Beware the Green/Labor 'super profits' tax – it could be coming to ruin an economy near you

When governments tax higher profits at a higher rate they are penalising the outperformers. They might also be penalising the lucky, but it is not easy to tell the difference between those who outperform and those who are just lucky.

And when governments take that money, it is often not applied to uses which will return a profit. In Queensland the super profits on coal have been used to pay money to electors to compensate them for a higher cost of living unrelated to coal prices.

This is a policy that frustrates itself. The higher taxes on coal will drive investors away from coalmines in Queensland as there are plenty of other places to invest with tax rates that are not punitive, like New South Wales. That means that the additional revenue won’t be available to the government over the long term as it will dwindle away to virtually nothing.

The decline in the industry will also mean a decline in living standards overall, and fewer people able to pay for products, the production and sale of which, allow other Queenslanders to meet their cost of living.

Industries that make high profits also tend to be highly productive per employee, and pay higher wages, as well as lifting overall national productivity. The things politicians tend to spend the money on are often low productivity, and redistributive.

Politicians would do less damage if they invested in transport infrastructure, for example, because good transport infrastructure can raise national productivity. Or in paying back debt, because that would shrink the size of the government, which is low productivity, and allow private interests which are higher productivity, in.

But paying households $1,000 as a credit towards their electricity bills, as Queensland has done, when state government policies are the reason those bills are high in the first place is an exercise in futility and wealth destruction.

The politicians on the committee made a comparison with personal tax rates where higher earners are taxed at a higher rate. Many economists would say this should be a flat rate too, but putting that to one side there are fundamental differences about how you treat human beings and economic entities.

We don’t want our citizens to die or suffer because of lack of resources, which is why we redistribute some money from the better-off to the poorer. We do want companies to die, at least the ones that are not profitably using their resources.

In fact, even amongst successful companies the rate of death is high. The most successful companies tend to be on the stock exchange. In the 2023-24 financial year 156 companies were delisted from the ASX and, netting-out with new entrants, the total number of companies fell from 2,255 to 2,155.

Commerce ought to be a continuous redistribution from those who can’t to those who can. That’s how we maximise national wealth and have the resources to look after those individuals in the community who need it.

No business has a right to survive, but every person does.

However, if governments go around clobbering the most successful businesses with higher taxes, then none of us will be surviving as well as we could. The zombie needs to be put back in its coffin, and some of our politicians need to be “delisted” too.