Tax pain is our gain

Tony Abbott campaign launchElections are illuminating in the sense that they effectively reflect the fears and hopes of the voting public. After all, fear and hope are natural responses to the prospect of change which elections represent.

The sentiments of fear and hope sometimes spin around the idea of taxation. In Sunday's Liberal campaign launch, Tony Abbott repeated the phrase 'big new tax' five times. It is assumed that he refers to the Mineral Resources Rent Tax (formerly the Resources Super Profit Tax) which is an industry tax, not a consumer tax. Yet the speech left the impression that ordinary voters must reject it for their own sake.

It is a familiar Liberal riff, reinforced by Abbott's statement that 'under the Coalition, spending will always be less and tax will always be lower than under Labor'.

This illustrates just how much fear is fused to the hip-pocket nerve during elections. Voters do not like the idea of tax because they would rather keep their money. Moreover, as reflected by campaign offerings from both major parties, voters also hope that government will give them back the money that they have already spent through rebates, while maintaining the infrastructure and services to which they are accustomed.

It is a vicious cycle and a cynical one. The language used so far in the election campaign implies that voters are purely self-interested, that their sentiments of fear and hope are individualistic.

Perhaps they are merely un-reflective.

The concept of taxation bears reflection. In a 2009 paper titled 'The Philosophy for Tax' written under the auspices of Australian think-tank Per Capita, Katherine Gregory identifies five core functions of taxes. These include funding essential social services such as police and public transportation, social investment such as health and education, as well as income redistribution and equitable access to these resources.

This is not usually the framework in which taxes enter political debate. They are instead presented as something to be minimised and endured. Even when new taxes are supported by moral argument, as perhaps in the case of a carbon tax, proposing them can prove detrimental, as former Prime Minister Kevin Rudd learned.

Yet somehow, as populations grow, environmental impacts deepen, and the pressure on sectors such as health and education increases, most Australians want to keep the status quo on taxes.

They need to be reminded that infrastructure and services generally work because, in a functional democracy like Australia, the taxation system works. In developing nations, taxes are also collected but often lost through corruption and incompetence. They rarely translate to paved roads, classrooms and hospital beds. In such countries, we usually see the gap between the rich the poor widen to extremes for lack of public funds.

In Australia, newly built roads do not discriminate between drivers who are on a high income tax threshold and those on minimum wage. Public hospitals give the same quality of care to pensioners that they do to DINC (Double Income/No Children) couples. State schools educate newly arrived refugees as well as fourth generation Australians. Fire services rescue life and property regardless of postcode.

In other words, we take for granted that government provides equitably for all. If the standard of service we receive depends on how much tax we pay, then many of us would be in dire straits. Through taxes, we invest in a civilised society that would provide for us in times of need. Taxes are therefore not a necessary evil. They are a necessary good.

Of course, we may legitimately question how taxes are apportioned, as in the discrepancy in funding between government and non-government schools.

But unless we begrudge the services received by those on lesser incomes, we should not readily accept that paying less tax is always better.

Fatima MeashamFatima Measham is a state school teacher in Victoria. 

Topic tags: big new tax, tony abbott, julia gillard, kevin rudd, resources super profits tax, Mineral Resources Rent



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Existing comments

Thank you Fatima for raising an issue about elections that I find troubling: that our political leaders seem unable or unwilling to raise the standard of debate about caring for others through taxation. So much publicity is given to stirring fear of what we might lose or to pork barreling promises of how we will be better off as individuals. Of course this extends to our attitude to asylum seekers too.The politics of selfishness once again rears its ugly head!

Ern Azzopardi | 11 August 2010  

Hear hear! Thanks Fatima, for these refreshing and relevant comments. There is little doubt that a stable and secure democracy requires fair and equitable taxation. Sadly, almost no politician is willing to point out the obvious necessity for taxation. They prefer to promise benefits, often to the relatively well-off, while avoiding reference to how these are to be paid for.

Myrna Tonkinson | 11 August 2010  

Thank you, Fatima, for so thoughtful an essay.

I am totally bemused by this idea that it is wrong to run a deficit. It is a way the world can be run well and certainly more humanely. I believe that the moral question should be "Is it immoral NOT to have a budget deficit when we have 100,000+ homeless, some 40,000 of whom are seriously mentally ill." It's a no-brainer. If we have a sick child we will increase a mortgage to try to save our child's life. And so our leaders should argue. But sooner than raise taxes, both major parties accept deaths as part of how the world is; deaths of strangers don't matter.

We need to become a more moral society. As a start, may I suggest churches open as shelters for the homeless during these very cold winter nights. Or, as priests and ministers pull up the covers at night, are they unaware of those who will die from the cold or acquired pneumonia from cold, this night or tomorrow? We need LEADERS.

Caroline Storm | 11 August 2010  

Our system of Government is, in one way, corrupt in the allocation of tax moneys to marginal seats. For example, attention was drawn today on the ABC Local 774 to the plight of the Wagga Hospital much in need of a revamp which has not happened because it is in a safe Liberal seat. Yet the Libs have promised $36M to revamp Geelong's Skilled Stadium because Corrangamite is so marginal.

The local paper also buys into this corrupt behaviour, for example, by questioning yesterday why we have seen neither Abbott nor Gillard in Geelong during the campaign. Lo and behold, Gillard appeared (not as a consequence of the paper's query, mind) bearing $257M for duplication of the Princes Highway between Geelong and Colac. That road suffered from being in a safe seat, held by the Liberals and their predecessors for 76 years. At least the spending will benefit everyone who uses the Highway.

The idea of fairness and good sense is gone from the application of tax moneys. It is no wonder we question taxation as we see the cynics spend our money. Oh for the politicians to say "Australia is the land of the fair go and we will spend your money wisely to maintain that vision". I'd vote for that.

Peter Horan | 11 August 2010  

Yes, taxes (and redistribution of wealth) are essential to create and maintain a healthy and stable society. It is interesting to make a list of countries in the order of amount of taxation. The countries which I would find least pleasant to live in come near the bottom with low rates of tax.

We would have a whole lot more tax available to provide for those in need if we could cut the $31 billion per year which is given to the non charitable arms of religious organisations in the form of tax exemptions and direct and indirect grants. These serve only to line the pockets of pseudoreligious organisations such as Scientology or to subsidise the ivory tower lifestyles of Christian bishops as examples.

Kenneth Cooke | 11 August 2010  

To begin with: ALL taxation is nothing short of legalized theft by governments which is ultimately distributed according to political favour. I am yet to be convinced that any socialist spending plan ever approaches the efficiency of free enterprise based investment decisions. Secondly, one should never display ignorance of the fact that each and every "industry" tax impost will ultimately be passed on to the consumer.

So-called "industry" taxes are no more than a cop-out by governments pretending to to help make thin people fatter by claiming to be making fat people thinner. It just doesn't work AT ALL. No public servant should be paid more than he/she would be paid on the free market. Hence police, nurses etc would receive reasonable pay for the essential work they do, however useless add-on numbers of public servants that add NO real wealth production to society while living off the sweaty brows of private enterprise workers (taxation) would remain unpaid, would need to retrain and get a real world job.

Workers are only employed in free-enterprise if they produce real wealth for that enterprise, most public employees are added to the public apurse on the basis of being paid from incresed taxation (theft from other workers) or loans (theft from future generational spending power). If a private firm fails to make a profit, workers are laid off. Governments don't have to justify their losses, they just tax or borrow (thieve) more without any real accountability. WHY is it that our current Australian government insists on spending ever more on doubtful schemes; since when has any government proven they are more adept at spending my or your savings more efficiently than you or I?

Just who defines fair and equitable taxation, and on what basis can it be refuted that increases in taxation is not expanded theft perpetrated on an under-educated, muzzeled public.

Ramon G. Tighe | 11 August 2010  

Why is the truth that taxes are a necessary good not trumpeted from the house tops? For decades I have tried, in the classroom and in general conversation, to present the arguments that Fatima advances. (Not as well as Fatima, I must admit.) Now when complaints about education and health come up, I point out that we are not prepared to pay for(through taxation) the services that we are demanding. Generally people fail to see the connection.

Sheelah Egan | 11 August 2010  

Well said, Fatima. What we need is solid social capital, fairness for all, and reliable services for all of us when we need them. For these things we need taxes, and if they need to be high, so be it. Scandinavian countries have had levels of taxation which some would see as confiscatory, but their social services are also generous, and entrepreneurship somehow survives: Nokia, Saab, Volvo, Husquevana, Hasselblad, Orrefors, etc, etc.

Peter Downie | 11 August 2010  

If the tax so raised was spent wisely few would object. But I'm afraid that socialist-leaning governments seem unable or unwilling to control the bureaucracy so as to achieve this end. See the Yes Minister episode "The Compassionate Society" for a funny, but not-so-off-the mark depiction of what really happens. Do we pay taxes in order to feel "cleansed" as Humphrey Applebee suggests?

Ian | 11 August 2010  

Its good to talk about tax. Thanks Fatima. In this country we have just witnessed the amazing spectacle where hundreds of people have come out in favour of the richest people in our society paying less tax. If miners are to pay less tax (as it seems) then workers will pay more. A good question to ask the miners is why are they prepared to pay more company tax than a resource tax? It is because a company tax is passed on to the consumer (the worker/the family/the poor) but a resource tax is not passed on in the same way.It is a tax that the industry itself pays. Tony Abbot knows this, the miners know this and all economists know this but it is not spelt out to the people. Remember Forrest claimed to have $138 million in kitty to fight the mining tax. Who had that sort of money to fight the GST? Taxes are our contribution to the good governance of our country, but honest people pay more taxes than dishonest ones. My hope is that whoever wins the election will take a good hard read of the Henry Review into Taxation. Our present taxation hits the poor and leaves a myriad of exemptions for the well off. The Henry Review points to resource rents and taxes on land as an equitable way forward. These are the issues we need our politicians to address.

Anne Schmid | 11 August 2010  

There is much confusion in the public mind between routine expenditure and capital investment. Traditionally in Australia most public utilities were financed by long term government loans with interest paid over long periods. Such schemes as the Snowy mountain scheme were financed in this way. Modern day Liberals seem to be of the mind that governments should not own anything and should not borrow money at all but leave it to the Private Sector. After the War the Economic fashion was that of John Maynard Keynes when the the theory was that governments borrow money in bad times to boost investment. there was the assumption that when prosperity returned the money was paid back. This has happened recently in the U.S.A. and Europe. Australian Liberals have an obsession against government debt. Private enterprise debt should be counted too in assessing prosperity. No one wants firms to go bankrupt

john Ozanne | 11 August 2010  

Sorry, but this iss the most unconvincing argument i've heard yet in support of the industry specific, discriminatory Mineral Resources Rent tax.

Glad, not sorry you're not teaching economics,business or political science to my grand-children.

Bill Barry | 11 August 2010  

The OECD list of countries showing the % of income paid as tax has Australia near the bottom of the list ... and I would not want to be sick or unemployed in any of those few countries with tax rates even lower than ours.

Also, there's more sense in the community continuing to own assets such as hospitals, schools, power plants, roads, telecommunications than for them to be sold off (particularly under the pretense of paying off debt when any "profit" is more than the interest paid on any government debt). How much easier it would be for the new broadband technology to be introduced if the community still owned Telstra and for the polluting power plants in Gippsland to be replaced by cleaner power plants if they were still owned by the people.

Part of our problem is that too many of our politicians are not as good as they think they are and they are persuaded by vested interests.

Paying a small portion of our income as tax is either the price to pay to live in a civilised community or a contribution towards the living standards of those who are not as fortunate as we are.

Geoff | 11 August 2010  

I'm feeling benevolent and want to make people happy. I want to grant Ramon Tighe's wish:

"Abracadabra! Let there be no taxation, and only private investment!" Oh, I forgot to mention: there's only one condition to my wish granting: that you, Ramon, will be unemployed and somehow incapacitated, without any welfare support. But don't worry, private investment will take care of you.....won't they?

Stephen | 11 August 2010  

Whenever there is a debate about taxation we can expect to see statements from the far right telling us that all taxation is theft. This nonsense is at least consistent with their second crazy belief that government is unnecessary and should get out of the way of the free market - which, we are assured, is quite capable of regulating itself. But if one recognises that government spending is a necessary feature of any decent and civilised society, then the necessity of taxation becomes obvious to the meanest intellect.

Jack | 14 August 2010  

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