Where are my (and your) taxes going?
While I was at Births, Deaths and Marriages I was stunned at the state of the waiting area. The seats were filthy. A friend asked “Did someone die or give birth on those seats?” when I shared the photo. Another along similar lines: “The right chair is for births, left chair for deaths. I’d hate to see the chair that’s used for marriages…”. Perhaps slightly flippant comments, but seriously, it is hard to understand how anything else could have made these seats quite this filthy. I noticed there seems to be a replacement program in progress as some seats are now plastic.
I then happened to find myself in Melbourne Central Station. Looking, as it happens, for a public bathroom. When I finally found one, the floor was filthy. Had nature not been demanding I obey, I would have found another convenience. Trust me, the photo is not nearly as bad as the reality.
We know the numbers of public servants employed per capita has drastically reduced over the years. Anyone who calls Centrelink knows not being placed on hold is an impossible dream. Yet The Sydney Morning Herald shares with us today that our federal government gave permission for Australia Post to keep the CEO’s $5.6 million salary a secret. Not technically a public servant, but such action is indicative of their perspective. Perhaps if we employed more taxpaying public servants at more realistic wages than $5.6 million per annum, we might have lower unemployment figures, have a phone answered at Centrelink and even, perhaps, we might have CLEAN facilities.
We all seem to pay a lot of tax (unless we are mining companies) to fund public services. Yet our hospitals are strapped for cash, TAFE is being killed off and the private education replacement isn’t working too well (the RTO I’m enrolled with has just gone into Administration, among others). I’m sure TAFE could have educated me for less than the $18,500 the course cost.
ROGUE operators drained billions of dollars in public funds through the vocational education system after a failed attempt to open the sector to the free market.
I know a few dirty seats and a dirty floor are not the worst things happening in Australia right now. However, they are very coal face indicators of a downhill trend.
As a taxpayer, I have simple expectations. I expect universal health, education, law enforcement, public transport and roads, environmental protection and various other services such as driver registration, births deaths and marriages and so on. Oh, and a decent NBN.
So far in the last twelve months I’ve broken a wheel (not just a flat tyre, broke the whole wheel) on the A10 and my car nearly fell into a huge pothole on the Westgate/M80 interchange. My RTO has gone into administration, I see our government risking destruction of our already fragile environment. I’m still on ADSL of some variety. I’m just one little person. Then I can’t find a clean seat to sit on.
Where are my taxes going?
It’s the economy, Stupid.
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The answer depends on whether you are talking about state government taxes, municipal government taxes, or federal government taxes. In particular, federal tax money does not go anywhere — it is destroyed upon receipt.
This may be hard for you to swallow, Robyn but economicreform (above) is right. Our federal taxes are destroyed. All federal government spending is NEW MONEY created by the Reserve Bank of Australia (RBA). Federal taxes simply remove money from circulation to help control inflation. State and municipal taxes and rates are different. State taxes fund some of state government spending, but they too receive federal grants and the equivalent of the GST collected, in NEW MONEY. State deficits have to be funded through bond issues.
One thing we need to own up to and accept is that there IS a place in 21stC western developed nations for jobs that employ unskilled, manual labour.
Why the neo-cons first dump those people, drivers, cleaners, garbos etc is explained by the disdain with which they hold the unskilled workforce. Listening to articles today about robots replacing unskilled labour, I was struck by the stupidity of replacing “the human face” in many jobs.
There will always be people who need a skill free job that provides for them and their family.
There will always be jobs that require the “human touch”.
We need to accept that and allow for it in our job development and if we don’t employ those willing to clean, cook and do the shit jobs the rest of us hate, they will end up as our permanently unemployed. Costing us far more than it does to emply them!
I have seen worse Where some one faced the Toilet and crapped facing the toilet and Wiped bottom and threw paper on the Floor I bet it was not a Genuine Australian and Yes it was in a blokes toilet
If as a bottom rung pubic servant one earns about $60,000 for 37 hours work and some lesser amount of knowledge, WTF does a top level admin possibly do that is worth 93 times as much?
Kerri…I have been a driver of trucks, buses and taxis for the last 10 years. I am anything but unskilled!
economicreform and John Kelly: I know you are right but simply stating this fact just turns people off, as far as I can see. It is just so completely against everything they have believed all their lives and which has been reinforced day in and day out by the media and everything they hear on TV and on the radio. It gives them the impression that perhaps you are making fun of them or you are crackpots, it’s all so difficult that they will never understand it, etc. etc. I think we need to develop a more “gradualist” approach, which guides them gently in the right direction. I must confess, I don’t have the answer. I have just stuck to the 3 sector financial identity, which no one can dispute. From there one can argue that govt. debt is not the problem because private domestic debt is, and the govt. must run deficits if the private sector is to pay down its debt. Further, all corporations borrow to invest, and so can the govt. because for a nation, education, health, and infrastructure are all investments. We can mention later that govt. “debt” is different as there can never be a default. Just my take on these matters.
You can see how the “framing” carried out by the propagandists has worked. I’m sure that 30 or 40 years ago, no one talked of “taxpayer funded” things. The phrase used to be “govt. funded” because govt. paid for those things. But by sheer persistence and repetition it has now become “taxpayer funded”. This leads directly to the argument that taxes are “theft” by the govt. of your hard-earned cash. Hence raising taxes is “bad”.
Now we can answer the question posed in the article: govt.s are supposed to fund these activities properly and the fact that they are continuously being made “short of money” is a deliberate neo-liberal strategy to dismantle the last vestiges of the welfare state. They have been at it for half a century at least, and they are winning.
To totaram: I think “I must confess, I don’t have the answer” is a bit of a cop-out. Both economicreform and John Kelly at least tried to impart some knowledge and (especially) truthfullness, and maybe, just maybe, someone reading their comments could be tempted to investigate further. I personally believe we should refute terms such as “taxpayer funded” and “tax reveune” and “govt debt” where-ever we see them. Having said that, can anyone help out totaram and EVERYONE else how we can discuss MMT in simple terms?
Good point Robyn. The condition of public facilities is a reasonable indicator of the level of service we are getting from the Government(s). I once heard an American talk about how he came home from China once having gone through an international airport that had been built from nothing in less than two years and it was enormous. On his way home from the American airport he went on a domestic train service that went underground in his home city. When he got off the train he came to an escalator that would have taken him up to street level, but it was closed for repair and was going to be out of action for another six months. He noted that this was about a quarter of the time that China had taken to build a multi-level airport with dozens of escalators, but his main point was that Americans thought they were living in paradise and hadn’t noticed just how poor their public facilities are. Your article reminds us that ours aren’t too good either.
Graham, love your example.
Totaram, I’d never thought of the subtle psychological shift that govt funded versus taxpayer funded may engender. To me, the govt is taxpayer funded, that is the simple reality (historical perspective). A fair society, businesses/corporations included, has no problem sharing the funding of public goods and services as necessary for social cohesion. Yet once we use taxpayer funded rather than govt funded there seems to arise a “but I don’t want to pay for that [particular service]” mentality in a proportion of the public. Edited to add: I realised I left my thoughts half said. What that then does is feed into the political support, the giving or withdrawing. The concept of supporting the politicians who aren’t going to spend on the things I want them the spend “my” money on (and vice versa). I think we, the people, need to remember irrespective of any economic theories, the money circulating in the economy is OUR money – the government is supposed to be us. It is all our money.
Passum2013 – thanks for that, I just ate my breakfast.
John & economicreform – then why not just print more of it and bring back TAFE (for example)? Rhetorical question alert!
This link may be of assistance http://www.moslereconomics.com/wp-content/powerpoints/7DIF.pdf
Robyn Dunphy: “then why not just print more of it and bring back TAFE (for example)? ”
Answer: yes we can, but the neo-liberals will counter by telling us horror stories of the Weimar Republic and Zimbabwe and that is where things get complicated. I have had these discussions with very well-meaning friends of mine and it is not easy because you then have to explain when inflation takes place and when it doesn’t, and why it has nothing to do with “foreigners willing to lend us money” and so on. By the way I have read Mosler, and Randal Wray and also the Bill Mitchell text-book(I have all these and recommend them to all and sundry). It’s hard to put all that stuff across in even a one-hour conversation.
There are plenty of readers of this blog who think Professor Bill Mitchell is a “crank”, in much the same way that the Nazis thought Einstein was a “crank”.
totaram has an important point re people’s beliefs about money. Above we have economicreform and John Kelly claiming:
This ‘destruction’ of money is counter-intuitive for the average citizen particularly when:
While it can be argued that it’s the electronic ‘money’ that is ‘destroyed’, people simply don’t believe it. Neither do accountants and others, including politicians.
It’s an important element in MMT’s credibility; or lack thereof. Perhaps if there was an announcement – Today we destroyed $X million and created $Y million then the punters might become believers.
“The world is full of so-called economists who in turn are full of schemes for getting something for nothing.” — Satyajit Das
Bill Mitchell et al included.
[In particular, federal tax money does not go anywhere — it is destroyed upon receipt]
To me this is a more reasonable explanation
Does The Government Destroy Taxes? How The Government Pays It’s Bills
Counter-intuitive or not, hard to swallow or not, John Kelly and economicreform are merely outlining reality, however unpalatable it may be to some. For someone of the Left I frankly regarding it as liberating. Taxation still serves a critical function at the Federal level however just not one that most people erroneously believe.
Ask yourself this. Where does the Australian government get Australian dollars from? The obvious answer is itself. Can it run out of the currency it has sovereign issuance rights over? The answer is no. Does it therefore require taxation or borrowing to fund spending? Again, given it is the government’s money, then answer again is no. What therefore does government spending do? Answer, it injects liquidity into the economy. What then is the government deficit? If the government creates and spends $10 into the economy, that $10 is merely an asset to the non-government sector of the economy. If the government withdraws $10 from the economy, the ‘budget’ might be in balance but it has destroyed $10 of non-government savings. Running a surplus is therefore to take more out of the economy than is spent into the economy by the government. Running a surplus is nonsensical in most cases given the government doesn’t require taxation for spending and can issue currency at will.
No one is claiming that the government should create and spend money without restraint. The limit is ecological, the resources at disposal, and what can be purchased in Australian dollars be it goods, services and labour. In other words, the capacity of the economy to absorb the liquidity.
The links others have provided are useful for delving into this further but it pays to remember that the money we use is little more than a government-backed social contract – a mechanism for the exchange of goods and services rather than wealth itself. To employ the old economic maxim – the money in my pocket is merely the income of the person for whom I give it to in exchange for goods and services, and so on.
With this knowledge you can be even more angered at the lack of funding in essential services or the stripping and privatisation of assets and utilities for you can see just how ideologically driven such actions are.
I might just stop paying tax then
If they are committing a crime destroying tax $ I may as well keep it and spend it on something useful.
I wonder if Bill Mitchell John Kelly and others explanation would do if the taxman tries to take me to Court
Not much point comlaining about big companies not paying tax then
If they destroy it, why bother
nurses1968: Taxation drives demand for the currency – it compels you to use the government’s issued currency over say cowrie shells or US dollars for you have a compulsory obligation to the issuer. Taxation serves a socially beneficial function, such as penalising activities that are socially destructive (alcohol and tobacco being such examples) or penalising activities that lead to greater inequality (hence a progressive tax system or taxes on unearned income). Taxation also creates a fiscal space by controlling the demand for the currency. If the government solely spent without withdrawing a portion of the liquidity, then you would risk excess liquidity broadly and excess liquidity among sectors of the economy. The government needs to tax to create the fiscal space to spend.
See economist Steve Hail’s video in the related article ‘It’s the economy, stupid’ for more. It’s provided beneath Robyn’s article.
Talk to me when there is OECD acceptance for such a system, though how they could adequately keep checks and balances is a little beyond me. What a time wasting pipe dream it is without that – its all completely false hope to me.
MMT really seems to be more about about hiding away the accounting side of things than anything novel. You’d find that the international business world would intervene.
The only way to sell this would be by selling it as a way to force a redistribution of wealth using inflation. Inflation hurts those who lend money the most, but it also hurts those on fixed incomes such as the elderly. Clearly it has no hope from that angle.
Rail against it all you like jimhaz. I’m merely describing how a Government with a sovereign currency, which has a floating exchange-rate operates now (that means not Greece, or any of the Eurozone and not any nation which has pegged its currency to another). In other words, Australia.
In not sure what you mean by the international business world would intervene. Neoliberal economics is the intervention of the business world effectively – to prevent people from appreciating the true fiscal latitude and capacity for governments to work in the interests of their people. Hence all the woo and the simple parables (the government is like a household – only i know of no household that issues its own currency and can obligate others to use it).
A little inflation is a good thing. Tell me jim, why is government spending necessarily inflationary (can you account for Japan?) and yet private-sector money creation through loans (which is not a financial asset but a liability) not inflationary?
Inflation is theft. There is nothing good about it at all unless you are a thief.
I’m not advocating rampant inflation Harquebus. Would you rather deflation?
Why am I bothering? You repeatedly demonstrate yourself incapable or unwilling to grapple with basic macro-economic principles. Inflation exists, deal with it. MMT describes the functioning of a sovereign currency arrangement. Again deal with it.
Oh and the money in your pocket or your bank account, it isn’t yours. Sorry but again, deal with it.
You continue under the delusion that what MMT describes is an ecological-free-for-all. (Neoliberals will argue that money is finite while the planet is infinite. An MMTer will merely turn this on its head).
Believing that the Earth is flat doesn’t make it so.
MMT is just another variation of fiat currency and yes, economic contraction is required if you a world that is habitable and I didn’t say “rampant”.
“By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some. The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose.” — John Maynard Keynes
Money isn’t wealth, which is where you fall down. it’s not finite and nor is it tethered to precious metals any more. It is the goods and services that enhance your quality of life that are the wealth. Money is merely a codified, government-backed social relation.
Again MMT is how a sovereign currency ACTUALLY functions – it is descriptive. The rest is you just barking at parked cars or arguing with an imaginary friend.
Fiat currency isn’t real money which, is where you fall down.
MMT is not imaginary?
What I have outlined in a rudimentary fashion is thus far descriptive. It is how it operates in broad terms.
The non-descriptive (interpretative) part is what to do with the fiscal latitude that the government has through a sovereign currency. A government can just as easily destroy the environment through certain types of investment as it can invest in renewables, in green infrastructure or even re-wilding for example. The government can use its fiscal latitude to subsidise corporations or it can better fund education, health and other public services. The choices made given this knowledge are still within the realm of the democratic discourse. A government can exacerbate ecological disasters, or create hyper-inflation, or it can improve the environment, invest in socially and ecologically progressive initiatives.
The descriptive part in no way proscribes or limits how such fiscal latitude could be employed. The onus is still on us to ensure that socially and ecologically progressive policies win the day as it always has, except the government can no longer hide behind the false claim that it can’t afford it.
“Fiat currency isn’t real money which, is where you fall down.”
Well don’t use it then and see how far you get. Give away all your Australian dollars now, I dare you.
What do you think the Australia dollar is, if not a fiat currency? I await your answer with interest.
If you mean that ‘someday the world will end and all human life will be extinguished’ means that money is finite then yes I’ll agree with you just as there are a finite number of collective human thoughts or potential sparks of imagination.
Keep using it [fiat currency] and see where it gets us. They have all failed except those currently in use because, they haven’t failed yet.
While I can trade my intrinsically worthless fiat currency for items of real value, I will continue. It is a good deal while it lasts. If you haven’t spent your fiat currency wisely, you will suffer.
[A little inflation is a good thing. Tell me jim, why is government spending necessarily inflationary (can you account for Japan?) and yet private-sector money creation through loans (which is not a financial asset but a liability) not inflationary?]
No, I cannot answer those questions, because I’d need to study them in great depth. Economics is not binary. There would be too many factors involved – current levels of debt and trade balances, trends, how productively the money was spent, levels of private debt or loans, financial state of main trading partners, what areas GDP is growing in, exchange rate trends etc.
I’m sort of open to a conspiracy theory in this area. If someone can demonstrate to me that the wealthy (outside of banks) are using the current monetary system unfairly – and that MMT would resolve that, then perhaps I’d be more supportive.
I openly admit little knowledge of Government Budgets but regularly see the MMT cultists go into a frenzy over the topic.
MMT is a “Theory” right?
Has it been trialled anywhere?
If it was such a wonder you would imagine at least one Government, somewhere, anywhere would have got on board
[If it was such a wonder you would imagine at least one Government, somewhere, anywhere would have got on board
That was my first comment ages ago when this MMT business came to my attention.
I do feel the US is kind of using it at present – there is little concern for the budget debt that would appear to be impossible to ever pay off, and being number 1 economically and militarily and with the US dollar as a world trading currency and multinational and billionaires running US politics – my guess is that other countries are just letting it go. What can they do? Devaluating the US currency wouldn’t help them
They’re in a different position to us as a result. We’d need agreement – they kind of don’t.
@nurse1968 – “I openly admit little knowledge of Government Budgets but regularly see the MMT cultists go into a frenzy over the topic.”
An admission of ignorance and a lack of an argument (‘cultists’) in one sentence. You’re welcome to retort with arguments anything that I, John Kelly, economicreform or others have said on the matter.
Ok Harquebus. Some suggested reading for you on the history of currencies (a clue, they’ve mostly been fiat) – David Graeber’s ‘Debt – the first 5000 years.’
jimhaz – Many of your questions are answered in Steve Hail’s 1 hour presentation above, which I think serves as a good primer. The government deficit is merely the net financial assets of the non-government sector (that is all those domestically and internationally holding Australian dollars or US dollars in the case of the USA). One is merely a minus and there other a plus on a ledger which totals out to zero.
The deficit is therefore not debt. Look up sectoral balances for more. It’s therefore meaningless to speak of the US or Australian federal government ever paying down government debt and dangerous to speak of caps. The size of the deficit merely reflects how the economy (which involves all users of the currency domestic and foreign are travelling). If we have goods and services that non currency users want, they will pay to hold Australian currency in order to obtain them and visa versa.
And with that I must end my involvement on this thread tonight. I recommend Steve Hail’s presentation and the links cited by others for further reading
Yes but don’t get hung up on the ‘theory’ bit. After all, you probably have confidence in the Theory of Gravity – you know when you jump off a verandah you expect to go down (and not up) – that’s the Theory of Gravity in action. You probably also believe in the Theory of Evolution, the Theory of Relativity, the Theory of … There are so many theories in both the Physical and Social sciences that we take for granted because they ‘work’.. Theories are ‘mental constructs’ – ways of looking at things.
MMT adherents usually claim that all they are doing is describing what actually happens. (Not what might happen and how it may be used in the future but the reality of what happens in the here and now. It’s descriptive.
I go away for 10 minutes (ok, slightly longer) and all hell breaks loose. You are all doing a fine job of answering each other, so I’ll sit back and read!
When MMT is subjected to and survives the scientific method then, it will have credibility. In the meantime, we only have the word of economists who, are not scientists.
Harquebus, please design, and explain how MMT can be subject to the ‘scientific method’?
Are your related to Malcolm Roberts?
Goodonya Matters Not. I knew that you wouldn’t let me down.
There’s no science, logic nor rational reasoning in economics. Look where the economic method has got us.
I knew you wouldn’t let me down. Predictable and predicted. But do go on. Take as much rope as you want.
Your point is?
I could go on all night and you still wouldn’t get it. When things improve then, I will apologize and crawl under a rock.
Time will determine which of us is the fool.
Time will determine, but without any limits, you can wait for 2000 years – like SHE! I am sure it will be fun!
Amazing that a person who blathers on about science, physics etc. always makes non-falsifiable predictions. Clever actually, if I didn’t think it was through sheer ignorance.
Want a specific period of time? Probably before 2020 and definitely before 2030 and that’s being optimistic.
Ignorant I am not.
Harquebus: I have some time, so I will bite. What is going to happen by 2020? How do we know if “things have improved”? You still haven’t made a falsifiable prediction. I don’t think you understand the concept. Make one such prediction now. I might still be around in 2020, although 2030 is doubtful.
GFC mkII. The GFC to end all GFC’s. If not by 2020, I don’t think that it will be much after.
When global debt levels decrease then we will know that things are improving.
I didn’t know that I was required to make a “falsifiable prediction”. If things do improve before then, my prediction will have been proved false. You’ll just have to wait and see. Hoping that you live long enough to.
Get that don’t think that it will be much after . Hilarious! Now totaram, there’s a falsifiable proposition of comic proportions. Note the gaping back door – will be much after. Note, in particular, the definitive timeline. One wonders re the ‘scientific’ methods employed to make such predictions.
To date he’s been rabbiting on about the end of civilisation as we know it and the evidence suggests he might be simply projecting from his own circumstances. Jeremiahs here, there and everywhere.
passum2013 … ‘I have seen worse Where some one faced the Toilet and crapped facing the toilet and Wiped bottom and threw paper on the Floor I bet it was not a Genuine Australian and Yes it was in a blokes toilet’ … ‘Genuine Australian?’
Scientific method on economic absurdity. That’s hilarious.
You never let me down do you. It’s always attack me. That’s okay. You are too insignificant when compared to our real problems which, you never seem to have any answers for.
“A new scientific paper by a University of Maryland-led international team of distinguished scientists, including five members of the National Academies, argues that there are critical two-way feedbacks missing from current climate models that are used to inform environmental, climate, and economic policies. The most important inadequately-modeled variables are inequality, consumption, and population.”
“However, these human impacts can only truly be understood within the context of economic inequality”
“One effect of this inequality is that the top 10 percent produce almost as much total carbon emissions as the bottom 90 percent combined.””
“Social and economic equality empowers societies to engage in sustainable pathways, which includes, by the way, not only the sustainable use of natural resources but also slowing down population growth, to actively diminish the human footprint on the environment.”
“We cannot separate the issues of population growth, resource consumption, the burning of fossil fuels, and climate risk. They are part of a coupled dynamical system, and, as the authors show, this has dire potential consequences for societal collapse. The implications couldn’t be more profound.”
If I post links that do not include a search criteria then, they are from my saved links or browser history and indicates that I have previously read the article.
Care to offer a solution?
Thanking you in advance for your considered and enlightening response.
Let’s get one thing very, very clear. I don’t attack an individual whom I don’t know in any shape or form – never met and have absolutely no interest in so doing. It’s certainly not personal. (I assume that the ‘ancient gun’ is a moniker? And not your real name.) Not primarily interested in people here – rather the ideas advanced. It’s the moniker of Harquebus, and the nonsense advocated, that’s under fire. What I do take issue with is the ‘ideas’, ‘predictions’ and the like which are written. Names matter not! Hence (in part) my moniker.
Yes you are right about not having any answers for very serious problems or difficult questions. Many, many ‘wicked’ problems. For example, I refuse to try and answer any number of metaphysical questions, such as the ‘meaning of life’? I know some do – and resort to religion, gods and the like in desperate attempts to ‘explain’. Not for me. Harquebus constantly advances an absolute epistemological position. As though the future is ‘knowable’ (in some absolute way) and it’s without hope unless we just give up and resort to some golden age in the past when technology and life was so simple. Not for me. It’s defeatist. Hiding under a pillow and all that. It’s backward looking. And more importantly – it’s simply not going to happen. That’s the political reality.
And enough from me.
Thank you for your considered and very enlightening blurb.
Can’t help yourself but to select carefully excerpts and take them out of context can you.
I bet that you didn’t even bother to read the article that I posted. Useless turd you are.
“Political reality.” That’s an oxymoron.
Another helpful ‘insight’?
Oh. And Cheers.
Or is that your latest falsifiable proposition?
Nope. Plain for all to see.
Prove me wrong and do something useful for a change.
Prost? Given your penchant for quotes, could it be one from Marcel Proust that you seek? Then try this one:
Having new eyes suggests that you look at the world in a different way. It’s possible. But not probable – at least in your case.
I already do. That’s what causes a lot of our arguments. One can not unsee things.
You can have another bash if you want. I’m finished.
Really? Marcel Proust reckons you can if you have new eyes . In short, (and in your case), have a less pessimistic ‘world view’ and adopt a more positive one. Give it a go. You have nothing to lose.
Won’t go into the interplay between and among intellectual ‘theory’, ‘methodology’, ‘fact’ and ‘meaning’ generation and subsequent attribution at this time of night. Readers might get bored. LOL.
Prost: “Prosit” in German and Spanish means “Cheers” (especially for beer)
and is pronounced “prost”