Taxing consumerism (it’s better than taxing the poor)
By R D Wood
Although we can hope for a more democratic economy through redistribution, we must also acknowledge our own personal role in being responsible citizens. As others have called for, we need taxes on multinational corporations; taxes on currency exchange markets; and taxes on those who inherit a golden goose sized nest egg. It is also about taxing what is negative, which might be carbon pollution or cigarettes or sugary drinks, and levelling these taxes against corporations with gross profits regardless of whether or not they pass that cost on to the consumer. In that way, the government, which means the people, can derive an income and encourage the betterment of society for all of us. This is what the focus of economic policy could be. It must lead towards non-violence in a broad definition and a good life as one of positive behavioural affirmation.
That we need to work smarter in order to live fulfilling lives means we need leadership that says it is OK to take a day off; it is OK not to lust after the latest consumer goods; it is OK to have a hobby. It is OK to realise that we are here for the long run. That this needs to go hand in hand with a service economy means we can combat climate change through economic means other than a simple tax on carbon. In other words, the greatest action we can take for saving the planet is providing economic conditions that support human labour, which is an inexhaustible resource. This is opposed to the commodity fetishism based on rare materials. Why should a massage be taxed at the same rate as a packet of chips when the former does not need plastic to exist? Like any other economic activity, they both are options for how we spend our time, but one costs less of the physical earth than the other. We need to think quite seriously about natural capital accounting and what is good for each of us as members of a connected community.
In that way, we need to raise a tax on ‘unsustainable goods’, which is to say goods that are not sustainable, which might mean local or Australian products depending on jurisdiction. Why should Chinese paper made from old growth forests be cheaper than recycled product owned by Australian businesses? In other words, our taxation system needs to be somewhat protectionist precisely because we need to protect our natural assets, which are in our national interests. For many, protectionism is a dirty word but in the messy application of theories one realises that trade is always reliant on lobbied interests. Free trade is only for beautiful idiots. To deny this because of some ahistorical abstract idea is as naïve as it is dangerous.
This is where craft and local economies need our support, from milk to art and beyond. Taxes could be raised in three levels. From the lowest to the highest they are:
- services
- local goods
- imported goods
This is because taxes deter behaviour and we need to realise that our behaviours have to change so we are better off and can chart our own course as a society working together. It is a good thing to have a service economy precisely because it minimises the overconsumption of goods, which is to say, it enables a more sustainable practice for spending one’s time meaningfully.
With a reformed and enlarged taxation system we need to save for the rainy days and shift the way in which people spend their time. Politicians need to inspire people when the sea gets rough and direct the boat at the same time. That means taxing bad behaviour by all of us, and, when it comes to new industries, providing leadership and redistribution to those most in need.
We need, then, to redirect economic activity into good commerce. This is not an out-dated twentieth century argument advocating irresponsible tax and spending in a simple welfare state. It is about how to re-route the activity of one’s life. This can be done through economic re-engagement. It is also to simply observe that people are willing to pay taxes when they are given a project they believe in. We must believe in Australia again as part of a climate-changing world. We must say that Belgium, Denmark, Finland, Luxembourg, the Netherlands have got it right when it comes to taxation, which is at the upper end of the global scale. One might also be tempted to suggest that high taxation encourages social cohesion and not only because one must have the idea of belonging. It does this because it also gives the water-cooler people something to complain about. Sometimes a force to negate is not always a bad thing. The task for Australia though is making our economic basis more sustainable so we can all manage what is a rapidly changing ecosystem.
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Return to home pageOn the other hand, we could abolish ALL taxes and introduce an expenditure tax!
(Look it up on Wiki)
No tax, no deductions. No tax, no need to send it off shore. No tax, no avoidance.
Makes money worthless, UNLESS you spend it, then GOTCHA, Cop that.
Of course, fine tuning of such a policy would be required, but I’m sure we can understand the thrust.
Or we could get a better understanding of how governments fund their activities when the government has sole control of the money supply, as the Australian Gviernment does. The Government does not need taxes to fund its activities, and it can never go “broke”. Taxes are used to control inflation and deflation, and to provide incentives or disincentives. So I agree wholeheartedly on taxing wasteful consumerism, not because it brings in Government Revenue, but because it makes people think more carefully about their spending choices.
For more information on Modern Monetary Theory, see Economist Bill Mitchell’s blog at . http://bilbo.economicoutlook.net/blog/
If you want to join a new progressive political party that is basing its policies on these principles , have a look at the New Democracy Party newdemocracyparty.org.au
Thanks, David Some very interesting ideas here. But wouldn’t this approach to taxation be incredibly unwieldy? I must be missing something, but wouldn’t this necessitate every single item or service that people spend money on having to be categorised?
gst on internet purchases – collected by the paying authority ie banks etc and deposited into ATO would be helpful??
John Howard’s argument for introducing the GST was that the government needs to raise revenue. We now know, according to the principles of MMT, this is pure rubbish. Australia is a sovereign currency issuer and does not need to raise revenue through GST. The GST is the most regressive of taxes as it falls heaviest on the poor and should be abolished totally.
Any political party that uses MMT as its monetary policy should have the abolition of the GST at the forefront of its policies.
Consumption and other indirect taxes are regressive
They do not tax the portion of income that is saved, and high income earners save more.
Here are the key findings from the ABS:
Overall, the average rate of the Goods and Services Tax paid declines with income, unlike income tax where it increases. ABS modelling shows:
> The bottom 20% pays an average of $38pw in GST, or 7% of their income
> The top 20% pays an average of $103pw in GST, or 3% of their income include business taxes like Payroll Tax, Stamp Duties, and Fuel Excise (this includes State as well as Federal taxes), which are largely passed on to consumers
These raise more revenue overall than the GST and together have a greater overall impact on household expenses. ABS modelling shows:
> The bottom 20% pays an average of $77pw or 14% of their income
> The top 20% pays an average of $183pw or 5% of their income
The combined effect of income and consumption taxes – including income tax, GST and other indirect taxes when added together is not as progressive as often believed.
In fact, the picture is much more nuanced, with a rate similar to that of a flat rate tax on incomes of around 25% (+ or up to 4 %) on all income groups.
The progressive effect of the personal income tax is substantially offset by the GST and other indirect taxes, so that:
The bottom 20% pays an average of $129pw or 24% of their income
The top 20% pays an average of $1,006pw or 28% of their income
The second 20% pays 21% of their income.
The greater the role for personal income taxes in the overall tax mix, the greater the reduction in household income inequality from the tax system as a whole.
http://acoss.org.au/images/uploads/Tax_Talks_1_Are_we_paying_our_Fair_Share_2015_FINAL.pdf
“Even though most politicians, economists, and pundits in the mainstream media won’t admit it, central banks exist to help governments finance themselves, at the expense of the average man. It’s the hidden, but real, reason they exist.”
“The Fed accommodated Obama—effectively financing his regime’s deficits by creating new currency units.”
” Manipulating interest rates to near 5,000-year lows is a crucial part of the life support system. Now the Fed is set to pull the plug and leave Trump holding the bag.”
http://www.caseyresearch.com/articles/one-big-fat-ugly-bubble
When Howard introduced the GST it was ‘a states’ tax’ and was designed to replace so called regressive taxes like state stamp duties.
Sadly it has now warped into a federal tax and the states never did eliminate their stamp duties as planned.
I like the thinking of Henry George and the ‘single tax perspective’. Neoclassical economics was established and used to obfuscate and refute the ideas of Henry George.
Well according to our esteemed treasurer Scott Morison we should reduce company tax to 20%. (create Jobson groethe)
What a brilliant idea, considering 36% of companies operating in Australia pay no tax. These are companies grossing millions or billions of dollars.
Even companies that did pay 30% tax the difference between gross income and net tax payable is unbelievable.
As I have said previously tax companies on their gross income even as little as 5%.
The government receives more tax revenue from employees than companies, go figure…