Stimulus payments no free lunch

07/05/2009 - 00:00


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The tax burden on working Australian families keeps mounting.

Stimulus payments no free lunch

LONG-TIME readers of this column will know that the two Western Australian Labor politicians State Scene most admires are Premier John "Happy Jack" Scaddan and former Finance Minister Senator Peter Walsh.

The reason is that Mr Scaddan's government (1911-1916) sought to transform WA into a true democracy, like Switzerland, by ensuring all adults had the right to call binding referendums on legislation.

In other words, he wanted to break the monopoly politicians have over the entire legislative process that locks the people out from a direct say on what will or won't become law.

In Mr Walsh's case, the reason was his no nonsense, tell-it-as-it-is civic-minded approach to administering national finances.

State Scene recalls attending a WA Labor state conference and listening to the endless list of motions calling for more spending of taxpayer money on seemingly impeccable causes.

It lasted two days.

Late on day two, Senator Walsh stood up and told delegates he'd been costing their extra spending motions and said they'd add several hundred million dollars to spending if adopted by government.

What struck him most, he said, was that no motion proposed saving taxpayers money.

In other words, it was a typical Labor conference - spend, spend, spend; never, save, save, save.

For several seconds, as this sank into delegates' heads, there was stunned silence.

Hours of debating motions thus called for millions more dollars of spending, thereby boosting taxes.

There was not one suggestion of where spending could be slashed so taxes could either be cut or savings spent elsewhere.

It's certainly tragic that Mr Walsh isn't keeping an eye on the Rudd Government's super spending sprees, now called stimulus measures.

We'd be far better off if he was.

Labor governments, in particular, love spending. They're fixated by it.

According to one of State Scene's best east coast contacts, the reason for this is easily found.

"The problem with the ALP is that its aspirant members have realised only too well that the state is a chicken which can be permanently plucked," he wrote in a recent email.

"The Libs and Nats tend to want the best for the country and their supporters and financiers in no particular order.

"Once nationalism and White Australia went, the ALP has become a party of unions, government administrators and the semi-criminal classes.

"I meet them every second day in [he names an eastern states suburb he regularly visits].

"Ministers are appointed to make sure an interest is protected, because the interest group is a huge donor, has influence in the party, connections with minority groups, is an attack dog against party enemies, etc."

For those who may feel aggrieved by the reference to "semi-criminal classes" it's worth adding his email arrived just before a spate of press reports alleging that a senior east coast unionist and former union official, now a federal Labor MP, used union credit cards for unauthorised purposes, including bankrolling visits to houses of ill-repute.

However, of greater interest is my contact's observation about Labor aspirants loving to pluck the state, meaning ever-higher taxes.

The ALP was created in 1900, the year before Australia federated.

In that year it adopted the principle of initiative and binding referendums so voters could have the final say on what became law.

Mr Scaddan failed to have such a bill adopted here because WA's conservative-dominated upper house blocked it.

But plucking the chicken has been a successful pastime for state and federal Labor governments, plus some conservative ones, since then.

State Scene was pleasantly surprised to recently receive a measure of just how successful plucking of that chicken has been since 1901.

According to the Sydney-based Centre for Independent Studies, one measure is the forward movement of what it dubs Tax Freedom Day.

The centre's research fellow, Oliver Hartwich, said Australians will have spent the first 112-days of 2009 working for governments.

"April 23rd marks the first day Australians will start working for themselves, or Tax Freedom Day," Dr Hartwich said.

"Total tax revenue for all levels of government as a share of gross domestic product rose from 30.5 per cent in 2006-07 to 30.8 per cent in 2007-08.

"Australians thus spend nearly 31 per cent of the year working for the government.

"The federal government's taxes rose from 25.1 per cent to 25.2 percent of GDP over the same period, so Australians spend just over one-quarter of the year working for Canberra.

"In absolute terms, federal taxes rose nine per cent compared to 2006-07, representing 82 per cent of all the taxes collected in Australia.

But there's worse to come.

"The federal government will run budget deficits of close to three per cent of GDP over the next few years," he said.

"This unfunded spending will eventually have to be paid for through even higher taxes, pushing future Tax Freedom Days into early May," he said.

"Australians will soon discover that fiscal stimulus measures are not a free lunch."

Dr Hartwich's calculations show taxes for all levels of government averaged $16,401 for every man, woman and child during 2007-08.

Of this $13,451 went to Canberra, while an average $2,972 went to state and local tiers.

He said that in per capita terms, taxes for all levels of government rose 7.1 per cent over 2007-08.

Commonwealth taxes rose 7.2 per cent on a per capita basis, while state and local taxes rose by 6.6 per cent.

"The figures show that the total tax burden is increasing relative to the size of both the Australian economy and population," he said.

"Tax revenue is also growing much faster than the rate of inflation, so the real tax burden is also increasing.

"In addition to the time spent working for the government, Australians will spend a further 5.9 hours on average completing their income tax return and spend $268 managing their tax affairs, based on Australian Tax Office estimates."

So keep Dr Hartwich's calculations in mind whenever you hear Prime Minister Kevin Rudd speaking of his ever-increasing spending as a "stimulus" because what is really happening is more plucking of that chicken - your taxes plus borrowings that must eventually be repaid.

"Stop picking on Labor," ALP backers will by now be saying.

"What about the conservatives, they're not lily-white on taxing, are they?"

True, they're not - but generally they're much greyer than Laborites, who are profligate.

Right through the Howard-Costello years, for instance, there was ever-increasing centralism and no reforms made on the mounting duplication that's costing taxpayers tens of billions of dollars annually.

State Scene therefore contacted Dr Hartwich to ask about the Howard-Costello years.

His reply: "Tax Freedom Day was also on 23 April for the financial year ended June 2007, which is closest to the end of the Howard government."

"Data before 1998-99 are not strictly comparable, due to a series break in the Australian Bureau of Statistics Taxation Revenue series.

"But going by earlier data vintages, Tax Freedom Day would have been April 15 for the year-ended June 1996, which is closest to the election of the first Howard Government."

The Howard-Costello era, which included those coast-to-coast big taxing state Labor governments, therefore together added over a week to our taxation burden.



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