Business & Economics

How tax phobia cramps our future

For many years, Australian governments with a vision for the nation have been hamstrung in their ability to fully realise their – and our – ambitions by a reluctance to confront head-on the great falsehood that haunts our political conversation.

This is the patent untruth that you can both reduce taxation and increase government spending on essential services at the same time. The only politician who was honest enough to call this out was Bill Shorten, and he was crucified at the ballot box.

Voters routinely decry the size of our national debt, our lack of adequate medical services, the decline of our education system, the disgrace of our aged-care system, the absence of critical infrastructure, and so on. But then they get apoplectic if any party so much as hints at an increase in taxation to pay for it. This paralyses the ambitious politicians and gives the lazy ones an excuse for their inaction.

Demonisation of taxation was promoted in the 1980s by ‘small government’ conservatives such as Margaret Thatcher and Ronald Reagan, who steered us into loaded talk about ‘the tax burden’ and, correspondingly, ‘tax relief”. Such minimalist governments didn’t need much money because they didn’t plan to do anything much with it – apart from buying weapons.

But in a caring, civilised society, taxation is not a ‘burden’ we need ‘relief’ from. Rather, if done fairly and sensitively, it is an opportunity to advance the common good and contribute to the future improvement of our nation.

It is clear that to create the flourishing nation we all want, we need to restore public commitment to, and confidence in, the collection of adequate government revenue. And, to accomplish this, we need to do four things. 

…if done fairly and sensitively, [taxation] is an opportunity to advance the common good and contribute to the future improvement of our nation.

Firstly, we need to make our tax system transparently fair and proportional so that taxpayers feel comfortable about contributing their hard-earned money. Previous governments have been spooked by the blowback from our aversion to taxes and have, therefore, failed to tackle the difficult task of sensible tax reform head on. For years we have been left coping with a whole raft of inefficient and unfair taxes.

Secondly, we need to be assured that the tax money that is collected is spent appropriately, and this means effective and well-funded auditors and integrity commissions in all jurisdictions.

It also means taking a close look at the regulations regarding donations to politicians and political parties – perhaps restricting them to small amounts from individuals or even banning them altogether.

Thirdly, past governments have a poor record in effectively and efficiently managing the spending of public money, especially with respect to infrastructure. So perhaps we need to expand the role of statutory bodies in many areas, with independent boards which can make evidence-based decisions on such matters.

Finally, we need to stop thinking in terms of our relatively small individual contributions and focus on the cumulative benefit of the system as a whole.

Consider this for example: there are approximately 14.7 million individual taxpayers in Australia. If each of those taxpayers paid on average just $2 a week extra tax – hardly noticeable – we would have enough additional money to pay the salaries of over 1,500 extra doctors, 4,000 extra teachers, 4,000 extra nurses and 6,000 extra child or aged-care workers. Not either/or but both/and. All four! What a difference that would make!

So we must bite the bullet and begin tidying up the current taxation muddle and setting up the appropriate safeguards so we can start to see paying taxes as a commendable and socially responsible act again.

Then we can get our healthcare system coping, our schools flourishing, our infrastructure functioning, our homeless off the streets, our Indigenous gap eradicated, our women in the workforce, our old people properly looked after and, last but not least, our huge public debt substantially reduced.

When you hear someone waxing lyrical about tax cuts, bear in mind: what they are wittingly or unwittingly espousing is increases in surgery waiting times, reductions in care for the young and the elderly, and bumpier roads.

If you wish to republish this original article, please attribute to RationaleClick here to find out more about republishing under Creative Commons. 

Photo by Caleb Lucas on Unsplash.

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