Economic Policy Trends
Lets have a look at the big picture and how economic policy is affecting our many decisions. The dominance of economic rationalism over the last 20 years has seen a decisive move away from progressive taxes favouring equity and towards regressive taxes, looking after the privileged. This includes:
The 1996 negative gearing reforms fueled a dangerous land boom. This resulted in a huge transfer of wealth to the well-off. Recent Australian Taxation Office reports show the surge in negative gearing claims costing society billions, ensuring that the poor subsidise wealthy investments in property.
In 2000 the regressive GST (Goods & Services Tax) was implemented, forcing low income earners to pay a higher percentage of their income in GST than do high income earners. Small business is also penalised in compliance costs. Under the previous Wholesale Sales Tax (WST) small business was exempt. Now big business can earn huge interest dividends on the GST withheld between BAS periods, offsetting compliance costs.
The 2000 halving of capital gains tax directs valuable capital towards damaging speculative activities. Similar reforms in Canada, US & England have all fuelled asset bubbles.
Land Tax – the current hysteria over land taxes in Victoria is the latest trend. As you will read throughout this website, a properly implemented land ‘value’ tax is the fairest and most progressive form of community revenue raising. Just ask the Nobel Prize winners in economics! Conservative forces thus have it in their sights as it is one of the few taxes they can’t dodge.
On the horizon
Former US Federal Reserve Chairman Alan Greenspan was often quoted as saying he wanted to replace income taxes with consumption taxes. We must not let tax evasion lead the government towards a tax system reliant on the regressive GST.
There is a world-wide push for flat taxes. Putting everyone on the same tax rate is acceptable if we all have the same opportunities. Obviously the wealth-gap is increasing. Such a move will only speed up the likelihood of car-jacking and other desperate acts by the under-privileged.
Public revenue should be raised from the common wealth created by rising land values. Collect the natural increase in land values with a Resource Rental charge and see equity, opportunity and freedom for all enhanced. Importantly, production is favoured over speculation.