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Death and Taxes – who pays the PENNY man …

June 30, 2011
Herman O'Hermitage
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Death and Taxes – who pays the PENNY man …
By: Herman O’Hermitage

Herman’s Comment:

When you consider the major tax changes of recent times a pattern emerges. Today we are debating the carbon tax and a mining royalty tax, last decade we introduced the GST, in the 1990s we were grappling with Super Guarantee Levy, and in the 1980’s we had changes to capital gains and Fringe Benefit Taxes. Before that it was not so clear. I could discuss Payroll Taxes, but that is quite a different story. The carve up between the Federal Government and States.

The ATO has a web page that is intended to address their civic responsibilities, and covers a 100 Year history of the ATO – they choose to label the 1980’s the decade of compliance.

Link to ATO History Website – “A 100 Year history of the Australian Taxation Office” –

In many ways that was very true, under the Hawke/Keating Labor government many of the changes were compliance related. We accepted the raft of changes as generally the changes redressed the blossoming avoidance industry. Most importantly for a time they earned trust.

They also labelled the 1970’s as an era of reform mainly in that our pre-occupation with low unemployment lead us to destructive or destabilising inflation. That is a different story, again maybe.

The next interesting overlay is who controls the treasury benches? Set out below is a history of Federal Parliament and how rarely the ALP was in government. Simplistically the Labor party has controlled treasury about 33% of the time since Federation. It is only when you reduce the sample to the last 30 years when you see more balance, between the left and right control of the treasury benches. (That too might make leftist hot beds cringe as many consider Keating to be rather centrist to moderate – pandering to big business).

110 years of Australian Governments –

Start End Prime Minister Party Years Conservative Years Labor
1/01/1901 23/09/1903 Barton 2.73
23/09/1903 27/04/1904 Deakin 0.59
27/04/1904 17/08/1904 Watson ALP 0.31
17/08/1904 5/07/1905 Reid 0.88
5/07/1905 13/11/1908 Deakin 3.36
13/11/1908 2/06/1909 Fisher ALP 0.55
2/06/1909 29/04/1910 Deakin 0.91
29/04/1910 24/06/1913 Fisher ALP 3.16
24/06/1913 17/09/1914 Cook 1.23
17/09/1914 27/10/1915 Fisher ALP 1.11
27/10/1915 14/11/1916 Hughes ALP 1.05
14/11/1916 9/02/1923 Hughes 6.24
9/02/1923 22/10/1929 Bruce 6.70
22/10/1929 6/01/1932 Scullin ALP 2.21
6/01/1932 7/04/1939 Lyons 7.25
7/04/1939 26/04/1939 Page 0.05
26/04/1939 29/04/1941 Menzies 2.01
29/04/1941 5/07/1945 Curtin ALP 4.19
5/07/1945 13/07/1945 Forde ALP 0.02
13/07/1945 19/12/1949 Chifley ALP 4.44
19/12/1949 26/01/1966 Menzies 16.12
26/01/1966 19/12/1967 Holt 1.90
19/12/1967 10/01/1968 McEwan 0.06
10/01/1968 10/03/1971 Gorton 3.16
10/03/1971 5/12/1972 McMahon 1.74
5/12/1972 11/11/1975 Whitlam ALP 2.93
11/11/1975 11/03/1983 Fraser 7.33
11/03/1983 20/12/1991 Hawke ALP 8.78
20/12/1991 11/03/1996 Keating ALP 4.23
11/03/1996 3/12/2007 Howard 11.74
3/12/2007 24/06/2010 Rudd ALP 2.56
24/06/2010 29-Jun-2011 Gillard ALP 1.02
Years In Gov 74.04 yrs 36.53 yrs

So if we simplistically say that the ALP was behind the tax changes of the 1980’s and 1990’s and now, that leaves just the GST for the conservatives.  (There you will still get debate because Keating proposed a broadly based sales tax in the 1980’s but went the other way in defeating John Hewson’s proposed tax reform of 1993).

High taxing belongs to the ALP. That is true from their ideology. A Labor government represents interventionist government and a conservative government represents small and efficient, well targeted government. This is particularly true when you consider the ALP introduced the first dole in the Great Depression (food coupons) and the first child endowment, first national health (Medibank) etc.

It is stark here to consider at State government how Labor controls the treasury benches much more than the conservatives. Throughout the states there might be exceptions like Gair or Bjekle-Petersen, but even in those 2 states if you work through the exercise, the ALP has an admirable sales pitch. The ALP philosophy has more acceptance at State level.

You could also argue the contrary in respect of the Howard years, regarding Family Payments. They blossomed throughout the era, were means tested, and do relate to immigration policy. Most importantly debate about Costello’s value as Treasurer is an example of merit due to the fact that he inherited structural deficits and left politics with healthy structural surpluses. Do we need to adjust for asset sales like Telstra? Under supply side economics that too is representative of smaller government. How is telephony or competition in telephony in the national interest?

This brings me to the current structural deficit. Since 2007 net public sector borrowing requirement (PSBR) has gone from nothing to $120 billion. We are told the government will come back into surplus by 2013. (For mine that is hollow, 2013 is an expected election year, in our uncertain times there are simply too many if’s, and what is the consequence of failure, we are in a mining boom). In this years budget, buried in the detail is the fact that issuance capacity (the ceiling) has been doubled to $250 billion. Our Government is happy to take their debts to 50% of GDP. At what rate is GDP expanding, maybe 2.5 – 3%.

address the wanton spending of this first Rudd then Gillard Labor government. Far too much of the wanton spending is put down to the GFC. We were told at the time that the schemes were non recurring ie they were once off, the economic stimulus programmes. Yet we have gone from structural surpluses to structural deficits. We will have to pay the penny man sooner or later, and on current trends we too will have the Greek disease of austerity programmes and asset sales as the only way to address the structural deficit. It will be out of our hands. This is where America is at. They have given their blessing to Christine Lagarde’s ascendancy to the CEO role of the IMF why? We are all in this together? Irresponsible stimulus programmes. Pump priming when the well is dry.

You hear from leftist support groups that they don’t want tax cuts, they would prefer increased government programmes. I can only question, how efficient is that government program, and could it be done more efficaciously by non-government?

During the great depression there are many stories about how those that stood by Adam Smith style economics, bogged down in their own mindless stupidity. Those that could see new or different solutions lead us out of the quagmire. Most agree that only WWII really got us out of that crap heap. The rise of nazism, first rebuilt Germany, and then stopping its spread, rebuilt the free world.

Reverting to the ATO site above. It is very interesting how they are able to now label the 1970’s as a period of rebellion, when we finally cast off the shackles of the great depression. Only addressing low unemployment saw the inflation genie out of the bottle. In time will we too see the 2010’s as only addressing the inflation genie as another period when reform was mandatory?

What does quantitative easing mean? Targeting a lower exchange rate to make an economy out of kilter more export driven. Is it working in the USA, has it worked in Japan? Japan still does not have sufficient domestic demand, but now has Korean, Taipei and Vietnamese factories to maintain a cost advantage. Is that likely for the USA when the Chinese can imitate any development before it’s official launch?

Wisdom would have you ask, is Australia well positioned to take advantage of opportunities as they arise. I would love to hear Peter Costello’s thoughts. Why did he not accept the challenge of continuing post Howard?

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Herman …

Links to Previous Post by this Author …

28th Jun 2011 – Democrazy… Herman O'Hermitage
26th Jun 2011 – Canberra Comment… Herman O'Hermitage
24th Jun 2011 – Materialism… Herman O'Hermitage
18th May 2011 – The Solar Electricity Debate… Herman O'Hermitage
6th May 2011 – The Assassination of BIN LADEN – the urban myth begins… Herman O'Hermitage
4th May 2011 – “Un-Australian.com.au” – on what being Australian means… Herman O'Hermitage
18th Apr 2011 – Asset Inflation – Herman O’Hermitage takes it to task … Herman O'Hermitage
9th Apr 2011 – POWER – in the Political sense – or Fuelling Industry? Herman O'Hermitage
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