The left faction of the branch of the Australian Labor Party (ALP) calling for a national debate on the size of government, arguing that taxes should be raised rather than cutting expenditure. From WA Today:
The Left will introduce a resolution at this weekend’s NSW Labor conference noting that Commonwealth revenue has fallen over the past decade – from 25.6 per cent of gross domestic product to 23.6 per cent…
The resolution asserts that: ”In order for Labor to deliver on the community’s aspirations for role of government, the revenue to GDP ratio may need to rise”…
[However,] opposition Leader Bill Shorten and shadow treasurer Chris Bowen, members of the right, have shown little willingness to consider a budget fix on the revenue side…
”We think that current tax to GDP ratio is about right, and that it’s important that that be maintained.”
I have some sympathy for the ALP left’s views. To a large extent, the Budget is suffering from a revenue problem, brought about by tax cuts introduced as coffers were flowing from the once-in-a-century commodity boom. And now the boom is over, tax receipts have plummeted (see next chart).
As noted previously, I also do not believe that Australia’s tax take is too high. Tax revenue is required to fund the public services that the community both expects and needs. And I personally wouldn’t care if taxes were increased a little if it meant important social programs remained (or were expanded), along with the provision of well-targeted infrastructure.
Of greater importance is ensuring that the tax base is broadened and based on more efficient and equitable sources. This requires a shift in sources from productive effort (e.g labour) towards taxes on land, resources, and consumption, along with adequate compensation for the poor (in the case of raising/broadening the GST). It also requires the closure of egregious tax lurks that distort the economy and/or overly benefit the wealthy, such as negative gearing, capital gains tax discounts, superannuation concessions, and tax breaks on company cars.
An adequate tax take is a vital element for a civilised society. And a high tax take is not an issue provided it is raised in and equitable and efficient way, along with well-targeted expenditure.
All sides should, therefore, place fundamental tax reform on the table and look to wind-back Australia’s world-beating and poorly targeted tax expenditures.
