Expenditure Tax.... the Gamechanger?

[ramblingboy42]

I have had an expenditure tax explained to me , it seems to make sense and adds up. This would eliminate every other form of taxation , after all, taxes are only charged to raise revenue.

Please do not challenge my exact figures here , they are close enough to get the point across.

2018 RBA figures used for illustration.

Australia's Federal and State Government revenue combined was $511 billion.

Australia's Federal and State Government expenditure combined was $735 billion.

So we had/have a combined government defecit of approx $220 billion.

Total Australian expenditure in 2018 was according to the RBA $255 billion per working day.

There were 251 working days in 2018

If this total national expenditure for 2018 was taxed at a 2% expenditure tax rate (discounting all other taxes) $1.3 trillion would be raised as revenue giving a surplus of approx $500 billion .....this could continue into perpetuity.

I can't really see a problem with this.

Why hasn't it seen the light before? Maybe it has. It was passed on to me.

[Homestar]

I don’t think your numbers are right but I’ll have to sit down and go through it. Not saying they aren’t but total revenue was $493B and tax was 25.3% of GDP in 2018 from what I can see.

Got some links to the data - I could be misinterpreting what you mean.

[scarry]

Cant see it ever happening,one mob will say it's the wrong thing to do,the other will say its fine.[bighmmm]

And the polies will have to pay too much 'expenditure tax' on their $2M to $10M homes,and play things,cars,boats,planes,whatever.

If we could see the proper,honest costings it may work well,although many things may get double taxed.

[jonesfam]

Is this like a high GST & no other taxes?
So we are taxed on spending not earnings?
Jonesfam

[ramblingboy42]

not sure what you mean by high gst jonesfam , but yes, it would replace all other tax, based on what you spend , not earn.

[Saitch]

it would replace all other tax,

Just as GST was touted.

[trout1105]

not sure what you mean by high gst jonesfam , but yes, it would replace all other tax, based on what you spend , not earn.

What a fantastic way of getting the poor to pay even more tax[bigwhistle]

[JDNSW]

GST is exactly the type of tax you are proposing. But it is far from universal, with too many exceptions, and it only applies to final expenditure. (If you try to apply it to every step of expenditure, it has all sorts of problems - for example, consider the relative tax paid by a business that does everything in house compared to one that buys in parts - the former pays tax on the sale price, where the latter pays tax on both the final sale price and all the input prices. Similarly, an expenditure tax with no exemptions would see me paying tax when I deposit money in the bank, and again when I take it out.

The claimed advantage of expenditure taxes is that they have less of a distorting effect on the economy, and are simpler and easier to collect, and are harder to avoid than other taxes.

The problem is that unless you have a lot of exemptions like gst does they are politically unacceptable, but if they do, the revenue is not enough to replace other taxes.

And as far as getting the poor to pay more taxes, as a proportion of income, the poor already do.

[NavyDiver]

Expenditure tax is a consumption tax. The issue with double taxation which exists with the current Consumption tax and all the leakages from an Expenditure/consumption tax such as on exports, health, food............... makes it a political beast which is unlikely to ever be supported in a democracy. The full G.S.T. law was ok- implemented with huge holes it was [bigwhistle]

So many great ideas just no real way of getting them put in place perhaps?

[BathurstTom]

Without any investigation and off the top of my head, won't this discourage spending, encourage saving and shrink the economy?

[ramblingboy42]

I dont know.

Won't every person be so much better off their lives will be enriched dramatically?

eg , you buy a car you pay 2% tax on it.

[scarry]

Without any investigation and off the top of my head, won't this discourage spending, encourage saving and shrink the economy?

The GST at 10% didnt seem to do that.
Although it isnt on some things,its on most.

So i doubt 2% will make much difference.

[trout1105]

Wouldn't it be a Far better idea for the government to stop wasting our tax dollars on bad management, bad ideas and rorts.
This way we wouldn't need a new tax and maybe even pay less tax[bigwhistle]

Inflation is climbing, Wages are stagnant and all of a sudden a extra tax cost is a good idea[bigwhistle]
You can only get so much blood out of a stone.

[Discosux]

I like the idea, Instead of 36% of my time worked going to the government plus another 10% (post tax ) on top of that on what I spend.
A flat 2% sounds real good.

A flat 10% on all income - no deductions, no tax free threshold. everyone pays the same... sounds even better though.
Would encourage people to spend their money on assets that will generate further income. No more negative gearing BS, no more useless work utes every 2 years just because they're cheap due to tax breaks.

Makes sense in my head

[ramblingboy42]

seems some think the expenditure tax is additional to others......it isnt . The 2% is the only tax anybody pays on anything. My illustration showed how easily and rapidly the govt defecit would be removed and a surplus generated forever. No more lying sneaking thieving and cheating necessary to give favour to anybody.

you would never need the tax rebate again....hopefully. There would need be no tax claims as every thing you purchase includes the 2% in the price.

it all seems a bit rose coloured glasses but it appears to have merit.

[Discosux]

seems some think the expenditure tax is additional to others......it isnt . The 2% is the only tax anybody pays on anything. My illustration showed how easily and rapidly the govt defecit would be removed and a surplus generated forever. No more lying sneaking thieving and cheating necessary to give favour to anybody.

you would never need the tax rebate again....hopefully. There would need be no tax claims as every thing you purchase includes the 2% in the price.

it all seems a bit rose coloured glasses but it appears to have merit.

I'd vote for it.

[NavyDiver]

I'd vote for it.
I did once think Joh Bjelke-Petersen flat tax was a great idea[bigwhistle] RIP idea and rot in the ground perhaps mr joh who was proven a crook I hear[bigwhistle]

[Arapiles]

GST is exactly the type of tax you are proposing. But it is far from universal, with too many exceptions, and it only applies to final expenditure. (If you try to apply it to every step of expenditure, it has all sorts of problems - for example, consider the relative tax paid by a business that does everything in house compared to one that buys in parts - the former pays tax on the sale price, where the latter pays tax on both the final sale price and all the input prices.


VAT/GST is a multistage tax, and it was deliberately designed as such, cf sales tax which was only applied at the last stage.

[Arapiles]

I did once think Joh Bjelke-Petersen flat tax was a great idea[bigwhistle] RIP idea and rot in the ground perhaps mr joh who was proven a crook I hear[bigwhistle]


The only reason people thought that it was a good idea was that they hadn't worked out how much tax they were actually paying: people tended to focus on the highest marginal tax rate they paid and invariably assumed that was the rate of tax they paid on everything. In point of fact the overall tax rate was the blend of rates that they paid. The Bjelke-Petersen flat tax was 25% on everything, no exceptions. That's actually more tax than most people were paying back them, or now.

[Discosux]

And as far as getting the poor to pay more taxes, as a proportion of income, the poor already do.

So they'd be better off with a flat tax 2% then.
They don't spend much, because they're poor

2% of say 50k is only 1k. (not even 50 x Macca family meals worth)

[Discosux]

I did once think Joh Bjelke-Petersen flat tax was a great idea[bigwhistle] RIP idea and rot in the ground perhaps mr joh who was proven a crook I hear[bigwhistle]

Have they converted his tombstone into a urinal yet?

[scarry]

Wouldn't it be a Far better idea for the government to stop wasting our tax dollars on bad management, bad ideas and rorts.
This way we wouldn't need a new tax and maybe even pay less tax[bigwhistle]

That will never happen,its just a part of life.The only difference is some waste a lot more than others[wink11]


Inflation is climbing, Wages are stagnant and all of a sudden a extra tax cost is a good idea[bigwhistle]
You can only get so much blood out of a stone.

It isnt an extra tax,it replaces all taxes.I wonder how they will work out LCT,and Land Tax....[bighmmm]

[Discosux]

The only reason people thought that it was a good idea was that they hadn't worked out how much tax they were actually paying: people tended to focus on the highest marginal tax rate they paid and invariably assumed that was the rate of tax they paid on everything. In point of fact the overall tax rate was the blend of rates that they paid. The Bjelke-Petersen flat tax was 25% on everything, no exceptions. That's actually more tax than most people were paying back them, or now.

Except now you pay GST, Stamp duty and all the rest of what's left over of your post tax dollars.

25% is too high. 10% flat is the sweet spot imo.

[JDNSW]

Except now you pay GST, Stamp duty and all the rest of what's left over of your post tax dollars.

25% is too high. 10% flat is the sweet spot imo.

With total government expenditure in Australia equal to around 39% of GDP (Federal government is about 24%), it is a bit hard to see how 10% or even 25% as a flat and only tax is going to cut it!

[Homestar]

I have had an expenditure tax explained to me , it seems to make sense and adds up. This would eliminate every other form of taxation , after all, taxes are only charged to raise revenue.

Please do not challenge my exact figures here , they are close enough to get the point across.

2018 RBA figures used for illustration.

Australia's Federal and State Government revenue combined was $511 billion.

Australia's Federal and State Government expenditure combined was $735 billion.

So we had/have a combined government defecit of approx $220 billion.

Total Australian expenditure in 2018 was according to the RBA $255 billion per working day.

There were 251 working days in 2018

If this total national expenditure for 2018 was taxed at a 2% expenditure tax rate (discounting all other taxes) $1.3 trillion would be raised as revenue giving a surplus of approx $500 billion .....this could continue into perpetuity.

I can't really see a problem with this.

Why hasn't it seen the light before? Maybe it has. It was passed on to me.

For the life of me I can't find this info anywhere - can you please post a link to this? Thanks.

[1984V8110]

I suspect there is an error in a key assumption. The ABS has retail turnover at around 27-30 billion a month. (Retail Trade, Australia, March 2022 | Australian Bureau of Statistics (https://www.abs.gov.au/statistics/industry/retail-and-wholesale-trade/retail-trade-australia/latest-release)). I think this tax would have to only apply to retail prices or the 2% would compound (and the GST is designed to avoid that).

The 255 billion per day figure in the original post looks close to the turnover of AUD on the Foreign exchange markets.

If I'm correct the 2% figure is no-where near enough to generate the income needed.



Cheers

Michael

[towe0609]

Remember the "Henry Review (https://treasury.gov.au/sites/default/files/2019-10/afts_final_report_part_1_consolidated.pdf)" ... here is the first recommendation.

1. Concentrating revenue raising on four efficient tax bases

Australia has too many taxes and too many complicated ways of delivering multiple
policy objectives through the tax and transfer systems. The capacity of the legislative and
operating platforms of these systems, and their human users, to deal with the resulting
complexity has been overreached. The tax and transfer architecture is overburdened and
beginning to fail in dealing efficiently and effectively with multiplying policy goals and
demands. Rationalisation of the tax and transfer architecture should now be a strategic
priority.

Key directions

• Revenue raising should be concentrated on four robust and efficient tax bases:
– personal income, assessed on a more comprehensive base;
– business income, with more growth-oriented rates and base;
– private consumption, through broad, simple taxes; and
– economic rents from natural resources and land, on comprehensive bases, noting
that revenue from rent taxes will likely be more volatile than from the existing
resource royalties it will replace.

• Other taxes should be maintained only if they efficiently address social or economic
costs — such as taxes on tobacco, alcohol, gambling and environmental costs, and
efficient road user taxes or charges.

• In time the following taxes should be abolished and their revenues replaced by taxes
applying to the four robust and efficient tax bases:
– insurance taxes;
– payroll tax;
– property transfer taxes;
– stamp duties on the purchase of motor vehicles;
– resource royalties, replaced by the rent tax;
– luxury car tax;
– the tax on superannuation contributions in the fund;
– income taxes on all government pensions, allowances and benefits; and
– fuel and vehicle registration taxes, if replaced by more efficient road user charges.

I'm haven't followed the public policy to know what, if anything, has been implemented from this list. I thought there were some changes to economic rents from natural resources - but cannot recall the details.

[trout1105]

It isnt an extra tax,it replaces all taxes.I wonder how they will work out LCT,and Land Tax....[bighmmm]

The government never abandons a tax, I just invents new ones to add to all the others.

[ramblingboy42]

For the life of me I can't find this info anywhere - can you please post a link to this? Thanks.

can't produce a link , but you may find it by looking for australia one websites q+a

[Homestar]

can't produce a link , but you may find it by looking for australia one websites q+a

I've spent quite some time looking everywhere - I think the numbers are wrong - straight up - with no data to back them up, it's just a pub conversation really isn't it - with not much thought or research put into it.

[scarry]

it's just a pub conversation really isn't it - with not much thought or research put into it.

A bit like half the threads on this site,but that’s OK,all fun and games[wink11][biggrin]

[Homestar]

A bit like half the threads on this site,but that’s OK,all fun and games[wink11][biggrin]

Agreed, but the OP said originally - "Please do not challenge my exact figures here , they are close enough to get the point across."

Which is fine, but I was trying to work through this based on actual data, but it seems not to exist so not sure how the claims can be made is all.

[ramblingboy42]

ok, I made no claims at all , just transferred something I had heard.

the figures come from the RBA.

I stated that.

now , you can do your research should you choose.

go to australiaoneparty.com look up latest dispatches....you may have to go to another media site to see/hear the dispatch

btw I had a full listen to it earlier , it made sense.

[jonesfam]

I have, in my spare time, been searching the Internet thingy for information re this thread.
I could not find anything related to only having an expenditure tax.
But I did find the attached link interesting.

The case against income tax - Renegade Inc (https://renegadeinc.com/the-case-against-income-tax/)

Not being a Tax Accountant I could not quite follow all of it like why the government does not need tax but I found it interesting
Jonesfam

[ramblingboy42]

I gave a link.....

australiaoneparty.com

[vnx205]

Riccardo Bosi is the face of that australiaoneparty group.
He seems to be an untrustworthy nutter.


Extremist Riccardo Bosi: followers duped — The Klaxon (https://www.theklaxon.com.au/home/riccardo-bosi-supporters-stung)

[ramblingboy42]

So , there is no party , apparently a number of hard to locate independents stood but no indication of votes gained by A1 independents.

I found where Ricardo "explained" the tax and listened several times. Food for thought if nothing else.

Surely someone else has proposed an expenditure tax before......to me it seems possible.

One of the morning shows might like to play with it.

[TonyC]

So , there is no party , apparently a number of hard to locate independents stood but no indication of votes gained by A1 independents.

I found where Ricardo "explained" the tax and listened several times. Food for thought if nothing else.

Surely someone else has proposed an expenditure tax before......to me it seems possible.

One of the morning shows might like to play with it.Didn't Pauline Hanson run with it at the 2019 election?

Tony

[3toes]

There is an economic theory that no government has ever actually needed tax income to operate. This is based on the reserve bank or whatever alternative exists. The government sets these up and then puts in their constitution that they have an account with an unlimited overdraft. The reserve bank does not have the right to refuse to write any cheque the government asks for.

Taxation is to control the economy giving favour and making some activities less attractive due to the added cost of tax. It should also cover the cost of collecting the taxes. Under this theory Taxation has nothing to do with repaying the national debt it is about managing economic activity

[Max Headroom 2.3m]

When I was young, my ambition was to pay lots of tax......on the under-lying assumption that this meant I had earned lots of money. To this day I have only ever achieved 50% of that deal [bawl][bawl].

[BMKal]

Ricardo Bosi is a scamming con-man who probably should be locked up somewhere. The Australia One Party is a collection of gullible fools that he had sucked in - many of whom still haven't caught on that he has scammed them for some money and that the "party" they contributed to and were stupid enough to believe in is not even registered with the Australian Electoral Commission.

As for a "spending tax" - it was proposed many years ago by Joh Bjelke Petersen and was at the time called a "consumption tax".
The proposal was to tax ALL income at a flat rate (I think it was 25% from memory), and then to apply varying levels of "consumption tax" to spending, with different rates for life's essentials / luxury items etc. "Income" included ALL income, both personal and company, so would have been a much higher number than what is raised via today's "income tax" as all companies with an income gained in Australia would have paid 25% (or whatever the figure was) of that income in taxation.

The proposal didn't really go anywhere, as Joh was considered a bit of a nutter throughout Australia (except for in Queensland, where "politicians" like Joh, Russ Hinze, Bob Katter, Pauline Hanson, Clive Palmer and others are all part of the furniture). However, the original proposal for the "GST" was loosely based on this "consumption tax" idea, but was bastardized even before it was introduced and became just another tax on top of those we were already paying.

[JDNSW]

Ricardo Bosi is a scamming con-man who probably should be locked up somewhere. The Australia One Party is a collection of gullible fools that he had sucked in - many of whom still haven't caught on that he has scammed them for some money and that the "party" they contributed to and were stupid enough to believe in is not even registered with the Australian Electoral Commission.

As for a "spending tax" - it was proposed many years ago by Joh Bjelke Petersen and was at the time called a "consumption tax".
The proposal was to tax ALL income at a flat rate (I think it was 25% from memory), and then to apply varying levels of "consumption tax" to spending, with different rates for life's essentials / luxury items etc. "Income" included ALL income, both personal and company, so would have been a much higher number than what is raised via today's "income tax" as all companies with an income gained in Australia would have paid 25% (or whatever the figure was) of that income in taxation.

The proposal didn't really go anywhere, as Joh was considered a bit of a nutter throughout Australia (except for in Queensland, where "politicians" like Joh, Russ Hinze, Bob Katter, Pauline Hanson, Clive Palmer and others are all part of the furniture). However, the original proposal for the "GST" was loosely based on this "consumption tax" idea, but was bastardized even before it was introduced and became just another tax on top of those we were already paying.

Not quite - GST actually replaced a number of taxes, most notably wholesale sales tax (which varied widely according to what the item was and bizarrely according to what it was intended to be used for), and motor vehicle tax. It was supposed to replace a number of state taxes, but the follow through of this by states has been markedly incomplete.

[Homestar]

There is an economic theory that no government has ever actually needed tax income to operate. This is based on the reserve bank or whatever alternative exists. The government sets these up and then puts in their constitution that they have an account with an unlimited overdraft. The reserve bank does not have the right to refuse to write any cheque the government asks for.

Taxation is to control the economy giving favour and making some activities less attractive due to the added cost of tax. It should also cover the cost of collecting the taxes. Under this theory Taxation has nothing to do with repaying the national debt it is about managing economic activity

If there was something in that it would be more than a Theory by now…

[3toes]

This theory has been around for a long long time. There are people pushing variations of it at the moment to support their view of why countries can spend spend spend with no repercussions in the longer term. Think those who say the government budget is not like a household budget and so does not need to be balanced. Of course we now ask what does balanced actually mean

The beauty of economics is that there are no wrong answers just badly justified ones. You can find a theory to justify almost any economic policy you want

[Saitch]

The beauty of economics is that there are no wrong answers just badly justified ones. You can find a theory to justify almost any economic policy you want

'Spending money on things that aren't really a necessity' would be a good theory topic.

[scarry]

Not quite - GST actually replaced a number of taxes, most notably wholesale sales tax (which varied widely according to what the item was and bizarrely according to what it was intended to be used for), and motor vehicle tax. It was supposed to replace a number of state taxes, but the follow through of this by states has been markedly incomplete.

The big difference, was the GST was added to labour costs.

[scarry]

'Spending money on things that aren't really a necessity'

Something my sons are experts at[bigwhistle][bigsad][biggrin]

[trout1105]

Something my sons are experts at[bigwhistle][bigsad][biggrin]

I think that a fair few of us are also guilty of this, Myself included[bigwhistle]