What should Scott Morrison do with his first budget tomorrow? Here are seven ideas to return Australia to fiscal responsibility.
1. Land tax
In the world of tax, only one hero is left waiting in the wings.
A tax that raises billions, targets the wealthy ahead of the poor, and doesn’t inhibit activity we want to encourage. The name of that tax is land tax, and it is very much overdue.
The sticking point will be the cash-poor, asset-rich grandma who would be forced to eat rice and beans to pay an enormous land tax bill. Whatever ugly exemptions or fat payments are necessary to make that problem go away are tiny compared to the long-term upside. Just do it.
REVENUE: $15 billion-plus a year.
2. Carbon tax
Defund Direct Action and replace it with a broad-based carbon tax linked to the global price. This will have superior fiscal, environmental and economic effects and is likely to have the support of just about everybody (except maybe a few editors at certain tabloids).
EXPENSE/REVENUE: Neutral after compensation.
3. Infrastructure bonds
If this is not in fact the centrepiece of Tuesday’s budget I will be shocked. This government needs to splash some cash in order to win votes — the lesson of the austere 2014 budget will not be forgotten. The only way it can appear to do so without also blowing up the deficit is by having debt held off-budget, for example, by an enlarged and empowered Infrastructure Australia funded by bond issuance.
There has never been a more exciting time to raise funds on global markets; global long-term interest rates are stuck down in the weeds. With inflation currently dangerously low and falling, there is room for big projects in the Australian economy. One crazy idea I’ve heard around the traps is a high-speed internet network that reaches every home in Australian. Perhaps that is just the sort of wild idea global bond markets would fund?
EXPENSE/REVENUE: Neutral on the budget.
4. Competition reform, including road user charging
Where possible, shifting the economy towards making use of price signals makes very good sense.
For example, instead of using “willingness to wait in traffic” as your criterion for who gets to drive on the freeways in peak hour, we should use pricing. Much like there are Wallys with Water, we also have Trevors in Traffic. Some of these people can and should travel at other times or on other routes to get out of the way of people who can’t. Price signals will help sort this out.
Other areas where competition reform could be valuable include pharmacies, aviation, coastal shipping, airport parking, patent and copyright protection.
REVENUE: $10 billion-plus from charging to use government-owned assets.
5. Universal basic income (UBI) scoping study
Optimising the use of markets — for carbon, roads, etc — is important for anyone who wants to use resources efficiently. But it has risks; markets are efficient, not kind, gentle or moral.
The more we use markets, the more we need to actively prevent disadvantage. We ought to invest in the world’s best health and education systems. Our welfare net could also use reform. The best way may well be a UBI. This is an idea whose time has come — it is getting a lot of attention around the world.
It works as basically a big payment to all Australians. For those with no market earnings it comes as cash. For those with earnings, it essentially operates as a negative tax rate. It would be very costly. But a big study would help us figure out how and when it can be afforded.
EXPENSE: $50 million.
6. Federal ICAC
Much like an inquiry into trade unions, a royal commission into banks will likely find a few bad apples in a few places and a range of bad practice that we already kind of know about. A proper, independent, permanent commission against corruption could achieve far more.
EXPENSE: $50 million each year.
7. Sew up the gaping holes in our tax system.
The Panama Papers show us only a tiny fraction of what is likely to be an enormous global issue: personal tax avoidance. Company tax avoidance is in the spotlight, too.
It is true the rich already pay by far — by far — the most tax. Maybe we would simply be overwhelmed by revenue and could easily lower taxes on companies and the very wealthy if we were collecting what they owe — who knows?
Let’s start this process by first chasing down every last cent they owe and then deciding.
REVENUE: $? But potentially heaps.
Other strong ideas might be to fund Gonski; delay major defence acquisitions; address super tax concessions; shut Manus and Nauru; broaden the GST; legalise and tax low-risk recreational drugs; fund CSIRO and researchers, and cut subsidies to private schools.
I’d like to see a Job Guarantee, a commitment to genuine full employment and an unemployment rate of 2%.
It can be funded because Australia is a sovereign nation producing fiat currency- the reason we can magically find the money for submarines. The government can invest whatever it wants in whatever it likes.
But acknowledging that doesn’t sit well with decades of the inappropriate household budget analogy or the surplus fetish, does it?
Yes. A land tax. A growth tax for the States. When talking about value capture, why stop at the consequence of new projects. Why not capture a portion the added value which accrues to inner city land owners over time.
A Job Guarantee would be much better than a Basic Income Guarantee. A Job Guarantee acts as a price anchor for the entire economy; this means it puts downward pressure on inflation. A Job Guarantee satisfies the population’s unmet desires for work; it can be structured to broaden our understanding of what work is; it gives everyone who wants to work the sense of purpose and belonging that comes from paid work; it prevents poverty; it builds the skills and capacities of workers; and it produces socially useful goods and services. It’s no contest: a JG would be far better than a BIG. Bill Mitchell, an economist at the University of Newcastle, is a prolific academic and popular writer on this topic.
“The sticking point will be the cash-poor, asset-rich grandma who would be forced to eat rice and beans to pay an enormous land tax bill.”
She wouldn’t have that problem if she downsized to something more affordable, and that would free up the property to be better used by more people (thus helping ease housing pressures).
Or if she reverse mortgaged the house.
excellent article Jason