but how to maximise use our existing stock. 

    Not only do we have an unrealistic image of what type of dwelling or location we need to live in, but both taxes and regulation act as a disincentive to the type of nimbleness that a housing ‘crisis’ demands. Before we as libertarians abandon important principles such as freedom of movement and succumb to the allure of protectionism, we ought to ensure migration really is the problem they say it is.     

    Death, Taxes and … Death Taxes?

    By
    Max Payne
    -
    0

    “We know that there is a growing pot of wealth, sitting in the hands of older Australians that will be passed on in coming decades.”

    Gosh, that sounds juicy. What government could refuse the temptation to take a slice of that pie?  

    However, that sentiment speaks to the fundamental flaw in the approach of our policy makers towards balancing our books – always trying to increase revenue without doing much to cut spending.

    While it would take a brave government to set their sights on inheritance as a potential source of tax revenue, comments from incoming Productivity Commission boss, Danielle Wood, indicate the wrong question is being asked. 

    Structural Budget Pressures

    Treasurer Jim Chalmers, who is arguably among Labor’s more agile and pragmatic front-benchers, has flagged the NDIS and aged care as key budgetary pressures going forward. While high commodity prices are currently keeping the wolves from the door, the rapidly rising cost of Government funded services and a forecast drop in revenue over time has even the typically Keynesian Labor camp concerned. 

    Australian Treasurer, Jim Chalmers. Are death taxes next on the agenda?

    Although Labor has denied plans for an inheritance tax are on the agenda, Danielle Wood’s comments and the wider conversation nationally on debt and deficit are clearly not focussed on fixing the most glaring issue facing the budget – spending. 

    Out of control spending    

    For example, since its inception in 2013, the NDIS has grown astronomically and now accounts for the biggest cost of any social program the Federal Government runs – $30 billion last financial year. Originally designed to help those with genuine disabilities, the NDIS faces many unforeseen challenges. Its expansive criteria means that over 500,000 people now use the NDIS, participants don’t leave the program as quickly as first envisioned, and up to 20% of NDIS payments are estimated to be fraudulent! 

    Aged care is not immune either – one of the key recommendations of the Aged Care Royal Commission was to establish a ‘blank cheque’ style funding model. This would ensure outcomes remained uncompromised by ‘fiscal challenges facing the government of the day’. With attitudes like that, it’s no wonder social programs are growing at such a speed and are open to rorts – the government is being told the cash tap can never be turned off! What message does that send to users or providers? Of course, the first proposed solution to the issue of funding was to slap a levy on taxpayers – in other words, more tax.

    Cutting through 

    Dramatically reducing the size and scope of all government programs would be a more ideal solution (Caroline White knows it!), but at the very least Chalmers and the relevant ministers could begin with more palatable reforms in the service sector. For example, a user-pays model for aged care services – reducing the share paid by the general tax-base and increasing accountability for providers. Meanwhile the NDIS could benefit greatly from increased scrutiny of payments made and more stringent eligibility criteria.

    The government is being told the cash tap can never be turned off!

    While governments fear the political ramifications of being seen as ‘gutting’ social services, perhaps the issue needs re-framing. The Australian Taxpayers Alliance found in 2021 that a Victorian worker earning an average salary costs about $73,000 to employ. Of that amount, 55% is taxed! Our lifestyles, our productivity, our time and our future are being gutted – and all for what? So that whatever we have left when we finally kick the bucket can be taxed one last time?

    We can only hope that one day governments will attempt some introspection, but it doesn’t look likely just yet. Apart from talk of scrapping the Stage 3 tax-cuts, aged-care levies and death taxes, Jim Chalmers has also flagged that he expects future nation-building funding to fall at least partially on the super funds.

    At what point will we finally see the leadership required to start treating the problem of spending rather than the symptom of revenue?   

    4 Free Enterprise Policies Guaranteed To Make The Economy Roar!

    By
    Caroline White
    -
    2

    Red tape is a productivity-sapping and innovation-destroying virus on business. Australia is feeling the effects of a generation of governments that believe any problem in the world can be solved with another little rule, constraint or compliance requirement.

    Australian business is suffering death by a thousand cuts.

    There are too many rules to actually know and obey.

    It’s worse than a mere harmless intent though. Too many politicians and bureaucrats cannot help but paint business as the bad guy, an evil that needs to be contained.

    There are enforcers of the rules in all three levels of government. Workplace regulations, tax, superannuation, industrial relations awards and so on are dictated by the Federal government with their powerful agencies, particularly the ATO. The State governments are the most interventionist, with licensing, WHS, regulation and compliance of premises and properties, payroll taxes, stamp duties. These are enforced by an army of bureaucrats from scores of agencies. Then finally our dear local councils look over us to make sure we are operating according to their codes and plans, their rangers constantly on the lookout to catch us out. Sadly, they are aided and abetted by many citizens who see it is their duty to dob-in the smallest misdemeanour. 

    The Liberal Party are as bad as the left leaning parties, full of party careerists with little real-life experience. They talk of removing red tape, but the track record of recent Liberal governments has been to pile on more. They are incapable of addressing the problem because they do not genuinely believe it’s a problem.

    The system is so complex, many small businesses do the same as mine. We do enough to get our business open and what we can grow and prosper, despite the myriad of regulations we are knowingly or accidentally breaching. But there are too many rules to actually know and obey.  Ignorance of the law may not be a legally valid excuse, but ignorance is virtually inevitable when the law regulates almost every aspect of life and business. We are all commonly breaking the law because it is impossible not to.

    So, what would I do about liberating business from this byzantine morass of red tape? How do we unscramble the omelette?

    First, all new laws should have a sunset date of 5 to 10 years. The law lapses automatically if it isn’t extended.

    Second, we sunset all existing laws over the next 5 to 10 years. Yes, every single law would be assigned a sunset date to lapse. This can be a random date; it doesn’t matter. As long as the law is reviewed or lapses.

    Thirdy, we halve all fines and penalties. We remove incentives and rewards for the government to seek out non-compliance and confrontation. We reduce the size of the government to get rid of the people imposing the rules and bleeding off our hard work.

    Finally, we abolish and cut taxes. Abolish payroll tax as it taxes job creation and discourages investment. Cut company and personal income taxes to remove the disincentives. Australia’s company tax rate should be 15% to more closely align with our trading partners. Income taxes should be reduced to a top rate of 25%, so the best and brightest want to come to Australia.

    Cut Taxes To 20%

    By
    Bob Day
    -
    0

    It goes without saying that rules and sanctions should be clearly specified in advance so people know how they are supposed to behave and what will happen to them if they don’t.  Also, importantly, rules must apply equally to everybody.

    But the rules governing tax liabilities have become so tangled and complex that nobody can be sure any longer what they are or how they will apply in any given case. And behind the vast volume of laws – the actual legislation – looms an equally massive array of ATO public determinations, public rulings, bulletins, interpretative decisions, policy papers, circulars, administrative guidelines and practice statements. Some of these are supposed to be binding on ATO officers, and in general ATO staff rely on them rather than on the legislation. In practice that gives them something close to the force of law.

    But the ATO no longer simply implements a known set of rules; it develops and amends the rules case by case. In effect, the ATO makes its own rules. As a consequence, we have tax laws which have lost their intelligibility, certainty and predictability. It is not real law as we’ve come to understand that term.

    The resulting attitude of many taxpayers is to treat the law and the courts as irrelevant. “Forget legal advice, just give me an ATO ruling that will protect me from penalties or prosecution,” they say. Many taxpayers, of course, just surrender and pay up.

    Systems which are complex in their application, debilitating in the sense that the more you earn the less of each dollar you keep, and unfair and unreasonable in the sense that people feel penalized for working, are destined to fail in the long term.

    Take Australia’s cash economy, estimated at 15 percent of GDP, one of the largest in the developed world. An underground economy of that magnitude requires the involvement not only of a lot of businesses, but also of millions of consumers. As we know, laws only work when people believe in them; clearly a lot of Australians have no respect for our tax laws.

    Despite what many advocating increases in tax would have us believe, the total tax take in Australia is quite high. Some say that compared with other developed economies, Australia is a ‘low tax’ country, and that workers and companies could comfortably pay more. This is ridiculous. When it comes to taxing incomes, Australia is right up there with the Europeans and way ahead of most of our neighbours in the Asia-Pacific region.

    High tax rates undermine enterprise and destroy the will to work.

    You don’t have to be a Laffer Curve true believer to accept that behavioural response is a reality. When you add to this the corrosive effect on the moral relationship between the state and its citizens, the case for fundamental tax reform becomes even more compelling.

    There comes a point when the prospect of giving up half or more of any additional earnings leads people to decide that it is simply not worth it.

    Taxation then starts to produce gross inefficiencies as people stop working as much or as hard as they used to, and governments find their taxes are not producing the revenue they expected. Politicians and bureaucrats who lack real world experience and an understanding of how an economy and markets work are drawn into a vicious spiral, jacking up tax rates to try to compensate for the falling revenues that their high tax demands have created.

    Similarly, many on welfare reject opportunities to work because of the punitive effect that small earnings and high tax rates have on the security of their benefits and the value of extra work.

    And people on very low incomes fare worst of all, for as they increase their earnings, higher rates of income tax combine with the loss of means-tested benefits deprive them of up to 80 cents of every extra dollar they earn.

    If we are to extricate ourselves from this dysfunctional system, the goodwill of the public needs to be restored by getting tax levels back to something which most people would see as reasonable. To achieve this, we need to remove one of the most significant tax avoidance avenues and align personal tax rates with company tax rates.

    There is certainly a pressing need to reduce the current company tax rate (25% for companies with turnover below $50m, 30% above that). I accept it can’t be done overnight, but the Government would do well to start cutting the rate by one percentage point in this Budget, and then announce its intention to make a similar reduction every year while in office. That would hold out the prospect of a 20 per cent company tax rate and, if it is really serious about an internationally competitive tax system, a 20% personal tax rate.

    Nobody enjoys paying taxes but in the 1950s and 1960s, relatively low taxation and a comparatively simple set of tax rules meant that most people paid what was due without too much complaint. Today, however, the Government and the ATO find themselves locked into a destructive relationship of repression and resistance with ordinary taxpayers. Where people can avoid tax by exploiting loopholes, they will do so; where they can’t eg PAYG taxpayers, they become resentful at the unfairness of it all.

    Taxing The Country Into Welfare And Disability

    By
    Dimitri Burshtein
    -
    0

    “We contend that for a nation to try to tax itself into prosperity
    is like a man standing in a bucket and trying to lift himself up by the handle.
    It is impossible.    ” 

    Those were not the words of an Australian Commonwealth Treasurer but rather of Winston Churchill addressing the House of Commons in 1925 arguing against a proposed increase in taxes.

    Winston Churchill. Economic liberal and twice UK Prime Minister.

    Almost 100 years after Churchill’s comment, Treasurer Chalmers presented his second Budget, in May 2023.  It showed yet another record amount of tax collected and sums spent.  For the coming 2024 financial year, the Government expects to collect $668 billion (25.9% of GDP) to fund $684 billion of spending (26.6% of GDP). 

    Of course, spending is higher than revenue so yet again
    there is a deficit to add to the national debt pile
    for our children and grandchildren to pay.

    Of the $684 billion of spending, it is estimated that $356 billion or around 52% will be spent on health and welfare.

    And within the social security and welfare line is the following:

    From a standing start around ten years ago, assistance to people with disabilities, ostensibly NDIS, is now the second largest Commonwealth government program.

    Over the life of the budget (FY23 to FY27), the average annual increase in spending on the aged pension increases by 6.5%, but the average annual increase in spending on the NDIS is 7.9%.  Both increases are faster than economic growth and the average annual increase in receipts (3.7%).

    Like much of the developed world, Australia is experiencing an ageing population. It could be reasonably expected that spending on aged pensions might increase, but so much for superannuation. 

    Yet given the rapid growth of NDIS spending, one might conclude that
    Australia is also experiencing a dramatic increase in disability. 

    Maybe there is something in the water.  Or perhaps the education system.

    Parked near the back of the budget papers is an analysis of real per-capita spending and taxing: per-capita to adjust for government activity increasing due to population increases; real to adjust for inflation over time.  And in these numbers, the true state of budget disrepair is evident.

    On a real per-capita basis, in the 2024 financial year:

    • Commonwealth receipts are expected to be $18,102;
    • Commonwealth payments are expected to be $18,479; and
    • Commonwealth net debt is expected to be $15,574.

    Impressive.  From an average four-person household, the Commonwealth expects to extract $72,408.

    But here is the interesting part.  Thirty years ago, in per-capital real dollars:

    • Commonwealth receipts were $8,866;
    • Commonwealth payments were $10,110; and
    • Commonwealth net debt was $11,364.

    So basically, in the space of 30 years, on a per-capita basis, we are paying double the amount of tax, the Commonwealth is spending almost twice as much, and debt is 4.5 times larger in real terms.  And 30 years ago was 1983-84, when Bob Hawke came in inheriting a national economic basket case.

    It is worth noting that the inclusion of historical real per-capita data in the budget papers is owed to the negotiation efforts of former Senator David Leyonhjelm.  Such important government finance transparency highlights the value of a strong classical liberal voice in Australian parliaments.

    Improved budget reporting. Legacy of former Senator, David Leyonhjelm.

    During the 1980 US Presidential election debate, Ronald Reagan asked the (rhetorical) question: “Are you better off than you were 4 years ago?” Here is a question for Australians.  Is Australian government better than it was 30 years ago?  Given the doubling of taxing and spending, are services better?  Is Australia safer?  Are we healthier or smarter?

    Perhaps Churchill was only half right.  A nation can’t tax itself into prosperity, but Australia is trying to tax itself into welfare and disability.

    This Tax To GDP Rate Is Mind-Blowing!

    By
    Dimitri Burshtein
    -
    0

    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.

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