Joe Poprzeczny: State Scene - More of the same on taxation

Now that we’re well and truly into the Federal election campaign pundits will begin predicting the date of the looming State election.

State Scene has long contended that Premier Geoff Gallop is likely to emulate his predecessor Richard Court’s 1996 decision and go for it in early December rather than wait an extra couple of months.

That said, State Scene wonders what’s likely to be offered to Western Australia’s million or so voters by Australia’s highest-paid MPs, most especially on the taxation front.

The records of the major parties – Labor and the Liberal/National Coalition – over the past several decades are not markedly different in this crucial area.

Ask yourself if there’s much difference between Dr Gallop and Colin Barnett in this regard.

Neither is likely to ever offer what could be described as a truly imaginative vista for our overtaxed State in the area of taxation

The Gallop Government, to use Independent Labor MLA Larry Graham’s recent one-liner, has, since February 2001, given Western Australians “a one billion dollar tax hike”.

And Dr Gallop claimed during the last campaign that he wouldn’t be boosting taxes.

But why pick on him and Labor?

Anyone with the time can go back and scan budget papers for the Court and Colin Barnett-led Liberal era from 1993 to 2000. Those who do will see taxes and charges rose substantially over those eight years.

All this serves to show that the more things change – from Labor to conservatives and back, and back again – the more they remain essentially the same.

Whoever electors in WA install into power, tax escalations invariably occur.

Leaders of winning parties size up the situation shortly after victorious election nights.

Financially that means they have four budgets ahead of them, with the first earmarked to have the biggest tax and charges hikes. Typically, this move is promptly justified by claims that the predecessors – now the opposition – had left the new team with a big black hole in the books.

Taxpayers are then assured that once this so-called hole is filled with new tax dollars all will be rosy, since sound economic managers are now in charge.

But when the next budget is handed down, although the talk of black holes is forgotten, taxes usually rise substantially for a second time.

If the incoming government has been fortunate enough to be facing a Federal one that’s of another political persuasion it has the added advantage of being able to Canberra-bash to help justify the second budget’s tax and charges boosts.

That leaves just two more budgets, with the last simply too close to the next election to risk really big increases.

In other words, budget three still carries a range of relatively sizeable rises since the one after, the last or fourth, must contain what both sides refer to as ‘pre-election sweeteners’.

The Gallop Government’s sweeteners consequently came this year with stamp duties on, for instance, first home buyers scrapped up to the $220,000-mark and a 5 per cent across-the-board reduction in this lucrative impost.

Why was this done?

Simple. Labor had to be able to keep promoting the notion that it looked after ‘the little people’ – John Howard’s so-called battlers – and because it’s the last (the fourth) budget before the rapidly approaching election.

This deliberately staggered four-stage cycle in which there are three years of steadily trimmed tax rises is, after the next election, repeated by the succeeding government.

This cycle has, of course, quite deleterious effects.

Firstly, politicians are never required to look for savings because they know it’s only a matter of increasing revenue, especially during the cycle’s first three years. That means they become lazy and unimaginative.

Secondly, since both sides play by the same basic rules, voters are locked in to an unchanging or vicious circle of deception, despite deliberately vaguely worded promises to the contrary at election time.

Thirdly, the government’s slice of economic activity continues to rise, meaning it becomes increasingly difficult for people to make certain ends meet and to realise others.

For instance, ever-rising taxes is a partial explanation for why so many opt for credit.

One should also not forget that, in addition to the State-based taxing cycle, a similar cycle exists at the Federal level, where Canberra’s income tax and GST slugs are also rising.

Can the citizenry combat these cycles?

The answer is obviously yes, because in democracies anything can happen if enough people want it so.

Unfortunately electorates are steadily corrupted by the dual State and Canberra taxing cycles, since greater numbers of individuals and groups become dependent on governmental largesse.

But despite such formidable obstacles two modest moves could be made that would have long-term beneficial outcomes for all.

At the Federal level pressure should be mounted on all of WA’s Canberra MPs to bring back tax indexation, something the Malcolm Fraser-led government of the mid-1970s briefly adopted but promptly scrapped.

Closer to home, at the State parliamentary level, severe penalties should be imposed on MPs of governing parties who raise taxes and charges above levels indicated during election campaigns.

The way this could be done is that each party going into an election should be required to give specific – that means arithmetical and down to the second decimal point – undertakings on each and every tax and charge that the government strikes.

For example, the parties would undertake not to increase stamp duties by more than a prescribed percentage level in years one, two, three and four of their tenure.

Any winning party that dishonoured such undertakings would be penalised by having every MP within the governing party’s rank required to forego their salaries for that entire financial year.

Nothing short of such financial penalties – so, yes, a new tax, one on broken promises – would bring an end to the current cycle of promising so-called sound economic management at elections and promptly forgetting such vague words to move into the four-year taxing cycle once again.