Governments do not like to govern. Governing requires choices. Choices create losers and losers complain. It is much easier to pretend there are no trade-offs and spend more, regulate more, tax more, and describe the resulting expansion of the state as compassion.

This is why Australia’s endless arguments about tax and tax reform are usually conducted in the wrong order.

First, it is asked whether negative gearing is fair, whether capital gains are taxed too generously, whether high earners pay their ‘fair share’, whatever is a fair share. Then, ‘experts’ examine the system, and discover, with miraculous consistency, that the government needs more money.

You already know the answer when the Secretary of the Treasury Jenny Wilkinson says that, ‘revenue needs to be raised from somewhere’. She is not making a philosophical claim but rather is stating an accounting reality and one that is now the whole debate.

The first-order question is seldom asked: why does the government require so much revenue? You cannot have a serious conversation about tax until you have had one about spending. The size of the tax system follows from what the state does.

Milton Friedman clearly made this point highlighting that the true burden of government is not the amount collected in tax, rather the amount government spends. Expenditure can be financed in only a handful of ways: tax today, borrow and tax tomorrow, or let inflation erode the purchasing power of money. The source of funds may change, but the burden does not. Spending, in other words, sets the size of the bill.

Which is why the fixation on who should pay more is such a convenient distraction and one designed to divide. It begins the argument after the decisive spending questions have been settled. Government decides how large it will be, and then it considers how to apportion the bill.

There is a perfectly sound case for taxation. A functioning country requires courts, police, infrastructure and, in Australia’s strategic circumstances, serious defence. Civilisation is not free, and anarcho-libertarian slogans do not patrol sea lanes.

But this is not where the current argument sits. The modern Australian state has moved well beyond raising sufficient revenue to perform a defined set of functions with spending now treated as irreducible and private income and capital treated as adjustable variables.

This only works if the income is simply present, a standing quantity, produced automatically, waiting to be apportioned. But nothing in history supports such a view.

Thomas Sowell has written extensively that poverty is not the great economic mystery; it is humanity’s default condition. The phenomenon requiring explanation is wealth. Why do some countries generate businesses, technologies, investment and rising living standards while others stagnate. This is the question a government concerned with prosperity should obsess over. Unfortunately, Canberra is increasingly interested in a different question: how should wealth and income be divided?

The distinction is not academic. Wealth is not like a mineral deposit beneath Parliament House, finite, already there, waiting to be allocated. It requires creation and nurturing, thus the task is to create the conditions under which more of it is produced and not to decide who deserves what share.

Hence the asymmetry in Australia’s political debates. A concession worth a few billion dollars attracts intense scrutiny; a spending program of the same size is an ‘investment’. Let someone keep more of their own income and the budget has incurred a ‘cost’. Spend the same amount through Canberra and the government has ‘delivered’ something. The language is the reveal, that Canberra believes that money belongs to the state first.

But capital does not behave like a stationary object waiting to be taxed. It moves. Tax the return on risk and, at the margin, less risk is taken. Tax saving more heavily and some capital goes elsewhere. Make the system sufficiently complex and people who might otherwise build companies will instead devote extraordinary energy to structuring their affairs around Canberra’s rules.

Tax settings are not the whole of Australia’s productivity problem: government spending, competition and business investment matter also. But it is odd to spend a decade making risk less rewarding and then profess surprise at the result.

Meanwhile, the bill keeps growing. Gross Commonwealth debt sits at just under $1 trillion. Commonwealth payments sit at near 27 per cent of GDP. Deficits stretch across the forward estimates and, if budget forecasts are to be believed, total more than $120 billion over the forward estimates. A return to budget balance is forever visible somewhere over the horizon, conveniently beyond the political life expectancy of those promising it.

And the growth in government spending is not mysterious. The NDIS, aged care, health, defence and interest on borrowings account for the overwhelming share of government spending growth. Some of it is unavoidable. Much of it is not. The NDIS was legislated with generous eligibility and no serious mechanism for controlling cost, and now grows faster than the economy that funds it. Interest payments alone approach the cost of entire departments and purchase nothing whatsoever. None of this attracts the forensic attention devoted to the capital gains discount, though the sums involved are an order of magnitude larger. Yet every deficit is spending for which the tax has merely been deferred.

This is the intergenerational equity argument never made in Canberra. Australians are told endlessly about the unfairness of purported concessions enjoyed by one generation. Yet they are never told about consuming a service today and posting part of the invoice to Australians who are currently in primary school, or who are not yet born. They cannot vote, cannot lobby, cannot withdraw their support at a by-election.

The deeper problem is that government lacks the disciplinary mechanism that operates in normal domains. A business that repeatedly spends more than it earns runs out of money; failure imposes correction. Government responds to failure by increasing the budget. A program underperforms and requires ‘additional investment’. A policy creates a new problem, and the answer is another policy, another department, another appropriation. The state treats its own failures as evidence that it should grow.

The remarkable thing is not that government always needs more revenue. It is that Australians have stopped asking why.