Let’s repair the budget once and for all

Tue, 16 May 2017  |  

This article first appeared on the Yahoo 7 Finance web page at this link: https://au.finance.yahoo.com/news/1187922-051601764.html 

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Let’s repair the budget once and for all

Let’s once and for all repair the budget and start on a path of lowering government debt by hiking taxes on luxury cars, wine, petrol, diesel, beer, spirits and so-called ‘other’ alcoholic beverages.

Not only will a decent lift in tax in these areas fix the budget, it will be good for the general health of the population (less alcohol consumed), it will help the environment (less driving and a switch to other means of transport) and in the case of luxury cars, it will be fair (taxing expensive cars).

It can work.

As the dust from the 2017 budget slowly settles, it is apparent that there is a moral and political advantage from selectively hiking taxes. There is strong support for the 20 per cent lift in the Medicare levy from 2.5 to 3 per cent; the bank tax is seen to be a claw-back of some of the support that government has previously given to the big four banks; while the tobacco excise tax impost (admittedly delivered over many years) is set to deliver nearly 3 per cent of all revenue to the government and people should stop smoking in any event.

As things stand, there is a problem in that even with this brazen tax grab from the Turnbull government, the budget deficit is still substantial and gross government debt is on track to exceed $600 billion within three years and then it will hit a stonking $725 billion (which will be around $55,000 per household) by 2026-27.

Let’s start from a budget fact that in the financial year 2020-21, the government will raise $15.2 billion from the tobacco excise tax. That is a lot of money from the 13 per cent of the population that smoke.

The luxury car tax in that year, will by way of comparison raise a puny $720 million even though sales of luxury car are already at a record and are set to growth further over the next few years.
So $15 billion from smokers and $0.7 billion from luxury cars?

Come on!

Let’s ratchet up the luxury car tax so that an extra $1.5 billion per annum (or more) is raised by 2020-21. Who could argue against a bit more tax on those horrid Porsche Cayenne’s? The money could be hypothecated against road funding and public transport infrastructure in the big cities even though it would simply flow through to the budget bottom line.

The wine equalisation tax will raise $1.02 billion in 2020-21. Wine is so cheap now that the cleanskins and goons are often cheaper than bottled water. Let’s address the health and other issues that alcohol consumption brings and ramp this up by $2 billion a year. No nickel and diming here. The case to ramp it even higher is strong.

The petrol, diesel and other fuel taxes will raise $21.5 billion in 2020-21. With global oil prices and therefore retail petrol prices so low, in fact lower than a decade ago, a hike in the excise rate that delivers and extra annual return of $3.5 billion by 2020-21 would add only a few cents a litre yet give a lot of extra money to be hypothecated against roads and road safety of some other existing cost. Easy.

Bundling the excise on beer, spirits and other alcoholic beverage together yields a tax take of $6.1 billion in 2020-21. How about doubling the various excise rates to yield an extra $6 billion and all of a sudden, the budget numbers are looking rosy, the population will wear it because the revenue is hypothecated against roads and health spending and the political cover is that there are good policies.

These items together, proposed this way, would raise a hefty $13 billion per annum to the budget bottom line. This would go a long way to locking in the surpluses which in turn would feed into a lowering in the level of government debt.

The revenue could also cover spending on education, universities, roads, hospitals and age care, all big ticket items that are growing at a rapid rate.

All of this is, of course, a bit tongue in cheek but it shows how the current budget has been framed and seemingly received. Either tax hikes on ‘bad things’ are good or if they are hypothecated against an item – disability insurance – no one will dare complain. Let’s do more of it while the mood is thus.

With neo-liberal economics all but dead, who’s to say a further round in tax hikes like the ones suggested are unlikely or undesirable? After all, who would have thought that the Liberal Party would be imposing a bank tax and further hike in the income taxes via the Medicare levy in the current budget when, just a few months ago, such things were all but impossible?

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THE LATEST FROM THE KOUK

The Australian stock market is a global dog.

Sat, 24 Jun 2017

This article first appeared on the Yahoo7 web page at this link: https://au.finance.yahoo.com/news/1381246-234254873.html 

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The Australian stock market is a global dog.

At a time when stock markets in the big, industrialised countries are zooming to record high after record high, the ASX200 index is going no where. So poor has the performance been that the ASX is around 20 per cent below the level prevailing in 2008.

It is a picture most evident in the last few years. Since the middle of 2013, the ASX 200 has risen by just 10 per cent. The US stock market, by contrast, has risen by 50 per cent, in Germany the rise has been 55 per cent, in Canada the rise has been 20 per cent, in Japan the rise has been 45 per cent while in the UK, with all its troubles, the rise has been 15 per cent.

So what has gone wrong?

Tony Abbott and debt

Fri, 16 Jun 2017

With Tony Abbott and governemnt debt hot news topics at the moment, I thought I would repost this artricle which I wrote in April 2013:

Enjoy, SK

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Here’s a true story. It’s about a man called Tony.

Tony is a hard working Aussie, doing his best to provide for his family. He has a good job, but such is the nature of his work that his income is subject to unpredictable, sharp and sudden changes.

Tony’s much loved and wonderful children go to a private school and wow, those fees that he choses to pay are high. He used to have a moderate mortgage, especially given he was doing well with an income well over $200,000 per annum.

Then things on the income side turned sour.

Tony had a change in work status that resulted in his annual income dropping by around $90,000 – a big loss in anyone’s language.

How did Tony respond to this 40 per cent drop in income?

Well, rather than selling the house and moving into smaller, more affordable premises, or taking his children out of the private school system and saving tens of thousands of after tax dollars, Tony called up his friendly mortgage provider and refinanced his mortgage.

In other words, Tony took on a huge chunk of extra debt so that he could maintain his family’s lifestyle. No belt tightening, no attempt to live within his means, just more debt.