A GST hike will hurt everyone. Everyone.


The AFR’s economics editor Alan Mitchell has taken a Treasury briefing. He is out this morning offering all sorts of reasons why a broader, higher GST is a brilliant master-stroke that deserves universal applause.

He knows, we all know, a Goods and Services Tax is regressive and unfair. Citizens earning up to $100,000 will need compensation for the harm it causes. That is most of the population.

PWC estimate a 15 per cent GST would raise $113.5 billion, with $76 billion of the tax raised needed to repair the damage it does to households.

That’s not tax reform.

The logic chain behind Alan’s piece today runs something like: Treasury advises the government of the best options (See: Australia’s Future Tax System), government rejects the advice, Treasury shrugs and pursues second best, Alan advocates dud reforms.

Alan Mitchell is usually very sound. He knows which are the best tax bases and has been prepared to speak out for them. See here, here and here.

Yes, the best taxes are on land and resources.

Taxed labour sulks; taxed capital leaves; taxed land simply surrenders the economic rents that fall to it.

PM Malcolm Turnbull recently told ABC Melbourne’s Jon Faine he didn’t want to win an economics prize with his tax reforms. That’s political code for taking second-best options that protect rent-seeking behavior.

I nearly burst into tears.

Imagine if our engineers refused to build stronger, cheaper, safer bridges because it didn’t suit the cement companies. We would string them from lamp posts.

If the federal Liberal/National Party government genuinely wanted Australia to be the most dynamic and prosperous country on earth, they would embrace Treasury’s agenda.

There is a tax available that drives economic activity. It is land tax. And growing the economic pie is a much better strategy than fighting over who gets to eat the most.

Alan, contest destructive rent-seeking behavior. Help government make the best decisions. Please.


  1. John Massam03-12-2015

    David C, You are right on track.

  2. Steve04-12-2015

    What no one ever mentions is that this is a back tax on all your saving.. Say you have saved some years for something of significance, now you will have to save for another year or some months to buy it. An increase by 5% is equal to your bank interest after tax for the last 2 years (thats if you have carefully selected accounts to start with)
    There will be no compensaton for this, especially if you are stuck with the modern part time casual work that does not pay a living wage to start with.

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