Will the Government Super-Tax You Next?

Will the Government Super-Tax You Next?

We laughed yesterday.

We laughed the day before as well.

So yesterday’s laughter was nothing new.

And surprise, surprise, we had another laugh this morning.

The reason we laughed yesterday was down to the front page of the Australian Financial Review (AFR).

Yes, sometimes Australia’s premier business newspaper produces more laughs than the funny papers.

“Henry sees super profit taxes for all”, yelped the headline.

That’s what treasury secretary Ken Henry sees does he?

We’ve labelled Canberra’s top pen-pusher as Emperor Henry in the past due to his apparent craving for power.

But it looks like we need to give him a new nickname.

What about Mystic Ken?

Or Madame Henry, the world famous fortune-teller.

If the federal budget needs topping up perhaps Lindsay Tanner could sell tickets for a Mystic Ken palm reading, “I see you paying more tax… now hand over the cash before I set the boys on you!” [puffs hard on cigarette].

Of course that wasn’t all Mystic Ken had to say. It seems he’s had enough of free speech too and wants to clamp down on it. Unless you happen to agree with his point of view naturally.

As reported by The Age, Mystic Ken blurted:

“Whenever an idea is ventured in public by a person… there’s at least a handful of academics who will contest it… it is unbelievably frustrating, incredibly frustrating… there are occasions on which economists might, at least for a period, put down their weapons and join a consensus.”

You can see why we laughed so much.

I don’t know about you, but we always thought that a consensus was reached after discussions. A consensus is reached after everyone puts forward a point of view. Then there’s a bit of give and take, followed by agreement of some sorts.

A consensus doesn’t mean shutting up and just agreeing with the pen-pusher extraordinaire.

Besides, we don’t like the consensus approach. We’d never agree to anything unless it was full blown free market capitalism. No compromise.

Incidentally, if you click on this link, it will take you directly to the article in The Age. The article is now headlined, “Back the tax, Henry tells economists”. But that wasn’t the original headline, as you can see from the link. Originally it was, “Keep shtum Henry tells economists”.

Our resident German and editor of the Weekend Daily Reckoning, Nick Hubble tells us that, “Stum (pronounced shtum) is the German word for ‘shut the hell up’.”

We think that pretty much sums up the Mystic Ken approach. Perhaps he thinks he’s created the Eleventh Commandment, ‘Thou shalt not speak.’

Our laughter this morning was due to another The Age article. This time quoting Reserve Bank of Australia (RBA) board member Warwick McKibbin.

It’s a lengthy quote but it’s worth repeating. Just for the fact that it’s coming from a mainstream economist who is in such an influential position:

“I also disagreed with the scale of the stimulus package… It wasn’t evidence-based policy; they panicked. The government rammed those decisions through the economy even though they were fraught with risk. No one was consulted about an alternative view and if you did say anything you were attacked by the Treasurer and the Prime Minister in public.”

He went on:

“The stimulus created a problem. The government overspent but they had enough in reserve. Then they decided that because of politics they had to get their spending back so they could claim they had fiscal surplus – for which there is no economic basis, by the way – so they come up with a really badly designed resource tax to try and get the position to look good three years from now, and in the middle of a sovereign risk crisis exposed the economy to a reassessment of sovereign risk.

“The review of the tax system should have been independent of the Treasury and then critiqued by it and other economic agencies.

“Treasury, as far as I can tell, has become an arm of political policy. Historically they have always been the ones who have said, ‘Wait a minute, this policy of subsidising green cars to try and save the constituents of a particular electorate is not a very sensible way to spend $8 billion.’ You just don’t see that now.”

Look, I don’t agree with everything McKibbin says, it’s just good to see even the mainstream economists giving the stimulus spending a bit of a poke.

But anyway, as we see it, the Mystic Ken tax-’em-to-death approach is just all part of the idea that Australia has a bullet proof economy. Nothing ever could possibly go wrong. No amount of government fiddling and meddling could ever stuff things up.

As long as all the bureaucrats stick together everything will be fine.

In fact, as they see it, the private sector with its stupid profits and dopey productivity would have ruined the Australian economy for everyone.

Much better to take the money from the private sector and individuals and spend it on school buildings.

Or spend billions on housing insulation.

And billions on inflating the property bubble.

That’s just the way it is.

Now Mystic Ken has had a fabulous thought. If the Resources Super Profits Tax is such a great idea, why not make all businesses pay it.

After all, it must be a good idea otherwise the government wouldn’t have come up with it.

Make every business which earns so-called super profits pay a super tax. Remembering that anything above the risk-free government bond rate of around 6% is now considered a super profit.

Incidentally, that got us thinking. We checked out the term deposit rates yesterday afternoon. Turns out, would you believe it, that it’s not only mining companies earning super profits…

It’s those bloomin’ scavenging pensioners too. Ooh, words can’t disguise how furious your editor is that some pensioners and even ordinary people out there are earning a super profit.

Get this, Dutch bank Rabobank is even aiding and abetting these individuals by offering 6-month term deposit rates of, wait for it, a super profitable 6.31%. If the government doesn’t come down hard and tax that super profit it’ll be a disgrace.

But if you think that’s bad, it gets worse.

Those greedy saving pensioners are earning anything up to a whacking great 7.3% on a term deposit with Rabobank. And what have they done to deserve that super profit?

Nothing.

Sure, they’ve worked thirty, forty or maybe even fifty years. And sure, maybe they’ve paid a whole bunch of taxes along the way.

And sure they’ve put their neck on the line, but heck, what are they doing now? Nothing. They’re sitting back and earning interest like, erm, interest earning do nothing-ers.

It’s time for the savers to be punished for saving. Those savings are really other people’s money.

I mean, where does that interest come from? It comes from exploiting those that go into debt just so these savers can lord it up at the bowls club or at the bingo. Has there ever been a greater sin than living in retirement off the proceeds of interest?

We think not. Tax it. No, don’t tax it. Super-tax it.

In fact, super-tax the whole darn economy.

Except housing of course, because we don’t want that bubble popping do we…

Can You Trust the Housing Data?

A Money Morning reader has sent us some interesting data on the reporting of median house prices in Western Australia.

Naturally enough neither the reader nor your editor would ever cast any aspersions on the data, however we feel we should point out some interesting anomalies.

The reader suggested we take a look at Kelmscott in Western Australia, which according to RPData saw a 1,621% increase in the median unit price in May.


Source: realestate.com.au

Although interestingly the median house price fell by 17% over the same period. So much for house prices never falling eh?

The reader suggested we look at other suburbs where there are similar anomalies. Such as Armadale, Canning Vale, and Parkwood.

Look, I’ll be honest, I don’t know much about the Kelmscott area. I’m sure it’s very nice. And according to our pals at Wikipedia, “Kelmscott is home of the first Red Rooster restaurant.” So it can’t be that bad.

And maybe $4.75 million really was the median unit price in May. Maybe there was only one unit sold and it was for that amount. Or maybe there were three units sold with one going for an even higher price. Who knows?

Of course, there’s always the chance that it’s just the property equivalent of a ‘fat finger’ error. Much like that which was supposed to have been the cause of the recent New York Stock Exchange ‘flash crash’ – although it has quietly been revealed to not have been a fat finger problem.

But what we will say is this. We’ve long been very suspicious of house price data, whether it’s median prices or any other method. Mainly because it’s so opaque, and because the housing market is so illiquid.

We know the stock market isn’t perfect, but at least when a stock is priced at $20 you know exactly what it’s worth. With housing that isn’t the case.

We’ll wait and see if RPData have anything to say on the matter.

Cheers.
Kris.

Kris Sayce
Kris is never one to pull punches when discussing market developments and economic events that can affect your wealth. He’ll take anyone to task — banks, governments, big business — if he thinks they’re trying to pull a fast one with your money. Kris is also the editor of Microcap Trader — where he reveals the best opportunities he’s discovered in the markets. If you’d like to more about Kris’ financial world view and investing philosophy then join him on Google+. It's where he shares investment insight, commentary and ideas that he can't always fit into his regular Money Morning essays.
Kris Sayce is the Publisher and Investment Director of Australia’s biggest circulation daily financial email, Money Morning Australia.Kris is a fully accredited advisor in shares, options, warrants and foreign-exchange investments. Kris has close to twenty years’ experience in analysing stocks. He began his career in the biggest wasp’s nest in the financial world — the city of London — as a finance broker back in 1995.
It’s there where he got his ‘baptism of fire’ into the financial markets, specialising in small-cap stock analysis on London’s Alternative Investment Market. This covered everything from Kazakhstani gold miners to toy train companies.After moving to Australia, Kris spent several years at a leading Australian wealth-management company. However he began to realise the finance and brokerage industry was more interested in lining its own pockets with fat fees, commissions and perks —rather than genuinely helping out the private investors they were supposed to be ‘working’ for. So in 2005 Kris started writing for Port Phillip Publishing — a company which was more attuned to his investment outlook. Initially he began writing for the Daily Reckoning Australia— but eventually, took over Money Morning. It’s now read by over 55,000 subscribers each day. Kris will take anyone to task — banks, governments, big business — if he thinks they’re trying to pull a fast one with your money! Whether you agree with him or not, you’ll find his common-sense, thought-provoking arguments well worth a read. To have his investment insights delivered straight to your inbox each day, take out a free subscription to Money Morning here. Kris is also the editor of Tactical Wealth and Microcap Trader where he reveals the best opportunities he’s discovered in the markets that you could profit from. If you’d like to learn about the latest opportunity Kris has uncovered, take a 30-day trial of Tactical Wealth here or Microcap Trader here. Official websites and financial e-letters Kris writes for:

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28 Comments on "Will the Government Super-Tax You Next?"

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cb
Guest

Kris – Good harangue, especially the first part. But the second half also is onto a good thing. And, no, you cannot trust any data that is generated by partisan interests, but must always have that figurative salt shaker to hand for that pinch of salt.

cb
Guest

Oh, and with the unparalelled brilliance of Mr Joye, you should indeed keep an eye out for the novel twists through which your doubts will all be put to rest, because if you look at it the right way, all is well with the world, and there really is nothing to worry about, and so, why not buy a house, or two?

michael francis
Guest

Cocaine Ken sounds better.

michael francis
Guest

That $4.75 million is trick. It’s designed to create critisism so they can sue anyone who does.

cb
Guest

hahahaa, MF, it does!!!

cb
Guest

hahahhaa, watch out for thoseland mines, and you especially don’t mess around questioning Rismark!!!

cb
Guest

GB – here is a fantastic Bonner line from today’s DR post:
“China’s economy can recover (it just needs something to recover from!)” By the way, I am not saying anything about the substance of the claim, but simply celebrate its backhanded wit.

Jay
Guest

“Of course, there’s always the chance that it’s just the property equivalent of a ‘fat finger’ error. Much like that which was supposed to have been the cause of the recent New York Stock Exchange ‘flash crash’ – although it has quietly been revealed to not have been a fat finger problem.”

quietly revealed???? can someone post a link with info on this?

gutfeeling
Guest

“Will the Government Super-Tax You Next?”

– you forget, as a PAYE earner I have been ‘super taxed’ my entire working life!

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