Each year the government releases a budget that outlines our income tax system (among other things), and each year they hide the truth. Instead of simply reporting the marginal tax rates, the government reports three different sets of numbers (basic rates, medicare levy, LITO) and then leaves the reader none-the-wiser about how they interact to produce the actual income tax rates. The first time I publicly complained about this silliness was back in 2009.
In 2011 the government announced a series of changes to the income tax system as compensation for the impending carbon tax. At the time, I ran the numbers to show how they would change the actual tax rates.
Now that the 2012/13 Budget is out, it’s time to run the numbers again to strip away the magic and report the honest marginal tax rates faced by Australian workers. These numbers are quite similar to the numbers I reported last year, except for an increase in the threshold for the Medicare Levy. Last year I had pointed out that the Medicare Levy was going to kick in at a lower income than ordinary income tax starting in 2012-13… and it’s good to see that somebody in Treasury has noticed this problem and fixed it.
Some people are worried about climate change. Many of these people believe that the solution to climate change is to throw politicians and bureaucrats at the problem, and maybe have a conference about setting up the terms of reference for a steering committee that will investigate the rules for a community forum that elects a board to appoint a working group to write a discussion paper.
Take THAT you evil climate.
For the proponents of climate change “action”, I have some good news. Not only will Australia have the world’s biggest carbon “tax”, but we also have a few government programs working to save the penguins from sun-stroke. Did I say “a few”? Let’s have a closer look… Read more…
The recent Queensland budget audit showed an expected 2012-13 operating deficit of $4.9 billion (up from $4.2 billion), and proposed a range of tax increases and soft spending restraint over several years, with serious structural reform only briefly hinted at in a few sentences on page 203. We can do better.
This document shows how we can immediately return to surplus, fundamentally reform hospitals & schools, cut taxes in half, and slash regulation to get the economy booming.
The below reforms are a clear break from “business as usual” and would require brave political leadership. The spending cuts will be unpopular, especially from those people who previously received the “free” money.
However, while these reforms introduce some short-term pain, the long-term benefits are clear and significant. A more competitive hospital and school system will lead to better quality health and education. Dramatically lower taxes and fewer regulations will spur new investments and productivity growth – leading to more jobs and higher wages. And importantly, these reforms ensure the budget position is sustainable so that we do not leave a legacy of debt and deficits for future generations.
The recent announcement that the legislated minimum wage will increase by 2.9% means that we can expect there to be nearly 100,000 fewer jobs in Australia. In response, commentators and unions have cheered and asked for more.
This is a great example of Bastiat’s old rule about what is seen and what is not seen. When a business downsizes and people lose their jobs, the impact is immediate and visible – resulting in news headlines and stern-sounding politicians. But when the government subtly destroys thousands of jobs slowly and indirectly, they are given a free pass.
Of course, that is cold comfort for the unemployed.
Last year, American funny-man Jon Stewart asked a series of questions to libertarians. Since then, plenty of people have responded, giving fairly comprehensive answers. I agree with some of those answers, but I thought I’d put together my own “short answers” anyway… only six months late.
1. Is government the antithesis of liberty?
We need definitions. If “liberty” means people being allowed to act voluntarily with each other (as I define it) then the antithesis is involuntary behaviour — e.g. violence, coercion, theft, murder. The government certainly does all of that, but they are not the only example (eg mafia, rapists). Further, some libertarians will suggest that if a limited government is able to decrease “private” violence & coercion, then they might even be a force for good. (This idea is known as the “night-watchman government” or “minarchism”.)
It’s worth quickly noting that government does not mean “governance”. You would still have much governance in a libertarian society (for example, cricket rules).
Soon to be added… Macedonia, Serbia, Romania, Qatar, and maybe Burma, Moldova and Ukraine
We hope that Joe Hockey is a liar. We can understand why a politician would want to bash banks, and we can understand why a politician would want to promise more regulation to control the “naughty market”. Both of these are populist positions which hit the political funny bone, and score cheap points.
It is no surprise that Wayne Swan regularly complains about evil bank profits, and we’re sure the Greens (and other assorted reds) would eagerly agree to more regulation. But while we can understand the political desire for populism, when it actually comes to managing the rules for our economy, we can only hope that Hockey is not serious about his stated desire to have the RBA act as referee on interest rates.
Now the issue is whether banks should be able to set their own prices for loans. To be fair, Hockey has only suggested that the Reserve Bank of Australia (RBA) should nudge banks, but given his track record on not understanding finance it’s a dangerous start. It hints very much towards government regulation of interest rates, which is price fixing of some of the most important prices in the economy.