If Scott Morrison and Malcolm Turnbull were corporate CEOs, they’d be done for misleading and deceptive conduct.
They claim that the 2018-19 Budget will cut taxes. To most people, this would mean the amount of tax they pay next year will be less than what they pay this year. Yet, the government’s own Budget figures show that taxes are rising rapidly year after year after year.
Tax receipts are forecast to rise from a record $473 billion in 2018-19 to $554 billion in 2021-22 – a 17 per cent increase, or 4 per cent per year – more than twice the rate of growth to inflation and wages.
I can hear you saying it now: the population is growing so that means the tax burden per capita isn’t as bad. Yes, the population is growing. But it isn’t growing as fast as taxes. In fact, just about half the rate. So tax per capita will rise over the next four years.
When the government says it is cutting taxes, what it means is that the tax burden will continue to grow, but just at a slower rate than what otherwise would have been the case. This isn’t a cut. It’s just a slower increase.
The reason taxes are growing is because spending is growing. The only line that matters in the Budget is the line that specifies spending. If that number is getting bigger then taxes will grow, either now or in the future. And growing it is. From a record $484 billion this year, spending is projected to grow to $573 billion by 2021-22. Every single dollar of this spending must be paid back with higher taxes. Those taxes will be raised either today or deferred via higher debt into the future.
It is this second option that governments, including the current one, have pursued year after year. Gross government debt grew by an eye-watering 380 per cent over the past decade to reach a record amount of an expected $561 billion next financial year. This is projected to rise further still to $578 billion by 2021-22.
The lack of spending restraint is what makes the Treasurer’s much-bragged about “tax speed limit” unworkable. The “tax speed limit” seeks to cap the tax-to-GDP ratio at 23.9 per cent. This is good, at least in theory. But you cannot have a tax speed limit if you don’t have a spending speed limit. And on this count, there are no signs the government is looking to cap spending.
Of course, it’s easy to bash the government. They are the ones that have to put out fully costed policies. It’s much easier for oppositions to get away with half-baked, un-costed, and abstract rhetoric. And Labor should not be let off the hook. It was Labor, under Gough Whitlam that first destroyed the Budget by increasing spending by an unbelievable 20 per cent in 1974-75 and 16 per cent in 1975-76, in real terms. It was Labor again, in 2008-09, that increased spending by 13 per cent in real terms, which sent the Budget into a debt and deficit spiral.
What this shows more than anything is that Labor, and the political left more generally, have largely owned Australian politics for the past four decades.
On virtually every front whatever Labor offers the Coalition will deliver, but in a more cost-effective and gradual manner. This can be seen on everything from renewable energy subsidisation to Gonski education funding, to the NBN, to the NDIS.
The Coalition has been reduced to being a tax collector to pay for ever more lavish spending programs in health, education, and social services and welfare.
The issue is that this concedes the higher moral ground to Labor. It presupposes that the left-wing political program of bigger government, smaller civil society, and more welfare instead of more work is fundamentally correct. The quibble is only over the fiscal “sustainability” of it all.
But here’s the rub. It isn’t sustainable, no matter which party holds the levers of power. So long as governments maintain a dominant role in the education, health, and social services sectors at the expense of civil society, the call on the taxpayer will continue to rise.
The time will come, eventually, when those in power will need to be honest with Australians. And the honest thing to say is this: unless they change their behaviour, both major parties are going to send the nation broke.
Daniel Wild is a Research Fellow with the Institute of Public Affairs.
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