Higher rates, higher taxes – you bet!

By October 12, 2012Politics, Society

For those not transfixed with the galactic struggle going on in the ACT – the elections will be held tomorrow week – one issue is the claim by the Liberals that rates are going to triple if Labor is returned, a claim indignantly denied by the Labor Government. But it seems that the forward estimates do suggest that increases are likely. The ACT is doing its best to get rid of the stamp duties and other charges that were supposed to have been replaced all those years ago by the GST (do you remember?). If that happens, the lost revenue has to be replaced from somewhere, and the most likely somewhere is the contributions we ratepayers make to the  bottom line. Our personal contribution is already a few thousands, and an increase in that does not make for cheerful contemplation. Since we do not intend to buy another property, we could accept with equanimity a continuation of stamp duty.

But that’s selfish, wimpy stuff, isn’t it. I should be thinking of the general welfare, shouldn’t I. And I do, most of the time. And what keeps coming into my head is the thought that, like it or not, rates and taxes have to go up. There are just too many demands on the public purse – and our political leaders keep on proposing new things to spend money on.

Now there is an alternative. We could be all be more personally responsible, and our political leaders could learn to say ‘No’ more forthrightly. Brave though they are, this is a form of courage rare among elected politicians. And we the people have a ready resource to offer them: they should spend public money on concerns dear to us, and finance such largesse by ending expenditure somewhere else of less interest to us – and taxing the rich.

Australians are masters at this game, but at least we have an economy that has some semblance of  growth in it. Welfare payments continue to rise as a proportion of the US budget, but are financed by borrowing, which you learn quickly that you can’t do for long in your own household economy. Australia can’t do it for long either, as doing so soon affects our credit rating, which is plainly the most important judgment in the world. How long the Americans can do it remains to be seen.

So, to return to the point, rates and taxes must rise. Of course, as one of the Labor candidates said the other day, don’t forget that our economy could grow. But what if it doesn’t grow enough, or at all? It’s so good when it does: more people at work pay more taxes and seek less welfare. The reverse is not fun at all, for us the people or for our governments.

No one wants to look hard at the financing problem. Governments go on setting up new programs, appointing new public servants, adding new responsibilities and increasing the forward estimates. If there is an assumption, it is that growth will pay for it. When the bottom line can’t cope, governments bring in an efficiency dividend, forcing the public service to decide what can be ignored. The outcome includes apprehensive and irritated public servants.

We are not, in world terms, a heavily taxed people, being at the bottom of the OECD table in terms of the incidence of all taxes. As one of a large number who have fixed incomes, I am not looking forward to any increase in rates or taxes, but I see no alternative unless we ask for less, and political parties stop trying to bribe us with the modern equivalent of bread and circuses.

There’s nothing new in any of this. I would date this phase in our political economy to the Menzies Government from 1950, which was the first Australian government for a long time to enjoy a fiscal increment each year, as revenue increased faster than expenditure. Expecting it to continue has become a habit. It’s a lot to ask for, but I wish that one of our political leaders (more than one, if possible) would tell us, in strong and simple terms, that we can’t keep going on like this.

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