What does our Prime Minister really think about money? Does he see himself as the ‘Robin Hood’ of Australian democracy?
Absent any systematic treatise, it seems we have to guess how his thinking works based on his words and actions. Over the last week, his words have changed. The Prime Minister’s reasoning for this change, as reported by him, is because he was driven by a sense of ‘fairness’ to deliver more tax relief to more people.
But is our Prime Minister’s ‘fairness’ actually ‘just’? That depends on our view on the role of taxation. For example, if taxation is primarily about providing minimum care for those who cannot provide for themselves, that is very different to if we view taxation as a means of ensuring everyone receives the same benefits regardless of individual context.
It seems that our Prime Minister has confirmed that he is in the latter camp. He has demonstrated a tone deafness to the nuances of taxation changes and changed his mind, dramatically, under the cover of his plaintiff cry, ‘But this is fairer!’
The irony is that his drastic turn-around is purported to fix a problem of his own government’s making. The ‘cost of living crisis’ is driven, amongst other things, by the rising price of energy. The unnecessary and ineffective rush to so-called renewables, and the banning of alternatives, is central to the difficulties being experienced by families and businesses.
Does it make sense to give more money to those with less, regardless of the cause? Drs Laffer and Domitrovic have suggested that this is not necessarily helpful. Indeed, they have identified that beyond a certain point (perhaps 20 per cent of GDP), more taxation is counter-productive, regardless of the distribution pattern. According to their ‘transfer theorem’, when you take money from those who are involved in increasing goods and services, they have less to invest in their productivity. And when you give that money to those who have a little less, this alternative source of income detracts from their incentive to be productive (and earn more on their own).
As Dr Laffer explained in an interview: ‘Whenever you transfer resources you always reduce total production in the system. Always. You take from those who have a little bit more, reduce their incentives to produce, and they’ll produce less. You give to those who have a little bit less, provide them with an alternative source of income, and they, too, will produce a little bit less. Whenever you redistribute income you always reduce total income, period.’
Here is why our Prime Minister’s Robin Hood act of fairness is more than a broken promise. He is, long term, aggravating the very dynamic he pretends he is fixing! He claims this is good economics. He is wrong. Why? Because he is, again, creating options that decrease productivity. It is unjust. It is against the principles of respect for individuals within a community. It is against the principles of choice within the community itself. We can call it ‘big government’ or ‘socialism writ large’, but at a deeper level, it is an attack on our humanity.
Why? We humans are choice-makers towards meaning and truth. Existential questions of life are important to us. For example, we recoil against the horror of any war. We should throw ourselves into protecting others from the evil of those who rejoice in the horror of war.
In leadership, our choices should be made in a manner that demonstrates a transparent relationship between responsibility and authority. But when the government takes too much of our money, it is taking authority which is not its to use. This is why allowing taxation bracket creep to flourish is unjust. It separates the responsibility of productivity from the authority to make decisions about our productive efforts. Again, Laffer puts it bluntly:
‘Whenever you redistribute income, you never actually redistribute income. You destroy total income completely. Every revolution on planet Earth has been fought in order to change the distribution of income. Not one of those revolutions has ever succeeded in redistributing income, but all of them have succeeded in destroying the entire quality and quantity of total income. All of these attempts at high tax rates have been attempts to redistribute income, taking from the rich and giving to the poor. Robin Hood. And none of them have succeeded. But what they have succeeded in doing is destroying total income and the quality of life in our country.’
That is what the Prime Minister is doing when he claims he is being ‘fairer’. He is continuing to reduce the quality of life in our nation. Is this why he shied away from what he was intending to do (or at least thinking about doing) with blatantly misleading responses to questions about the already legislated Stage 3 tax cuts.
There is an old saying that explains that what comes out of our mouths demonstrates the state of our heart – where our heart is the total of who we are. What does this say of our Prime Minister?
