Dryblower on the tax troika

LAST year Australia’s manufacturing and service industries thought it was amusing to see the mining industry targeted by a proposed super-tax. Dryblower reckons the smirks are missing today as every industry and household contemplates a carbon tax.
Dryblower on the tax troika Dryblower on the tax troika Dryblower on the tax troika Dryblower on the tax troika Dryblower on the tax troika

 

Tim Treadgold

If it proceeds as planned, the carbon tax will be the third new tax suggested by the Australian government in less than 12 months, with carbon joining mining and the flood levy.

There is a pattern in the three taxes which forms a shape called “government v industry”, though perhaps not everyone is seeing that as clearly as Dryblower, so let’s look a little closer.

The mining tax, we were told last May, was about capturing the peak profits of the resources boom and redistributing the proceeds elsewhere in the economy – with industry paying for the privilege of government doing the redistributing.

The flood levy has a similar aim. Tax everyone and redistribute to regions hit by natural disasters. This time it’s the people paying and the government spending.

The carbon tax is a re-run of that theme. Tax industries which produce carbon and redistribute the revenue to low-carbon industries while also compensating some people for the extra cost.

Carbon is a re-run of the game, only this time the manufacturing industries of southeast Australia (which laughed at the miners last year) have suddenly woken to a world where electricity costs will soar at a time when they are being crushed by cheap Chinese imports, and suffering the export restrictions of a sky-high Aussie dollar.

Government, naturally, seems unaware of the problems it is about to cause because, said quickly, the mining tax, flood levy and carbon tax sound an idyllic way to spread the wealth of an economy.

Only a few critics appear to have connected the dots which follow the money chain to the end game, which is a world of bigger government and smaller industry.

If this is starting to sound like an ideological rant then Dryblower apologises, though there is a reason for the rant, and that is a concern that Australia itself is being radically altered by policies that are poorly thought out and which will do long-term damage to the economy.

As most readers are familiar with the mining tax issue there is not much point in re-running that discussion, only to say that while iron ore and coal are the first targets of the tax other minerals are certain to be added to the list, if only because such a move would be so easy.

The flood levy, which has genuine humanitarian aims at its heart, might do some good. The test will be whether government spends the revenue raised wisely – and if that happens it will be a first.

The carbon tax is the one which has the potential to do the most harm, not merely because of its cost, more because it will lead to a spectacular misallocation of spending.

To understand this point, consider where the money being raised by the various taxes will go.

Mining-tax money, we are told, goes into an enhanced superannuation system and better government services in the densely populated southeast of the country, with a small allocation to better infrastructure in the mining states. In other words, much of the mining tax goes to people who have done nothing to earn it.

Much of the flood levy goes to help re-build infrastructure in Queensland where that state’s government hadn’t bothered to pay for insurance – like every other state. In other words, people in other states get to pay for the action of lazy government in Queensland.

The carbon tax, however, is the big one, because much of it will be spent on “green” electricity production such as solar and wind power generation which will require massive subsidies for decades to come – if, in fact, they ever work.

Talk of compensation for ordinary people faced with higher living costs is perhaps the biggest fraud of all because that ignores the job losses which will be suffered, especially in the manufacturing sector.

In Melbourne and Sydney, you might get a hand-out from government, but you might not have a job.

Taxing carbon, as in taxing mining, sounds easy, but will prove to be a spectacularly destructive misallocation of resources driven by a desire among a hard core of inner-city green voters who have the luxury of public transport, or live within cycling distance of work.

For most Australians, especially those in outer suburbs and remote mining communities, a carbon tax will quickly be seen as a tax on their living standards to support inner-city Greens.

*First published on Monday in ILN’s sister publication MiningNews.net.

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