Gina Rinehart’s stunningly inept intervention last week blaming the envious poor for their own stasis may have drawn international ridicule, but many of her assertions were also plain wrong.

In the latest incarnation of Crikey‘s Get Fact series, we decided to test the billionaire mining heiress’ central premise borrowed from the American GOP pulpit — that it is “business and investment”, not “high-tax socialist policies” that create jobs. Take it away, Gina:

“… those who hurt the most when investments are killed off by taxes, green tape and socialist policies that are not friendly to business or conducive to investment are those who usually vote for the anti-business socialist parties. And for them, the price is very high. It’s a job lost, when they have few savings, a mortgage to meet and children to clothe and feed.”

First, let’s start with her central claim: that Australia has “high taxes”. As Wayne Swan has repeatedly pointed out, our tax to GDP ratio is lower than almost all OECD countries, falling from 24.2% before the 2007 election to 20.1% in 2010-11.

During the 1950s, ’60s and early ’70s — with the top marginal tax rate (or MTR) well over 60% — unemployment oscillated between 1% and 2%. That’s full employment by anyone’s definition, as the following graph starkly illustrates.

Historical marginal tax rates from the AFTS Review; unemployment rate from ABS 6202 from 1978 (Source: ACTU; unemployment rates prior to 1978 are from Butlin 1977)

In fact, despite a number of variables being in play, the years with a higher MTR actually tended to equate to a lower unemployment rate (the dots represent a year between 1965 and 2011):

Historical marginal tax rates from the AFTS Review; unemployment rate from ABS 6202 from 1978, source ACTU

What about Rinehart’s claim that economic growth is apparently being held to ransom by “the socialist path of high taxes and excessive regulation”? As the following graph shows, higher top marginal tax rates didn’t seem to prove an impediment to economic growth either:

Historical marginal tax rates from the AFTS Review; real GDP data from ABS 5204; source ACTU

The Hancock Prospecting scion’s claims don’t even make sense in the country where her rhetoric is drawn from. In the US, recent data has debunked the link between high taxes and high unemployment. The New York Times‘ Economix blog earlier this year quoted from a new OECD study demonstrating that despite the US being a low tax country with a correspondingly low “tax wedge” (“the difference between the cost to an employer of employing a worker and the after-tax reward that the employee receives”), its unemployment rate remains bulbous.

Author Bruce Bartlett showed that federal revenues will sit at 15.8% of GDP this year against a postwar average of about 18.5%. Taxes, Bartlett reports, “averaged 18.2% during the Reagan administration; indeed, at their lowest point in 1984, federal revenues were 1.5% of GDP higher than they are now.”And when spending is taken into account, the economic footprint of the Australian government as a share of the economy seems even smaller. Only Switzerland and South Korea have both lower government revenue and lower expenditure as a proportion of GDP of all the OECD countries:

 So what would a Rinetopia look like? As Crikey discovered last year, the world’s richest woman used Australian Resources & Investment to back the development of a Shenzhen-style northern economic zone that would let her import cheap labour and avoid taxes.

An exemplar of how to run an economy was apparently the former West Germany. Post-War FRG finance minister Ludwig Erhard, she reckoned, “believed in the potential of a citizenry freed from the burden of government planners and allowed to build wealth for themselves”.

In January 1990, the unemployment rate in the GDR was 0.1% — but reunification meant that by early 1992 one out of three East German workers had lost their jobs as the Treuhand ran rampant. While the FRG’s unemployment rate dipped under 1% in the 1960s, by 1989 it had reached 7.1% — a big discrepancy, even though unemployment in the GDR was illegal and the rate was almost certainly massaged. Of course, employment in West Germany was arguably bolstered by the “Rhineist” tax-and-spend policies Rinehart derides.

As James Thomson documents elsewhere in today’s Crikey, Gina might have seen her wealth erode $9 billion as the iron ore spot price declines amid waning Chinese demand. In other words, it’s the inability of the Chinese government to engineer a broad demand-driven middle class — not the Australian government’s “socialism” — that will be the biggest break on her profits. And Australia’s unemployment rate is a different matter entirely.

Accordingly, we rate Rinehart’s claims about class warfare, taxes and unemployment as utter bollocks.