Your Money

Why it’s time for voodoo economics

| More

This week Rob Oakeshott’s baby – the tax summit – will attract the usual suspects who will be calling for tax increases as the politics of envy gets in the way of both enlightened thinking and better policy options.

In contrast, I reckon it’s time for some lateral thinking and ‘voodoo economics’.

The tax talkfest in Canberra comes as the PM has noted in parliament that the tax-take under Labor has actually fallen. The figure looks like a drop of $130 billion from 2008-09 to what is expected in 2012-13 and while that looks good for a government accused of being anti-business, it has mainly come from the fact we had a slower economy.

In reality, tax cuts were helped along by natural disasters, a beaten up global economy and a Reserve Bank that has used interest rates to knock out a hell of a lot of spending businesses and consumers.

And so now we have to think about ways of taxing more in some areas and reducing tax in others, hopefully, but the tax experts will put forward suggestions to improve efficiency and equity. These ideas are theoretically applaudable but often spell political disaster for any government dumb enough to buy these great brain explosions from economists.

I think the old Treasury boss, Ken Henry, proved this point with his tax musings, which effectively put the skids under Kevin Rudd’s popularity. It also rocked the stock market and the dollar for a while as well.

Given Ms Gillard’s polling performance right now, the tax summit will be all talk and no action.

That’s why I want some voodoo economics.

George Bush Snr made this line famous when he responded to President Ronald Reagan’s idea of big tax cuts that would actually increase tax revenue.

US economist Arthur Laffer argued that when tax rates are high there’s more incentive to get tax advice to dodge tax. His Laffer curve showed if you cut tax rates then tax revenue rose.

Now I don’t want to argue the toss with tax economists who live for the debate over whether our taxes are too high. Some economists say it is not on an international basis but nearly all accountants disagree.

I reckon instead of a taxing talkfest, this country needs a GAP – Growth And Productivity – summit where we look at ways to boost the two things that can create jobs while keeping inflation down.

We could look at, for example, ways to get weekend pay rates down for retail workers but doing more to improve working conditions to create happier workers, who are always more productive.

Ideas for boosting tourism so it is not captive to the ups and downs of the dollar would be a smart goal as well.

Great business leaders think outside the square to reinvent their businesses — Steve Jobs at Apple is a brilliant case in point, so why can’t governments?

Personally, I am sick of whingeing about Reserve Banks and predicable governments who keep on doing the same thing for mediocre results.

The definition of insanity is doing the same things and expecting different results.

My GAP summit might be the voodoo economics option we need to have.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Published on: Tuesday, October 04, 2011

Related articles

8 steps to family financial planning

How do I get rich?- the vital question not asked

How do I get rich?...the vital question not asked

How do you win?

The vital question not asked: how do I get rich?

blog comments powered by Disqus
Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300