Monday, 28 April 2008

Post #10 Hire a Hall/Everything (A Taxing Question)

The 20/20 summit has passed without most of us particularly noticing its beginning. It was like one of those towns you drive through before it sinks in that you passed a sign saying, "Welcome to...". I think the skeptics may be proven right about the whole thing being a flam. The treatment of taxation, or non-treatment is a feature of it that I found disappointingly prominent. I'll try to remedy Kevin's omission with a few pointers of my own:

1. One thing that gets me about the recent debate on "reforming" the economy is that the imposition of new taxes is seriously suggested as a solution for anything. The famous "carbon tax" that some people have been bleating about for the past decade is a good example. It basically means adding another tax to those already applied to carbon fuels to discourage people from using them. Stripped of the baloney it means you pay more at the bowser and for everything to which petroleum is a price input. The same goes for electricity generated using carbon fuels. Now, if the "market" could be dissuaded from using carbon fuels by taxing them they would have gone down a long while back. "Price inelastic" is the phrase that comes to mind. What is the consumer supposed to do; call the power station which is built for carbon-fuel operation and say: "The carbon tax has discouraged me from using your coal/oil-fired juice. Please only send solar or wind power to my home in future"? Actually, the Western Australian electricity supply now offers a "green power" option to some consumers and as some folk, who were lured into it, have now costs more than the carbon-fuelled juice.
The only way a change to clean power will occur is by subsidisation and tax breaks. The taxing option only turbocharges inflation. After all, who pays the tax? Not the oil or coal or gas providers. It's paid by Joe Blow at the bottom of the heap, who has no say in what fuel power staions use or what sort of vehicles the manufacturers build.

2.The second-most heinous tax I can think of (after death duties) is the "property rate" levied by local government. This has a particularly cruel twist. Because rates are determined by reference to the rents that properties may attract if offered on the open market, the owner-occupier who doesn't even own a rental property is coerced to pay according to what their premises might earn them in income if it was rented. That's really the limit! If a home was bought 20 or 30 years ago and has appreciated greatly in sale or rental value, the owner appears to be doing well. In fact they may be stuggling to find the funds to pay those value-based rates and in danger of losing their home. This is the classic trap of being asset-rich and cash-poor. After all, in the end, if you realise the value by selling up, you still have to find a place to live. Every place similar to the one you're leaving will be just as expensive. Unless you're seriously downsizing, you have a problem. Imagine losing a home you've put your guts into building up for decades, perhaps putting in hundreds of thousands of dollars in cash and labour. All for the sake of an unpayable couple of thousand in rates. If rates were restricted to rental properties I'd say, "fair enough"; after all it's income tax deductible for landlords and they are (usually) making money from the property. If local government must exist, let its revenues come from the Commonwealth and State mainstream or the taxing of commercial properties.

3. Payroll tax is the dopiest of all taxes. I've heard all the arguments in favour of it. Stuff 'em! It's a tax on employment, pure and simple. It should be abolished.

4. How about really simplifying the income tax system by establishing a tax-free threshold of $26,000 dollars and a flat rate of 20% on every dollar above it? The compensating factor would be a slashing of allowable deductions. Let people spend their own money for their own welfare first; give everyone a tax-free income that you could actually live on.

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