We Need Tax Cuts. Just Not These Ones…

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You know what I find interesting? Income tax is still a relatively recent phenomenon.

But didn’t the Ancient Romans tax their people?

While that’s true, it wasn’t an income tax, per se. It was more of an asset tax. Romans with land, animals and slaves paid taxes on their personal property. Not on their yearly incomes.

And even then, taxes might have reached highs of 3%.

OK, but what about the monarchs of Britain? Didn’t the Crown tax the hell out of the people?

Not really. To raise money, most of the Kings and Queens put taxes on goods. King John in 1203 put an export tax on wool. King Edward in 1275 put a tax on wine.

Even when London was scorched and charred from the fire of London, Charles II didn’t ask the people to cough up. He instead put a tax on coal to raise the funds.

In the 1600s, the politicians of England even tried to limit the level of taxes the Crown could create. With the Petition of Right, the Crown was prohibited to create arbitrary taxes without consolation first.

Maybe they saw what was coming (income taxes) and tried to stop it…

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Tax cap of 10%…

The Petition of Right didn’t help.

Heading into the 1700s, the British people, and their colonies in the US, saw more taxes each year. In the 1760s, one tax policy was the straw that eventually broke the colonies’ back, leading to the American Revolution.

It was only a few years after that Britain was directly dipping their hands into the incomes of the people. Maybe it was understandable, though. Britain was at war with Napoleon. They needed funds for weapons and equipment.

So the government imposed a temporary tax of less than 1% for over £60 and 10% for over £200.

Fast forward to today, and we all think of income tax as a given. It’s OK for the government to dip their hands into our pockets at gun point and take 30%, or sometimes as much as 50%, of what we earn each year.

Just take a look at this graph…

Money Morning

Source: Wikipedia
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It shows American government revenue by segment as a percentage of economic output (GDP). For decades, a limited small American government was content with taxes on exports and goods. Today, they dip their hand into your wages, and the wages of your employers.

And this is how it’s played out all over the world. Here in Oz, some of us are paying $54,097 in taxes, plus 45 cents on each dollar we make over $180,000.

To think the government deserves 45% of anything that you, I or anyone else makes, is ludicrous. All it does is encourage people to find loopholes. Maybe they stash their cash offshore somewhere. And it discourages Aussies from doing better.

Why bother working harder, producing more for others when 45% of your income is going to the government who’ll spend it on some terrible project that’s just there to win votes?

Maybe you’ve had time to digest the Aussie budget news…

Taxes will be lower, ever so slightly. But they’re moving in the right direction, I guess.

Politicians see you as a cash cow

Back to surplus we go. That’s what the forecasts are saying.

As I pointed out yesterday though, almost all financial forecasts end up being terrible guesses of the future.

Money Morning

Source: Australian Financial Review
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And of course, the Morrison government is trying like hell to win over voters. It’s why they also gave tax breaks of $1,080 a year to low and middle-income earners. The government is also kindly chipping to keep the lights on, handing out a onetime amount of $75 and $125.

It’s a bit of a slap in the face to be honest. Is $1,205 really going to make Aussies that much better off?

Even with this pitiful tax cut, it’s still Aussies paying the lion share of government revenues.

Money Morning

Source: Australian Financial Review
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And with this stolen cash, they redistribute it among the deserving and undeserving. The Aussie government even has a $98.3 billion expense called ‘Other purposes’. What is this?! A ‘just in case’ fund? Is it discretionary spending that politicians feel they can just blow on any old vote-grabbing project?

Why not increase spending for education or health?

Money Morning

Source: Australian Financial Review
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The Morrison government has failed

No, no. The government has to keep redistributing wealth. It wins the votes of the poor. It keeps people spending, although messy sums.

But it’s not a long-term fix for the problems we face.

The continuous and exaggerated boom and bust cycles created by lenders…helping all Australians build wealth for themselves and their families…giving everyone an equal opportunity to succeed rather than trying to make all outcomes equal…removing concentrated corporate influential from political life and legislation…

These are the things the Morrison government and all others have failed to address. When will we get someone who talks about small government and actually delivers?

No. Instead, all the pollies want to do is come up with temporary bonuses to keep the pigeons spending for four more years.

After that, it’s someone else’s problem.

Your friend,

Harje Ronngard,
Editor, Money Morning

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Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the…

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