Rohde’s budget reply

Australia's newly elected Labor government recently announced its first budget since entering office. On the whole the budget had some merits - tax reductions and a strong surplus. However, the government unfortunately maintained the bloated social welfare system that grew under the Howard government. The opposition leader presented his budget reply speech, in which he vaguely advocated less spending, and reducing petrol excises, but without any real details. I'll take this opportunity to present my own budget response as I believe that both major parties lack any serious new ideas for the future of the country, are simply maintaining the status-quo, and are essentially socialists. May I introduce Peter's 6 point plan to prosperity:

1) Abolish all welfare except unemployment benefits, which should be tied to work-for-the-dole. This includes the complete abolition of the various family and child benefits. The purpose of welfare should be to help those who are genuinely going through hard times, not tax the middle class and give the money back to them via rebates and benefits. This implies unnecessary taxation which in turn undermines incentive in the economy.

2) Double the goods and services tax (GST). Taxation is necessary. The question is how to apply taxation. We should aim to apply taxes so as to encourage things that ought to be encouraged, while discouraging things that ought to be discouraged. It is undeniably in the long term interests of the economy if investment and saving are encouraged at the expense of immediate term consumption. Significantly increasing the GST paves the way for this.

3) Use all the proceeds from welfare reduction and GST increase to reduce income, capital gains and company taxes. These three taxes represent the 'evil taxes', the ones which stifle economic growth, incentive and entrepreneurship. As such they need to be minimized, even if that entails making up the lost revenue by increasing other taxes, such as the GST.

4) Flatten income tax to be a single flat-rate tax. The current progressive tax system massively undermines incentive for hard working individuals and families, and penalizes those who are successful. Success and hard work are not things which we should intentionally be undermining through economic policy. A friend of mine tole me a great analogy a few years ago - "We used to have a watering can principle to government. Nowadays we have a lawn mower principle". Lawnmowers need to be eliminated!

5) Make the company tax rate the same as the income tax rate. This will close a huge loophole that effectively allows the super rich to designate themselves as companies and avoid paying the higher income tax rates.

6) Eliminate all tax deductions and offsets, thereby eliminating tax returns altogether. Australia's tax system is incredibly bloated. I have a bachelor's degree in engineering and a PhD in theoretical physics and yet I need help filling in my tax return because the system is so incredibly complicated and I can't figure it out on my own. At the last tax season I enlisted the support of a friend with a master's degree in economics to help me out. Even with his support we couldn't figure everything out. If all deductions are eliminated then people will know where they stand financially. Furthermore, an enormous amount of bureaucracy will be eliminated.

I present the motion to the house.

10 thoughts on “Rohde’s budget reply”

  1. I agree with 5 & 6. My brother is a HPE teacher and I think he claimed his treadmill on his tax return.

    I was just wondering though, why is
    “It is undeniably in the long term interests of the economy if investment and saving are encouraged at the expense of immediate term consumption”
    true? I’ve never really thought about it.

  2. Hi Tinos. What I mean by this is that if you invest X dollars into investment, that money goes into expanding the economy via infrastucture or facilities that increase the size of businesses. If that money is spent on immediate term consumption the less of that money goes into economic expansion. To give a clearer analogy, think of your own personal savings. If you invest X dollars today and then consume a portion of that in a years time, you’ll be better of than if you spent the same proportion of the money now and then invested what was left over.

  3. And you’re saying that by doubling the G.S.T you’ll make everyday goods and services more expensive thereby pushing people to invest and save? You thought a reverse progressive tax system was politically unviable!! Mebbe make a temporary exemption for petrol other you wouldn’t just get voted down but probably shot.

    Actually – prepare for jaw drop – I agree with most of that. Your too harsh on welfare and i think if you followed the ‘support in hard times’ logic you’d end up with more than unemployment benefits. Disability payments and pensions would survive in some form and I think student support can be justified on other grounds. Still massive cuts, but probably have to be preceded by much electoral reform.

    Flat tax rate is alright but I prefer the 30/30 idea where the tax rate matches the income free threshold thereby encouraging the poor without punishing the rich. As for encouraging incentive i think that’s a more complex issue than simply higher potential income = higher individual productivity = better outcomes for citizens. On that unelucidated logic i’d reduce company tax, but keep capital gains and increase estate taxes. Rewarding effort not happenstances of birth…

    Lastly have you though about the federalist implications of doubling the G.S.T?
    Good chance to weekend the centralised state?

  4. Your budget reply is certainly better than Nelsons!

    Can’t agree with flat tax for reasons Michael outlines. It is really far more complex.
    Can’t agree with doubling GST. For the same reasons I disagree with flat taxation. Though it is more efficient from a technocratic perspective.
    Don’t agree that capital gains is an evil tax. Reminds me of a quote from the IT crowd: “When I started this company all I had was a dream…and 3 million pounds” In fact talking about any tax as evil reminds me of the Mormon guy who came to my door. He was an campaign aid to GW. How I love to talk politcs and religion!!!

    Welfare does need scaling back. I think you’re spot on there. Disability, students allowances shouldn’t be considered welfare… I’d certainly say shove off parenting allowances and chidcare benefits except that these go some way to helping women reconcile their unfortunate lot as breeders for the nation with their desire to be productive. Do you want kids? Don’t expect your woman to give up her career, her education, her body, some of the most productive years of her life and then say “too bad your personal wealth can never equal or exceed mine because you chose to have children”. Take the baby bonus. The most obvious piece of middle class welfare, but standing in for paid maternity leave.
    You’re right tho, family tax benefit? Just don’t take it in the first place. So inefficient.

    Also, do you count the PBS as welfare? I couldn’t agree with the abolition of that scheme. From a development perspective it’s best practice.

  5. Sometimes I think I’m the only decent, hardcore market fundamentalist left in this god forsaken world… But I appreciate your comments Emoo and Mikey!:D Long live Ron Paul!

  6. Do you know why you are the only hardcore market fundamentalist left in this god foresaken world, Peter?

    Because everybody else has read Amartya Sen.

  7. No it’s definitely more people. But the point remains…

    I tell you what Pete, i’ll submit myself to Lord Ron, if you seek out a copy of Karl Polanyi – The great transformation.

  8. Hey Mike. Thanks for the comments. Once I’m back in Australia I’ll dig up a copy of Polanyi and have a read. I’ll let you know once I’ve read and then you can subject yourself to the Ronster.

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