Budget 2014 – You lose, the rich win, and what you can do about it

Smiling Abbott

Hockey’s budget will hit us hard

By now you probably already know Hockey and Abbott have targeted you with their budget. If you don’t, read this, this, this and this.

Or if you don’t have time for that, here’s a good summary…

2014 - 1

 

But big biz is $30 billion better off!

What you may not know – but undoubtedly do suspect – is that big businesses and their super-rich owners aren’t helping with the ‘heavy lifting’. No matter what Hockey says, they’re just not doing their fair share. Here’s why…

In his budget speech last night, Hockey said this:

I say to the business community we need you to help out. Rather than corporate welfare… Businesses should stand or fall on their ability to produce the goods and services that people actually want.”

Yet in the very next sentence, the very next, he said this:

…we are cutting company tax by 1.5 percentage points for around 800,000 businesses. We are abolishing the carbon tax and we are abolishing the mining tax.”

That’s a $30.9 billion tax handout over 4 years! ($16 billion company tax cut, $5.3 billion mining tax cut, $9.6 billion carbon tax cut. There are a few other wins and losses for business, but they seem to cancel each other out, as far as I can tell.)

Sounds like corporate welfare to me…

And bear in mind, this is on top of $10 billion / year that big polluters are already getting in tax handouts!

 

How does Hockey explain this?

When asked how big business is doing its fair share, he said:

…we’re only able to lower the company tax rate for 800,000 businesses. For larger businesses we can’t, so they’re doing heavy lifting in a sense.”

In other words, their contribution to the heavy lifting is not getting more tax breaks!

 

This is called ‘trickle-down’ economics

The practice of giving big tax breaks to big business is known as ‘trickle-down’ economics. The idea is you make things easier for businesses, so they can create more jobs, and then share the resultant wealth with their employees and society. The benefits supposedly trickle down.

 

But does trickle-down economics help anyone but the rich?

What really happens in a trickle-down economy is that the corporations take their tax handouts (corporate welfare) and their owners just get richer. Simple.

Look at America, for example. They’ve been practising trickle-down economics for years. Clearly it’s not working there. They have greater income inequality than some third world countries, and God help you if you lose your job or need to go to hospital!

But if that’s not enough proof for you, look at our own recent history…

 

Our governments have used trickle-down economics for years. Here’s what’s happened…

 

Company tax rates have dropped significantly

Since 1980, our company tax rate has been steadily dropping.

ScreenHunter_124 May. 09 14.17

 

Corporate profits have increased, but wages have dropped

And whatdyaknow? As company tax rates have dropped, profits of private non-financial companies have increased (as a % of GDP), but wages have decreased (as a % of GDP).

Profits vs wages

 

The rich have gotten richer, but the rest of us haven’t

Over the same period, only the rich have gotten richer. The rest of us are earning pretty much the same as we were back in 1980.

ScreenHunter_123 May. 09 09.24

(And, no, the rich won’t be paying their fair share, as a result of this budget. High income earners will have to pay an extra 2% tax on earnings over $180,000 per year. But only for 3 years. And let’s face it, they’ll hardly feel that! And it’ll raise only about $5 billion, in any case.)

 

Housing has become less affordable

Of course, if the cost of living had decreased over the same period, then static income wouldn’t be so bad. But it hasn’t. Housing, for example, has become less affordable.

ScreenHunter_03 May. 14 20.30

 

Unemployment hasn’t really changed

What about unemployment? Is trickle-down economics reducing unemployment rates? Nope. Although it’s been up and down, unemployment now is about the same as it was 35 years ago.

ScreenHunter_03 May. 14 20.54

 

But more unemployed people are living below the poverty line

Does the trickle-down approach improve the lot of those unemployed people? Nope. To the contrary, they’ve fallen quite a way below the poverty line

ScreenHunter_03 May. 14 20.45

Or looking at it another way…

Unemployment-benefits-and-p

 

In fact, poverty has increased, across the board

Poverty has steadily increased since 1994-95 (unfortunately I couldn’t find stats back to 1980). The black line is the one you’re interested in. It shows increasing poverty when changes in living standards are taken into account.

ScreenHunter_03 May. 14 21.01

 

So, with this budget, Hockey’s really just going to make the rich richer

Doesn’t look like there’s too much ‘trickling down’ going on, to me. In fact, it looks like we’ll all get worse and worse off, the longer our government persists with ‘trickle-down’ silliness.

 

Then why is he doing it?

Why do politicians persist with trickle-down economics, combined with austerity measures? Well, I can think of three possible reasons…

1) He’s just out of touch

If you’d like to give politicians the benefit of the doubt, you might simply say they’re out of touch. Clearly Abbott and Hockey have no idea what it’s like to be a 24-year old on the Youth Allowance, earning $29 a day, then having to part with $7 to go to the doctor, another $7 to get a blood test, and another $7 to get the results. Or worse, to be a 29-year old, who’s been out of work for 5 months, and been earning NOTHING that entire time, and to know that when you finally do get your Newstart allowance, you’ll be getting only $36 a day! (Remember, there aren’t enough jobs for everyone. So until there are, there’ll always be long-term unemployed people. In February, for instance, there were a total of 140,800 job vacancies in Australia, and more than 700,000 people out of work.)

Here’s some proof that Hockey, at least, is definitely out of touch (it’s an interview with him minutes after he gave his budget speech)…

2) He’s influenced by political donors

If you’re a little more cynical / realistic, you might deduce it’s because big business has the money to pay for private, confidential, back-room meetings with the treasurer. The below is a genuine screenshot from the Liberal party website. (Do you really think these profit-obsessed businesses are going to part with that money without something in return?)

ScreenHunter_122 May. 06 14.49

Here’s a bit of an intro to how political donations work:

 

3) He’s corrupt

If you’re very cynical / realistic, you might assume that our politicians are corrupt. Revelations from the Independent Commission Against Corruption (Icac) over the past few weeks would certainly support this world-view. So far Icac has outed the NSW Premier, its Police Minister, two Senators and two MPs. All for illegal fundraising activities. Activities which, by the way, are closely linked to the Federal Liberal party. My local MP, Karen McNamara, for example, is under investigation for failing to declare approximately $80,000 of donations, which turned out to be from illegal sources. Importantly, Abbott hand-picked McNamara to be the member for Dobell, even when she had this cloud hanging over her head.

 

And don’t forget, there’s absolutely no debt crisis

All of this scare-mongering and austerity politics from the government is a beat-up. Australia is one of the only countries in the world with a AAA-rated economy. There’s absolutely no debt-crisis. So bear that in mind when you’re thinking about how this budget will impact you.

 

What you can do about it

If you think this is unfair, don’t stand for it. You don’t have to wait ’til the next election to make a difference. That’s not how democracy works. Here’s what you can do now:

  1. Contact your state’s senators – The budget now has to be approved by the Senate before it can come into effect on July 1. Contact the senators from your state and tell them to block the budget. Also tell them which bits, in particular, you don’t like, and why. Politicians are, as you know, very vote-conscious. If enough people want them to block the budget, or part of it, they’ll do it. You don’t have to write a paper letter (although that’s always best). Emails work too, and even Twitter and Facebook are worthwhile.
  2. Educate people – Raise awareness. Educate friends and family, express yourself in social media, and blog about your thoughts…
  3. Take it to the streets – There are protest marches in Sydney, MelbournePerth and Adelaide this Sunday, May 18. And more marches, all around Australia in August. Come along. I’ll definitely be there (in Sydney). And don’t worry if you’ve never marched before. The Gosford march in March was my first, and there were plenty more like us there. In fact, from those I spoke to, it seemed most of those marching were first-timers.

 

Here’s the letter I’m sending

Feel free to copy or adapt this letter and send to your senators.

—————

Dear XXXX,

Please block the government’s budget.

Why? Because it’s both unnecessarily austere and completely unfair. Here’s why…

There is no debt crisis:

  • Australia is one of only 13 AAA-rated economies in the world.
  • We have the third-lowest net debt to GDP ratio in the OECD.
  • Our debt is not spiralling out of control. By world standards, it’s remained relatively stable since 1980.
  • Our debt is, and always has been, well below the OECD average, and always by approximately the same amount.
  • Our ability to service our debt is good.
  • Our inflation rate is low and stable.
  • Our unemployment rate is low and stable.
  • Our Gross National Income (GNI) per capita is well above the OECD average.
  • We spend less on cash benefit welfare than all but 4 countries.
  • Our public spending is lower than the OECD average.
  • Only 7 OECD countries spend less than us on pensioners (based on 2010 total social expenditure, not just cash benefits).
  • We spend less per GDP on healthcare than the OECD average.
  • We’re currently not increasing our healthcare spending at all per capita.
  • Australia’s chief economists and academics agree there’s no debt crisis (including Craig James, Shane Oliver, Paul Bloxham, Saul Eslake, Kieran Davies, Chris Richardson, Raja Junankar and Glenn Stevens).
  • The OECD has warned us against a harsh budget, as has CPA Australia chief, Alex Malley.

(Sources for all of the above here: http://www.glennmurray.com.au/abbotts-war-on-the-rest-of-us-and-why-theres-no-need/)

The budget places a disproportionately high share of the burden on welfare recipients, and low and middle-income earners:

  • Introducing a Medicare co-payment (of any amount – universal healthcare is a must).
  • Introducing a 6-month wait before school-leavers can get Youth Allowance.
  • Paying 25-30yr olds Newstart for only half of each year they’re unemployed.
  • Relegating under 25s to Youth Allowance instead of Newstart.
  • Reducing the cut-off for Family Tax Benefit B to $100,000 from $150,000.
  • Cutting Family Tax Benefit B for families where the youngest child is six or older.
  • Freezing the rate of all family benefits until either 2016 or 2017.
  • Increasing in the petrol excise.
  • Allowing hospitals to charge for visits to emergency rooms by patients with ailments that only require a visit to a GP.
  • Increasing the price of medicines on the Pharmaceutical Benefits Scheme with a $5 fee.
  • Loss of the Seniors Supplement for Commonwealth Seniors Health Card Holders.
  • Raising the pension age to 70 by 2035.
  • Dropping two years of Gonski funding to public schools.
  • Deregulating universities so they can set their own tuition fees (which, according to the architect of HECS, will increase the fees for some undergraduate degrees to $200,000).
  • Increasing the interest rate on uni student loans.
  • Decreasing the income threshold at which graduates have to start paying off their student loan.
  • Cutting funding to public hospitals by $50b.
  • Reducing the Medicare rebate for various procedures, deferring the dental program, and axing the national partnership agreement on preventative health.
  • Tightening the criteria for receiving and retaining a disability pension.
  • Making multiple cuts to Aboriginal programs.
  • Making multiple cuts to foreign aid.
  • Making cuts to the ABC & SBS.
  • Making multiple cuts to environmental and renewables programs.

Big business on the other hand, isn’t just let off the hook, it’s being given $30.9b!:

  • $16 billion company tax cut.
  • $5.3 billion mining tax cut.
  • $9.6 billion carbon tax cut.

And that’s on top of $10b/yr big polluters are already receiving in tax handouts.

Where is the fairness in this budget? A 24-year old on Youth Allowance will have to spend 24% of her day’s pay to go to see the GP. (48% if she needs a blood test.) Joe Hockey, or anyone else earning $500k per year, will spend only 0.05% of a day’s pay!

If passed, this budget will further widen the gap between rich and poor. It will increase rates of crime, homelessness, sickness, poverty, food scarcity, depression, domestic violence, suicides, school dropouts and under-education. It will also place massive strain on middle Australia, causing parents to work longer, worry more, and spend less time their families, friends and support networks. It will undermine the quality of our future innovation and industry capability, and put us at a severe competitive disadvantage, internationally. It will increase our reliance on coal – as a source of both power and export revenue – and will decrease the likelihood that we’ll be able to develop the more complex economy that we so badly need to develop, in preparation for the time when we can no longer rely on simply selling cows and dirt.

Yes, we have an aging population. And yes, we have a challenge to meet in order to support them. But cutting costs and undermining our future economic and industrial prosperity is not the way to meet this challenge. We need to be investing in infrastructure that will generate more revenue for Australia.

In the short-term, this means retaining the carbon and mining taxes, and ending tax concessions for fossil fuel companies and big polluters. In the medium to long term, it means investing in renewable energy, science, education, R&D, small business, and IT infrastructure and innovation.

Last, but not least, we need to stop wasting billions on concentration camps. Our treatment of asylum seekers is inhumane, breaches international law, and costs an insane amount of money – both in direct spending and in future losses due to damage to our international reputation and national psyche.

Please do not pass this budget.

In fact, I urge you to block supply altogether. This government has proven itself to be dishonest and heartless, guided more by big business and the IPA than by common sense, humanity and good economics.

It needs to go.

Your truly,
Glenn Murray

Comments

  1. Peter Harding says

    Commenting simply on the welfare sector, many (public and politicians) lean toward the belief that welfare is by and large simply a gratuitous handout by the State, when in fact things like pensions and support during periods of disability or unemployment have in the main been paid for in advance through the taxes levied on working people through their productive years. If this is not the case, then one asks, what indeed are taxes for, since many, if not all the activities or situations in which one is involved or uses have to be paid for through costs such as road taxes, education and health payments, funerals, and so on. Where does the money paid to the system throughout our lives go? Or is this simply too awkward a question to answer? It is not too great a stretch of the imagination to conclude that all we are doing is paying to be punished, or is this just too shocking and controversial a theory to contemplate?

    • says

      There is so much going on about cutting back on medical &welfare.How about our supermarkets.
      I Remember our Farmers tuesday when Woolworths donated 5.million one days profi to the farmers.IT was excellent
      But ever since than all they have done is to restrict FARMERS returns and Massively increased their Profits.Is it not time to curtail profits on essential items..
      Put a super Tax on any company that that uses offshore facilities to make more profits Ie Banks telephone companies etc.Bring the jobs back home, YES restrict the doll but only if you have jobs to offer.

    • Gus says

      Well done Glen Murray.
      Reply to Peter.
      As a layman of practical ability I find it difficult to understand the hyperbole surrounding our economy. This hyperbole appears merely a protect mechanism endorsed and promoted by our controlled media to offer to the general public a distorted view of economic reality.
      Where does the money go you asked…… could start with being over governed…. the Free Trade con that has destroyed our manufacturing and farming….. our economy is built on debt by borrowing book entry money (money created out of thin air) from the international bankers and paying interest on this growing debt that can never be repaid. Our spiraling interest payments of around 12 billion per year (?) could be better spent within and should Aus ever coin its own money again ( as our Constitution allows) in relation to its own economy and growth then we could be the lucky country again.
      We do not operate in a free trade environment as the title may suggest but a corporate controlled one.
      If the Australian Govt. signs the TPP Free Trade agreement then overseas corporations will be able to control our laws, we will lose many more of our rights and liberties, our cost of living will increase as our wages decrease in relation whilst our elected leaders will bathe in corporate sunlight…… it’s happening now as this budget suggests….. take from the poor and give to the rich….. Gus

      • Peter Harding says

        Thank Heaven for the confirmation of my (considered by some to be outlandish) views by the cognoscenti. I think the present Treasurer and his ilk are bell wethers leading the innocents to their fate as pseudo Americans, through their persuasive glib propaganda, which in truth is destructive. I for one have been around the block a few times at 81 years of age and have witnessed similar seductive approaches by the hard right wingers to follow their lemming like leads in other climes, when their inconsiderate and selfish policies inevitably lead to the dreams of the unwary being shattered on the rocks that lie below. I came to this, the best country in the world as a ten pound Pom back in 1970 and have been privileged to be granted citizenship after remaining in Australia for thirty five years before I decided it to be the right thing to do after weighing up the pros and cons with deep consideration. Regrettably, a new and risky political atmosphere has been the developing trend in this fair land ever since. I believe that evil (although that may not be quite the appropriate adjective) prospers when men of good will stand by and do nothing. Blessings to all those who are prepared to fight the good fight. As the U.S. Constitution states, “All men are born equal” and that being so, one would imagine that they would justifiably expect equal treatment and not the crumbs that fall off the banquet tables of the upper echelon of a two tier society. Best wishes always,

        Peter.

  2. abbienoiraude says

    Each budget I try really hard not to think “what’s in it for me”. During conservative rule I usually think ‘what are we going to have to bare’. This time I have never been so shocked.
    My husband is on DSP and I am his carer.
    We have raised three children on this and they went to uni with Austudy and part time jobs as their way of getting through. They are all tax paying members of society and good people ( despite them being raised by …SHOCK HORROR a disabled dad and a carer mum!!! Welfare recipients!).

    As we race toward aged pension age we thought we would be part of the ‘untouchables’ instead of being fearful each time a Conservative Govt came to power. Now?
    So many things are being cut and even disappearing. The immediate affect will be the $50 a week we will have to do without ( Pensioner supplement), let alone the extras to attend to husbands ongoing health concerns. We have been pottering along, on strict budgets of our own and making sure we can pay our bills by going without. We have never been overseas, we have only had one major holiday ( paid for by our children when we turned 60) to Tasmania! That’s it.

    So now what worries me is the way to deal with medical issues with not only less money, but also co payments. Living in country NSW we already pay ‘co payments’ to all the specialists…usually half of the doctors bill comes out of our pension ( not covered under Medicare).
    We have a car, so we can get to the nearest town for these visits…(40 mins away). We have cut back on hydrotherapy as the petrol was becoming too expensive….oh there we go ..another expense. (Where we live it has one of the highest costs of fuel in the state).

    I know I sound like I am whingeing but I am seriously concerned. I want to stay independent of our children and want to keep my husband healthy. I can and will give up on my preventative tests ( mammograms etc) as I refuse to pay the money for something that in the end protects me from being a burden.

    And..finally. To all those who say we do not pay ‘tax’…may I remind everyone we pay GST on EVERYTHING important to us…so it is a constant tax.

    I will write to my Senators and hope they block supply. I doubt it though. What to do!

  3. Marg1 says

    Yes I am shocked also with these despicable cuts. Is there anyone these people don’t hold in contempt. Probably on the likes of the Ruperts and Ginas. So sad for our country, thanks for a great article.

  4. G says

    Welcome to the United States of Australia. I am a firm believer that this country will soon be in recession due to massive cost of living pressures combined with inadequate medical and welfare services and rising unemployment and massively overinflated house prices. I work in engineering soon to be redundant and The Perth job market is dead. It ain’t gonna recover any time soon either. Engineering Australia wide is shrinking and in 2016 the car plants shut. Parts of SA and VIC will be ruined by this and there’s no abundance of work anywhere else. A mate who runs an auto sparky business mainly with heavy machinery told me in the last 12 months he had to double his client base to win the same amount of work. Things are looking bad for Australia’s economy. Abbott and Hockey’s budget will be the straw on the camels back.

  5. says

    A couple of thing Glenn – Corporations don’t really pay any taxes as that cost is always built into the price of any goods or services. Apart from that, Hockey isn’t “out of touch” – he is either totally ignorant about economics for a monetary sovereign nations, such as Australia, or he is totally dishonest in the way he portrays Australia’s debt.
    In actual accounting practice, all tax revenue is credited to the Government account held in the name of the taxpayer, thus leaving a zero balance in the account. Also bear in mind that most tax payments are simply book entries, and very few are actual physical cash.
    When the Government, supposedly, spends this money, all it does is transfer figures to an account in the Private Sector and deducts that figure from an account kept by the Government.
    In practice, every dollar the Government spends eventually finishes up in the Private Sector. A Monetary Sovereign Government cannot run out of “money” – it cannot go bankrupt, and it cannot become insolvent – it can always fund any program to which it is committed.
    Every single dollar a government spends directly, or indirectly, increases the savings potential in the Private Sector, whether it’s in Australia or overseas.
    Hence, every Social Security payment and every dollar paid as interest to bond holders, is ultimately spent in the Private Sector, and this includes payment for Government services such as the Post Office, the Hospitals, unemployment benefits, pensions, and every other public service.
    Because of the almost total ignorance (feigned or otherwise) most politicians have about Government financing, they all act like lemmings and seem quite content to make the society suffer. By talking about “budget deficits”, “balanced budgets” , “austerity”, and the most obnoxious of them all, running a “budget surplus,” they promote profiteering from their taxpayers. These politicians deliberately set out to debilitate the society they are supposed to be elected to support.

    The term “budget deficit” does not, and cannot apply to a monetary sovereign Government. The Government does not have any shortage of funds when it has the authority to create the nation’s money supply. In fact, every dollar spent in excess of what revenue the Government takes in, represents a direct investment into the nation’s future. Rather than being a “deficit” it serves to increase the savings capacity of the private sector.

    Hence, for the Government to talk about a “balanced budget” means they refuse to fund any investment for the nation’s future. What is even more harmful is for a Government to try and operate on a “surplus” because, that can only happen by reducing the savings capacity of the Private Sector.
    No Government should be created to make a profit out of its people.

    • David says

      “Every single dollar a government spends directly, or indirectly, increases the savings potential in the Private Sector, whether it’s in Australia or overseas…”

      “These politicians deliberately set out [by austerity policies] to debilitate the society they are supposed to be elected to support.”

      Got to then wonder what is their sick hidden agenda to deliberately create this suffering in our society.

      • says

        Their agenda is to protect the existing financial structure to ensure it is maintained as it really is their principle support. All the financial fundamentals changed in 1971 when Nixon had to remove the last remaining link to the obsolete “gold standard” that had dictated Government financial policy for the last couple of centuries. That standard limited Government spending and ensured that the necessary increase in the money supply needed for a growing economy had to come from borrowing “money” from the private bankers.
        Mayer Amschel Bauer Rothschild knew that back in 1791 when he said, ‘Allow me to issue and control a nation’s currency and I care not who makes its laws’.
        He is then reputed to have followed up that very accurate statement with this remark. ‘The few who understand the system, will either be so interested from its profits, or so dependent on its favours, that there will be no opposition from that class.’
        Nixon threatened that system by forcing every monetary system to become fiat currencies, but the bankers fought back and bought control of the political system through control of the Central Banks, so that the predatory lending thru bond issues and continuing government debt system would continue.

        • David says

          Thanks Guggzie,

          ‘so dependent on its [the systems] favours, that there will be no opposition from that class.’

          So the sick agenda of fomenting suffering is not one of economic imperative but purely the puppet masters (of Hockey and Abbott and co) desire (and Dickensian glee) to create dependency for fear of loosing control of their imposed system.

          [Noticed after my post there is another David in the thread below]

  6. peter daniel says

    It is a disgrace and I can not find anyone who voted these thieves in. Hockey should be waring a balaclava

    • Gus says

      David ….. humor in the absolute!

      “Political correctness is a doctrine, fostered by a delusional, illogical minority,
and promoted by mainstream media, which holds forth the proposition that it is entirely possible to pick up a piece of shit by the clean end”.

  7. Alan Warren says

    There were no surprises for many of us in this budget as the government’s media managers spent a good period in the lead up preparing us all for the worst…precisely what was delivered.

    Please, write to your State’s Senators and prove to them we do care where we are headed.

  8. says

    For anyone interested, there has been a fully verified tax system available to be placed on the table for at least the past 10 years, but deliberately ignored by all Governments. It is a very simple Debit Tax system of around a half a percent on EVERY financial transaction in Australia. The calculations show that such a system would eliminate EVERY other form of Government tax currently in force. Some of the calculations are as follows.
    In 1991 – 1992, the Reserve Bank of Australia issued a report stating that the ordinary working day business of the Banking industry involved non cash withdrawals amounting to $A120 BILLION.
    When the Debit Tax system was initially proposed, they suggested a rate of 0.33% on every financial transaction which would, at that time, provide the Government with the daily cashflow of $A396 million and an annual revenue of $99 BILLION.
    Obviously, the banking turnover has increased enormously since 1991-92 and the latest RBA figures, as of April/March 2009, show it is in the order of $258 billion a day. This takes into account all withdrawals, non cash and cash, including those made from ATM’s and EFTPOS and withdrawals made on week-ends and public holidays.
    A Debit Tax of 0.33% on DAILY withdrawals of $258 BILLION equals $774 MILLION IN FEDERAL REVENUE per ordinary working day.
    This equals – $204 BILLION IN FEDERAL REVENUE YEARLY
    This is not close to the 2009-10 budget estimates of $338.2 Billion.
    If the debit tax rate were lifted to 0.5%, it would result in revenue of $340 billion.
    In a fiat currency system used by a monetary sovereign nation, there is absolutely no need for any Government to make a surplus because; any surplus represents a drain on the savings of the private sector. A properly controlled budget would include the payment of interest as it becomes due and the gradual writing down of accumulated debts. Governments have no need to make profits out of their tax payers – Governments are there to provide the necessary essential services required by the society. However, the urge to make exorbitant promises to get elected does lead to wasteful expenditure.
    For this reason, it is absolutely critical that the rate applicable to any tax regime chosen by a Government, whether it is a Debit Tax Rate, or some other system, must come under very rigidly controlled guidelines to prevent any Government from arbitrarily increasing the rate. Because even minor changes can result in significant windfalls for the Government, as shown in the example above, the most appropriate control would be to specify the rate in a Constitution. This would force any Government to go to referendum should they propose a change. It would also take control out of politics and give both sides of the argument ample opportunity to justify their case.
    The other factor that needs to be taken into account when a Debit Tax system is introduced, and thus eliminating all other forms of taxation, is the very significant impact it would have on prices, on all types of costs and the resultant increased purchasing power for the consumers. These factors would result in a dramatic change to the entire economy and the inevitable reduction in the level of budget expenditure.

  9. Pearl Tabart says

    Hi Glenn, I have read all this. Is it true that the Senate can only block new spending but NOT any cuts to what is already in place? I have heard this from a solicitor so not sure if it is true.

    • says

      I’m no expert on the matter, but from what I can tell, this is the situation re double dissolution / block supply…

      The government submits a number of budget bills that are debated in the House of Reps, and then in the Senate.

      There’s at least one bill for new policies, and a couple of ‘appropriation’ bills for funding existing government services and the parliament. (However, just to make things tricky, some new stuff may also be included in the ‘appropriation’ bills.)

      If the Senate rejects a bill, the government amends it and tries again.

      The first Senate vote will be by the existing Senate, but the next may be by the incoming Senate (after July 1).

      If the Senate rejects the bill again, and 3 months has passed since the first rejection, the government may call a double dissolution. This means both the House of Reps and the Senate are dissolved and we have another election.

      If, however, the rejected bill happens to be one of the ‘appropriation’ bills, there’ll immediately be no money for public or parliamentary services, and the government will either resign or be dismissed by the Governor General. (No 3 month wait, here.)

      If the government resigns, it will be replaced by Labor.

      • Geoff says

        Any Labor supporter who wishes for the GG to intervene needs to look at 1975 and the damage it caused. And it’s not what will happen anyway. Labor will never block Supply, they will attack individual bills.

        • Goodwill says

          Likely. However if the govt attach controversial measures to appropriation bills, it’s anybody’s game.

        • says

          Hi Brian. Thanks for your comment. Please let me know if you feel I’ve gotten something wrong. It wouldn’t be the first time… 😉

  10. Gus says

    Mr Guggzie,
    I am interested in a Debit Tax System but have limited knowledge on it…. I will do some research.
    I consider our present tax on wages to be amoral as it is our human right to ‘earn our bread by the sweat of our brow’….. the ancient writings do not mention ’tax’….. if you are religious then Christ was against usury and Tax.
    If you use another persons labour to create profit then that is different and not a moral issue as regards tax on that profit.
    Tax on wages was implemented to pay the interest on fiat money loans created out of thin air by the elite Bankers…… we the taxpayers are the collateral to the Bankers for this thin air money and much of the tax collected on wages in Australia goes to pay this interest (usury).
    Tax was also implemented to pay for wars that benefited the Bankers but destroyed Nations…. is not all this ‘Tax’ amoral?…….. Gus

    • says

      You are quite correct Gus, to raise the question relating to taxes because, it is an entirely new ballgame when dealing with a monetary sovereign nation (such as Australia) and fiat currencies. (I have posted a series of articles on my webpage, http://www.aussieindependence.com which covers this in more detail)
      Prof. Bill Mitchell has provided a lot of information relating to Modern Monetary Theory (MMT) and this is being picked up in the US through the blog New Economic Perspectives (NEP) (Search for these on Google)
      The foundation for MMT is the following
      • Governments are created to serve a public purpose
      • Governments have the overriding authority to authenticate a nation’s money supply and define what shall be used as legal tender.
      • One of the Government’s economic responsibilities is to maximise employment opportunities for every citizen willing and able to work.
      • That a properly controlled fiat currency system can work for the benefit of society without causing inflation or deflation.

      As for a Debit Tax of 0.5% – for a person earning, say, $50,000 pa, and assuming they spend all of that, their total tax would be $2500. This puts the person’s earning back in their own pocket on the assumption that each one of us are best qualified to decide how to spend our money.
      For the “investors” who earn their living by trading on the various financial markets, they would be charged the same rate for every trade they make. With the current high speed computerised trades that can occur at the rate of thousands a minute, and include very substantial amounts of “money” (as this “money” is all digital and never gets converted to physical cash) this becomes a “rich” resource for the Government.
      However, the real truth about taxes for a monetary sovereign nation is, that they don’t fund anything – a monetary sovereign Government doesn’t need to raise any taxes at all –
      A Monetarily Sovereign government has the exclusively unlimited power to create its sovereign currency. Monetary Sovereignty is the foundation of economics.
      Anyone who doesn’t understand the differences between Monetary Sovereignty and monetary non-sovereignty, doesn’t understand economics.

      For many years the financial systems of the world operated on what was called “the gold standard.” What this meant was the amount of “money” created by the Government depended on the amount of gold they had available. In actual fact, this was quite a ridiculous system because, if the government didn’t have enough gold available they were forced to borrow from the private sector, and pay interest on the borrowings.
      Mostly, they didn’t actually borrow physical gold, the Government just gave the private money lenders an IOU, which is now called a Bond and/or a Treasury Note, and the lenders, in effect, let the Government open an account with the private Bank.
      It’s all rather nebulous in terms of the complicated details of how it worked, but the end result has always been crystal clear.
      The Government got into debt and finished up paying more in interest than the amount they originally borrowed. What this meant was that the Government had to continue borrowing, by rolling over the IOU’s as they became due because, there was never enough “money’ available to pay back what was borrowed.
      The private banks loved this system for two main reasons. The first, because, it was really a bookkeeping exercise of transferring numbers from one account to another. But the other reason the private banks were willing to lend to the Government was because, the Governments always had the power to tax their people.
      President Lincoln knew exactly how a fiat currency system worked back in 1861 when he created the “greenbacks”.

      He is quoted as follows, “The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers….. The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government’s greatest creative opportunity. By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. Money will cease to be the master and become the servant of humanity. Democracy will rise superior to the money power.”

  11. Gus says

    When we start separating the ‘amateur’ from the ‘professional’ then we must forget the ‘amateur’ and seriously probe just what has the ‘professional’ done for our society….. Gus

  12. says

    Thank you, everyone, for your great comments. Sorry I haven’t replied individually to most. I’ve been flat-chat with work and also discussing this stuff with a lot of people on social media (leading up to Sunday’s marches). Maybe I’ll see some of you there! :-)

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