Equity and simplicity

I’m not the goose plucker, I’m the goose plucker’s son and I’m only plucking geese till the goose plucker comes.

Ken Henry may have been asked by the Rudd Government to carry out a review of Australia’s tax system but he has not been given a blank sheet of paper to write down his favourite tax proposals. He will be forced to meet the economic and political constraints which drive one of the most controlling prime ministers in the last hundred years.

In addition to pleasing his political masters Henry has to present a tax blueprint which working families can understand and in large part accept. This necessitates him not traversing “the untrodden ways beside the springs of Dove where there are none to praise and very few to love”. In every meaning of the phrase, the Henry Review will be “rooted in the past”.

As well as attempting to keep Mr and Mrs Suburbia content or at least somnambulant, there are other dragons he must slay. These others are fearful beasts who guard their piece of the economic turf as if it had been placed directly into their hands by their god “Mammon”. These fire-breathing scaly reptiles come in all political hues from: captains of industry, mining company lobbyists, the CFMEU, teachers’ unions, the Australian Medical Association, to nature conservation groups and the churches.

Paul Keating warned that it was unwise to get between a state premier and a bucket of money. The warning, though apt, applies to a much larger group of industry, political, trade union, university, church and even welfare lobbyists who have received money in the past.

My tax plan

Given it’s the season to be jolly, this goose plucker’s son will proceed as if the task was to fill in a blank piece of paper with a tax plan which has a reasonable claim to be based on equity and simplicity. In addition I would want it to be efficient and to recognise that there are both positive and negative forms of taxation.

There are many forms of tax and in the minds of the general public, a tax is more likely to be considered popular when being paid by those who can afford it. Excise tax, which is considered a tax on sin (alcohol and cigarettes) is generally popular but there was an inordinate amount of hissing when the Rudd government tried to place a higher tax on alchopops than other alcoholic beverages. Here, perceptions about its complexity and unfairness held up the tax for a year in the labyrinths of the Senate.

Resource taxes are imposed in many countries. In 1795 American Thomas Paine argued that all citizens had the right to an equal share of the natural wealth of their country. The beauty about resource taxes is that they are imposed on profitable companies at the time when they are making a profit. Such resource taxes can be invested to pay a Basic Income in the future.

In Mongolia the government has recently announced it will pay all its citizens a Basic Income from the money it makes from exporting hydrocarbons and other minerals. Alaska has had a partial Basic Income for over 20 years paid to every resident who has lived there for six months. The Alaskan fund derives from oil royalties.

Some resource taxes like carbon emission taxes, are imposed to try to make polluting industries pay a contribution meant to deal with externalities which emerge as part of the mining or manufacturing processes. If such taxes are not imposed, the general public has to pay for the clean-up from general revenue.

Payroll taxes are a tax imposed on those who employ a substantial workforce. I am generally opposed to taxes on labour because they may cause some employers not to hire as many workers as they otherwise would. The one tax on labour which I feel must be paid by employers is workers compensation, because if employers pay the premium they are more likely to implement greater safety precautions in their work places, especially when higher premiums are incurred as the number of accidents increases.

Sales tax, consumption tax (GST), or valued added tax (VAT) are all variations on a theme. The GST or VAT taxes are generally more preferable to sales tax because they are simpler to understand and harder to avoid than sales taxes. Those who spend the most pay the most tax.