Monday, April 03, 2006

Report: Aussies pay too much tax

Today's Australian summarises the findings of the Hendy-Warburton inquiry into the competitiveness of our tax system. Funny thing that, the Australian government and all of our media think that the economy is something that needs to be "managed", that our economy must "compete" with other economies by having "competitive" tax systems.

Its a very narrow minded socialist perspective, which unfortunately is part of mainstream thinking in Australia. Businesses around the world must all must compete with each other under a free market system. Its not something that government needs to support or oppose. Government imposing taxes on individuals based on their incomes is a punishment for success.

So to put things in perspective, it is hardly an objective report/inquiry when you try to compare how much other foreign governments steal from their people compared to how much the Australian government steals from Australian workers in order to suggest what a "fair level of theft" would be.

Nonetheless, at least the report does recommend tax cuts:

The report, by Australian Chamber of Commerce and Industry chief executive Peter Hendy and Tax Board chairman Dick Warburton, draws on OECD figures showing that the top rate of marginal tax in the industrialised world has come down from 47 per cent to an average of 43.5per cent over the past five years. But Australia's top rate has been stuck at 48.5 per cent, including the Medicare levy.
Mr Costello told Melbourne radio last week that Australia's direct tax take was high in an effort to keep petrol taxes low.
Umm, rather than talking about trade-offs, explain to me why exactly you justify the extravagant taxing of petrol when all other goods have the regular 10% GST on them already. Does anyone see the inverted logic ?
"I think there are higher priorities in the tax system," Mr Howard said yesterday. "To me the most important thing a tax system can do is to provide incentive for hard work, and the other important thing to do is to provide help for people who assume the responsibility of bringing children into this world and raising them.
This statement reveals the two very important characteristics of the PMs thinking which may sound moderate to most, but to me they sound extreme. Firstly, he clearly shows his belief that a tax system is needed to provide incentive for hard work. What the ?! Tax, by definition DESTROYS the incentive of hard work (i.e earning income). The only way the tax system can provide incentive for hard work is by keeping itself as small and insignificant as possible.

Secondly, the PM confesses that it is the role of government to intervene in personal relationships and to subsidise families. I am deeply disturbed by this policy. The ideology behind it is as wrong and immoral as China's one child per family policy.

It may appear moderate to many Australians because it is presented in the carefully crafted language of affirmative action (i.e in a positive statement). The government will "help out" and support Aussie families who raise children. But you see government cannot create help and support out of thin air. They have to make transfer payments. They must first build up a tax base by taxing all Australians. After this has been done, they decide to reduce the tax burden on families by offering them rebates and payments. So in effect, they are placing an extra tax burden on all people who choose not to have children, and reducing the tax burden on those who do.
Another thing the PM said:
"And I will never agree to changes that are going to undermine the support for low- and middle-income families."
This is more nonsense, where the defenders of the system use Orwellian language like "support" to describe a tax system which by definition, does nothing but take money from people. It then spends it on administration costs and bureaucracy, and transfer whats left to other people who qualify for payments.