Thursday, May 22, 2014


Government services at both federal and state level have suffered for years because of a shortage of cash and an unwillingness on both sides of politics to increase taxes. Funny thing is that it is OK to do things like increase government charges but not to do anything that can be labelled a tax. Even funnier, successfully, labelling something as a levy may be OK while the same thing labelled as a tax is not. (Perhaps Gillard would have survived if she had talked about a carbon levy to pay for certain climate action instead of a carbon tax.)

Apart from reducing desirable government services the shortage of cash produces some less than optimum decisions,
For example:
Decisions re privatization and asset sales are made on the basis of “reducing the debt” instead of a rational analysis of the proposed sale.
Roads, tunnels etc. that bypass congested areas are built as toll routes using “public/private” arrangements. As a result, the routes are under-utilized because of the high tolls which means that the reduction in congestion is less than what could be achieved. (In the Brisbane area all the toll roads etc bypass congested areas.)
I think Abbott should be applauded for including tax increases in his strategy for making the budget more balanced. He should be applauded because for too long the country has struggled under governments that were too scared to make necessary increases in taxes. If anything, the green side of politics should be criticizing him for not raising taxes high enough instead of having the hide to increase taxes.
(Yep, it may be better to provide some of the revenue by cutting things like tax concessions that favour the rich – but I think breaking the fear of raising taxes is very important in terms of doing something about Costello’s freezing of the fuel tax and the desperate cuts made before the 2007 election.)
In terms of the a GST increase I think it should be increased enough to allow the states to fulfill their constitutional responsibilities without having to beg for money from the commonwealth as long as there are some offsets to protect those near the bottom of the pile. (15%?) Raising the GST may be more regressive than raising the top income tax rates but it is certainly far less regressive than raising public transport or medical charges.

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