Nobody wants to pay more tax, except me
Our tax system is designed to favour the old over the young. The young pay income tax but, for the most part, the retired don’t.
So what’s the problem? First, that old favourite, debt and deficit. It’s perfectly fine for the federal budget to be in deficit – where government spending exceeds tax collections – at times when the economy’s in recession or very weak and needs the government to prop it up, provided it’s back in surplus when things return to normal.
But we’ve run a deficit for most of the past two decades, with the government’s projection showing further annual deficits for as far the eye can see. Twenty years ago, the accumulated debt was equivalent to 5 per cent of the economy (gross domestic product). Now it’s 45 per cent. That’s the highest it’s been since we were paying off the debt from World War II. (You pay off government debt by running a budget surplus, which you use to buy back government bonds.)
Such growth in deficits and debt is clearly unsustainable. What’s more, it’s now clear that the global era of unusually low rates of interest on government bonds is ending, with rates around the world starting to shoot up. Interest payments on the debt already account for a big slice of total government spending. They’re about to start growing like mad.
The second reason the GST needs fixing is that, contrary to expectations when it was introduced 26 years ago, the amount it collects (all of which goes to the state governments) has failed to grow as fast as the economy is growing.
