GST tax and spend

On the day the ABS’s annual taxation statistics showed a rare drop in annual average tax paid, Essential Research released a survey which found that 61% of us think that Australians pay too much tax, while only 4% say we pay too little tax.

Tax surveys have a history of being sensitive to the question asked. Another question in this Essential Research survey asked if the respondents were prepared to pay more GST for a series of specific programs. The answers to this question contradicted the answers to the first.

On all five items suggested more than 4% impliedly said we paid too little tax, given that 42% would pay more GST if the money was spent on health and hospitals, 38% said yes to aged pensions, 28% to infrastructure such as roads and railways, 20% to paying off the national debt, and 11% to create a foreign investment fund. And so much for the idea that the GST is to fund the states, too.

Asking questions about taxing and spending in general and in isolation from each other doesn’t tell us anything very useful. The GST question in which there is an express trade-off mentioned gives more meaningful results, suggesting that the preference for more social service spending that emerged during the prosperous Howard years is intact. Specifying the GST makes it a better question than a more general tax question, as the GST is the only tax that everyone pays. Of course, it’s easy to tell a pollster that you are happy to pay more tax, and actual political reactions may be less positive.

Unfortunately for those who do want more spending on services, the rising tax revenues that will accompany economic recovery will have to be diverted to funding stimulus spending interest costs and repayments.

13 thoughts on “GST tax and spend

  1. If you look at the tax stats for Victoria – most categories of taxation still rose, but stamp duty on conveyances fell $905m between 2007-2008 and 2008-2009 (which included the brunt of the GFC), leading to an overall drop in revenue of $236m. Shows the danger of relying on a tax which is driven by volatile transaction volumes.

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  2. JC – I know, but it exempts (in Victoria) most individual land owners due to exemptions for land worth less than $250K, the family home, and land used in primary production. Hence I asked JP if he favoured a ‘broad-based’ land tax. It would not be subject to transaction volatility, and would encourage rather than discourage sale of land to achieve its more optimal use. I’m far from expert on these things so I am not advocating it, but it seems like an idea worth considering.

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  3. The family home is not exempt from land tax. It is taxed on the unimproved value by local councils. The ‘exemption’ at the State government level prevents double taxation.

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  4. Rajat – yes. I understand, but the argument that the principle place of residence is untaxed is untrue.

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  5. AN – I agree, my instinctual reaction is that a broad-based land tax would be preferable to a transactional tax such as stamp duty. Unfortunately I think the politics of the matter are such that stamp duty is a difficult tax to abolish, as most people don’t pay it directly (even if they feel the effect of it indirectly in housing costs and land use outcomes), whereas broad-based land taxes impact on many more people directly, and you will always get the cash-poor asset-rich pensioners and small business poeple who struggle against the imposition of land taxes.

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  6. I’m not real big into tax surveys. Asking the public tax questions sounds all democratic, but its not in practice – as the top 25% of income earners basically carry this country on their shoulders.
    I mean, what if the tax question said, do you think there should be a substantial increase in tax paid by those earning in the top 2% of people. I wouldnt be surprised if the answer came back 98% positive.
    Thus, I think we should scrap land taxes for poll taxes, and perhaps introduce a regime where the more tax you pay, the bigger your vote in elections.

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  7. That would work if ALL government did was tax and spend, Rebecca. But governments make laws, too. Do you think you should be able to buy a law that makes interracial marriage illegal, for example?

    The point of democracy is meant to be that community standards of law making are adhered to. And on that front it does decently.

    It’s just that governments have two powers and the other power is tax and spend. Something that should be run liberally, but not necessarily democratically.

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  8. @Shem.

    Hmm, that’s a different way to look at things. Perhaps there should be a seperate government body to decide on the budget that is elected slightly differently, with people who pay more tax (either as a percent of their income, or as a total figure) getting more votes. I can’t see it actually being done, but it’s kind of a neat idea.

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  9. Darn good idea mate. One parliament for budgetary matters, and another for laws, regulations and for aliens. This way, everyone is happy. Administration might cost a little more, but I reckon the folks paying all the taxes would be willing to bear it.

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