David Leyonhjelm guest post on the budget

When someone does something they shouldn’t, it’s often the cover-up that heralds their downfall rather than the original error.

In Tuesday’s budget the Coalition Government broke its commitment to offset new spending measures with reductions in spending elsewhere. For a fan of small government like me, this is disappointing enough. But for many people, it’s the Government’s attempt to cover up its breach that might disappoint them more.

The Government’s affirmation of its commitment was as clear as day in the key budget document: “new spending measures will be more than offset by reductions in spending elsewhere within the budget”.

And the Government pretended to deliver on this commitment by claiming that: “the overall impact of new spending decisions in this budget is an improvement to the bottom line of $404 million over the four years to 2021-22”.

However, this $404 million figure is a result of creative accounting that would make our banks blush.

First, the Government decided to rush a billion dollars of new spending out the door before 1 July so that it wasn’t counted in the four years to 2021-22. This was supposedly to provide long-term support for research and supercomputing infrastructure, apprenticeships and the Great Barrier Reef ‘2050’ Partnership Program.

There were no offsetting spending reductions elsewhere to compensate for the end-of-financial-year splurge.

Second, the Government still plans an increase in net spending in the four years starting on 1 July; it just doesn’t look like that at first glance. In an accounting trick that Enron would be proud of, the Government provided $500 million to the Defence Department before 1 July, but reduced spending by $488 million in the four years starting on 1 July.

Inevitably, the Department will spend this stockpile of funds over the coming four years, rather than in the next six weeks. If Defence spending was honestly accounted for, it would be plain to see that the Government is increasing net spending in the four years starting on 1 July.

Such manipulation of money flows to the Defence Department is nothing to do with national defence and everything to do with hiding the Government’s failure to meet its commitment to reduce net spending. It’s a cover up – plain and simple.

The Coalition Government clearly felt it necessary to fake its compliance with a commitment to reduce net spending. This suggests the Coalition knows that reducing spending is a good thing, but just can’t muster the courage to do it. It’s hard to say what’s worse: a fan of big government who unashamedly increases net spending, or a supporter of smaller government who increases net spending and feels guilty about it.

Even leaving aside its accounting fiddles, the Government’s claims that it is controlling spending are undermined by the fact that it plans to increase net spending next year and the following year, and only plans to cut net spending in 2021-22. That’s two elections away, in the political the never-never.

Increasing net spending is shameful when we are stuck in an 11-year stretch of budget deficits and growing government debt; a cruel burden on the next generation. And as the budget papers reveal, real government spending per person has never been higher.

With even a little bit of spending restraint, perhaps drawing on the ideas I set out in my alternative budget, we could achieve a budget surplus and be paying down debt right now.

Unfortunately, the Government’s plan for eventually returning to surplus continues to rely on extracting more revenue. Yet the real tax burden per person has never been higher than it is now, and the Government is planning to increase this burden every year for the next four years, notwithstanding its plans for tax cuts (some of which are up to three elections away). By every measure, tax is going up.

Even the Government’s plan to tax its way to surplus is far from certain. For instance, it hopes to raise an extra $3.7 billion in tobacco taxes over four years by cracking down on the black market (which the Government created when it put $20 of tax on a pack of cigarettes). The idea that tobacco smugglers will suddenly give up because of increased enforcement, and the smokers buying illicit cigarettes will swap back to legal taxed products, and not use imported e-cigarettes, is totally fanciful.

It seems we will continue to live beyond our means and suffer tax-and-spend governments for many years to come, regardless of which party is in power.

David Leyonhjelm is a Senator for the Liberal Democrats

This entry was posted in Economics and economy, Federal Politics, Guest Post. Bookmark the permalink.

19 Responses to David Leyonhjelm guest post on the budget

  1. Rafe Champion

    Is there a hint of a genuine reason to spend money on the Great Barrier Reef?
    And don’t mention the submarines.
    Or Gonski.
    Or the NBN.
    Or the NDIS.

  2. Ƶĩppʯ (ȊꞪꞨV)

    On what planet is paying out more than half your income not considered sufficient to be a “fair share” and that you can afford to pay more.

    socialism is a nothing but a crime sugar coated in fake compassion, and its adherents should be treated accordingly.

  3. Bruce of Newcastle

    In Greece the politicians are notoriously profligate. The Greek budget is a joke, and the EU has been using all sorts of wheezes to stop the whole place going bankrupt.

    The whole of the population are disgusted with Greek pollies. They routinely avoid as much tax as they possibly can.

    And the LNP and ALP are turning Australia into Greece.

    Cry our beloved country.

  4. Tel

    The Coalition Government clearly felt it necessary to fake its compliance with a commitment to reduce net spending. This suggests the Coalition knows that reducing spending is a good thing, but just can’t muster the courage to do it. It’s hard to say what’s worse: a fan of big government who unashamedly increases net spending, or a supporter of smaller government who increases net spending and feels guilty about it.

    Ignoring challenging questions over morality, honesty and trust… do you think this strategy can win votes? Seems to me that the people who benefit will treat it as largely a random windfall, therefore they have no expectation of future benefit and no reason to change vote.

    Newspoll claims an 8% jump in support for Turnbull, does anyone believe that? Really, 8% of Australians suddenly became Turnbull supporters just because of this budget?!?

  5. RobK

    The noose of inefficiency and paying large interest payments looms large. An announcement on the new space funding will save the day? Weep. This is a centrist controlled government, out of control. It pretends not to be.

  6. candy

    Really, 8% of Australians suddenly became Turnbull supporters just because of this budget?!?

    I think Tel because of the phase of the new tax plan where the tax bracket of 37% is removed and there is a flat tax of 32.5% for everyone on $41,000 to $200,000.

    That is promised in some years to come but it plays to the Liberal base very well. The burden of tax is shifted to the low income earners, which flat tax does.

  7. Snoopy

    and there is a flat tax of 32.5% for everyone on $41,000 to $200,000.

    Someone on $41,000 will not pay 32.5% tax. Stop the lying, Candy. Save that shit for the open threads.

  8. candy

    Snoopy, I read it on ABC site.

  9. H B Bear

    If only there was a major political party that believed in small government in Australia. And did something other than delivering speeches about it in London from the backbenches or Opposition.

  10. Tel

    Someone on $41,000 will not pay 32.5% tax. Stop the lying, Candy. Save that shit for the open threads.

    In the highly unlikely event that everything goes to plan from now until 2024 the resulting position will be that the MARGINAL income tax rate of 32.5% kicks in AFTER $41,000 taxable income. However there’s a magic trick with the Low Income Tax Offset which imposes some additional marginal tax (and it shifts from year to year).

    http://sjm.ministers.treasury.gov.au/media-release/045-2018/

    This is of course not a flat tax by any means, but it might be slightly closer to a flat tax, hopefully someone merges in the various extra levees like Medicare, Budget Repair, blah blah and produces a proper curve out of it. And no the low income earners are not going to be carrying the burden of the income tax, in a flat tax they pay only in proportion to what they earn but in this case they will pay considerably less than that.

    Personally I think the whole Low Income Tax Offset is stupid sleight of hand, they should simply increase the tax free threshold if that’s what they want to achieve. This is kind of doing it by stealth and then clawing it back again hoping no one is smart enough to notice.

  11. candy

    Personally I think the whole Low Income Tax Offset is stupid sleight of hand, they should simply increase the tax free threshold if that’s what they want to achieve.

    Totally agree. Increasing the tax free threshold to say $25,000 would have solved many problems.

    As well, everyone gets it, not just low income earners. If you make$200,000,eg, you still get the benefit of increased taxfree threshold, I believe.

  12. Snoopy

    Someone with a taxable income of $18,201 receives a Low Income Tax Offset of 19 cents. Correct?

  13. max

    The Burden of Taxation in Poetry

    Examples
    Accounts Receivable Tax 

    Building Permit Tax 

    CDL License Tax 

    Cigarette Tax
    
Corporate Income Tax 

    Dog License Tax 

    Federal Income Tax 

    Federal Unemployment Tax (FUTA) 

    Fishing License Tax 
Food License Tax
    
Fuel Permit Tax 
Gasoline Tax 

    Hunting License Tax 

    Inheritance Tax 

    Inventory Tax 

    IRS Interest Charges (tax on top of tax),
    
IRS Penalties (tax on top of tax), 

    Liquor Tax 

    Luxury Tax 

    Marriage License Tax
    
Medicare Tax 

    Property Tax 

    Real Estate Tax
    
Service charge taxes

    Social Security Tax 

    Road Usage Tax (Truckers) 

    Sales Taxes 

    Recreational Vehicle Tax
    
State Income Tax
    
State Unemployment Tax (SUTA) 

    Telephone Federal Excise Tax 

    Telephone Federal Universal Service Fee Tax
    
Telephone Federal, State and Local Surcharge Tax

    Telephone Minimum Usage Surcharge Tax 

    Telephone Recurring and Non-recurring Charges Tax 

    Telephone State and Local Tax 
Telephone Usage Charge Tax 

    Utility Tax 

    Vehicle License Registration Tax 

    Vehicle Sales Tax 

    Watercraft Registration Tax 

    Well Permit Tax 

    Workers Compensation Tax

    This we know: Taxes are not rescinded; they are extended.
    They are piled higher and higher.
    And when there is at last resistance, then comes the inflation tax. I can help you beat that one.

    https://www.garynorth.com/public/3119.cfm

  14. Dr Fred Lenin

    As far as Turnbull rise in popularity the poll was taken in the alp lunchroom during their daily piss up they love turnbull he is implementing their rise to total and permanent power. They will reward him by making him president for life of the Australian Province of the u.n. Peeples decromatic republik of world .
    Love percentages , Mugabe used to get 116 per cent of the vote .

  15. Bushkid

    candy
    #2711043, posted on May 15, 2018 at 8:41 am
    Snoopy, I read it on ABC site.

    The case could be rested right there. The ABC, indeed!

  16. Tel

    Someone with a taxable income of $18,201 receives a Low Income Tax Offset of 19 cents. Correct?

    It’s an appalling mish-mash.

    https://atotaxrates.info/tax-offset/low-income-tax-offset/

  17. John Constantine

    This article is about South Africa, but the only difference between them and australias krony kleptocracy is they can’t jam a burning tire over your neck here yet.

    “A smattering of influential figures, like the current president, Mr. Ramaphosa, amassed extraordinary wealth. They were allowed to buy shares of white-owned companies on extremely generous terms and invited to sit on corporate boards. They acted as conduits between the governing party and the white-dominated business world.

    Some of the A.N.C. leaders who were left out of that bonanza quickly found a new road to wealth: lucrative government contracts. The public tap became a legitimate source of wealth for the well connected, but also a wellspring of corruption and political patronage”

    https://www.nytimes.com/2018/04/16/world/africa/south-africa-corruption-jacob-zuma-african-national-congress.html

  18. Rob

    In fairness to Malcolm Turnbull, he is a strong advocate of smaller government. No one has done more to reduce the size of the government, last election he reduced the number of coalition members of the HoR by 15%.

Leave a Reply

Your email address will not be published. Required fields are marked *