Thread by @TopherField

All taxes are bad. But they're not all EQUALLY bad.

If we HAVE to have taxes, what is the less-bad option?

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I define a tax as 'less bad' if it's more efficient (less admin, etc), causes less intrusion into peoples private lives, causes less distortions (changes people's behaviour less), and distorts people's behaviour only in ways which tend to aid the economy, not hurt it.

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Here's how I rank the major options, and why (least-bad at the top):

1. Money exit tax
2. Import tariffs
3. Domestic consumption tax (GST)
4. Transaction tax
5. Property tax (including stamp duties)
6. Income tax

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Notice how the vast majority of tax revenue in Australia comes from the bottom 3... the three worst options (in my opinion.)

Let me go through them, keeping in mind that NO taxes are 'good', I'm just comparing their relative destructiveness.

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1. Money exit tax. Every dollar leaving an Australian account to a foreign one gets taxed. I believe quite a low percentage would do, let's assume 2-3% on every outflow of money (not just 'net' or 'on balance'). This therefore applies to profits of multinationals...

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...who will flock to Australia for our tax-friendly environment, paying only 2-3% as they repatriate profits to parent entities internationally.
Pros: privacy, compliance is done by banks, keeps money in Australia.
Cons: avoidance via crypto.

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2. Import tariffs. Tariffs are bad, but they're less bad than others.
If they 'work' by bringing manufacturing on shore, tax revenue drops. The upside is that if that's happening then there's more domestic jobs, industry, and national security.

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Pros: encourages on-shore economic activity, improves national security.
Cons: the 'protection' makes local industry less globally competitive, harming exports. It's ultimately paid domestically, contrary to popular belief.

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3. GST. Due to 'input tax credits' GST doesn't accumulate like a transaction tax, but theres a lot of paperwork and lost time to report on and remit.
Plus a consumption tax is still a drag on the economy. You may be taxing consumers rather than producers...

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... but you're still making it harder for producers to find buyers.
Pros: Administrated by businesses not individuals, less privacy issues compared to income tax, applies equally.
Cons: time consuming to administer, it's a real drag especially on smaller businesses.

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4. Transaction tax. It ends up being a domestic tariff. Its 'only .25% but that's on every transaction. By the time a 100% 'made in Australia' product reaches consumers it could easily have 10%, 25%, or even more, added because of all these micro taxes accumulating.

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In the same way that a tariff discourages importing, a transaction tax will discourage doing business domestically.
Pros: administrated by banks, good for privacy.
Cons: it's a tariff against domestic industry, rewarding imports, makes Australia uncompetitive.

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5. Property Taxes (Rates, property tax, stamp duty.) All bad. Stamp duty adds fraction to property transactions leading to a misallocation of valuable resources.

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Property tax means you never own your property and is a punitive tax against retirees who live for decades in an area which ends up with high property taxes they can't afford on their income. Rates are fine if they're genuinely 'fee for service, but they're not.

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6. Income tax. The worst tax in existence. It gives the state 'ownership' of every person, it is partial slavery. No privacy or rights against the government. Huge waste of time for every person in the country, huge administrative overhead for every employer...

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...discourages people from being more productive as the tax brackets climb (wage earners can hit high tax brackets as they work overtime), easy for some industries to avoid or minimise.
It's a human rights minefield, inefficient, and creates perverse incentives.

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These are just my opinions though.

What do you think (besides NO TAX which I obviously agree with)?

I'm Topher Field. Follow me here, watch my multi award winning doco at battlegroundmelbourne.com and buy my books and merch from goodpeoplebreakbadlaws.com

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