The Australian Bureau of Statistics this week released its annual compilation of data on spending, taxing and borrowing by all levels of government, and the results provide a sobering backdrop to the frenzied debate over the federal budget.
Taxation by federal, state and local governments in 2012-13 was $18,108 for every adult and child in the population. Households don't, of course, pay all of that directly, but they do pay around two-thirds of it (in personal income tax, GST, excise duties, stamp duties and so on), and they pay most of the remainder indirectly through higher prices of goods and services and lower wages.
Some commentators like to point out that we should not complain because if we were in Europe and not Australia, per capita tax might be more like $25,000 than $18,000.
However as Geoff Carmody argued with admirable clarity this week, these international comparisons are spurious; it is a myth to say we are a low tax country.
Tax of $18,108 per capita should be more than enough for the legitimate demands of government, but it isn't nearly enough to satisfy the governmental appetite even in Australia. Government spending in 2012-13 was more than $24,000 per capita, with the gap between spending and tax being filled by $4,500 per capita in non-tax revenue and $2,000 per capita in new borrowings.
Out of the tax and non-tax imposts, some $5,400 per capita flows back to households in cash benefits (such as pensions) and another $1,700 per capita in non-monetary benefits such as subsidised health care and pharmaceuticals. Of course, the bulk of these cash and non-cash benefits do not flow back to those who pay the bulk of the tax, which is another way of saying the tax/transfer system is highly redistributive.
A great deal can be said about the ABS figures, but a few points stand out. One is that governments can't go on borrowing another $2,000 per capita year after year. Something must give.
Another key point is that government spending is becoming more and more skewed towards social spending, with 61% (and rising) going on social security and welfare, health and education. If the problem of excessive borrowing is to be tackled from the spending side, as it should be, these functions cannot go untouched, notwithstanding the post-budget outcry against relatively modest savings measures.
If excessive borrowing is to be tackled from the revenue side, it means adding to an already heavy load of taxation on households, with all that implies for incentive and productivity. Yet just about the only budget measure that seems assured of being implemented is an ill-conceived income tax increase on a small minority of high income earners.
Robert Carling is a Senior Fellow at The Centre for Independent Studies.
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Fascinating fiscal facts
Taxation by federal, state and local governments in 2012-13 was $18,108 for every adult and child in the population. Households don't, of course, pay all of that directly, but they do pay around two-thirds of it (in personal income tax, GST, excise duties, stamp duties and so on), and they pay most of the remainder indirectly through higher prices of goods and services and lower wages.
Some commentators like to point out that we should not complain because if we were in Europe and not Australia, per capita tax might be more like $25,000 than $18,000.
However as Geoff Carmody argued with admirable clarity this week, these international comparisons are spurious; it is a myth to say we are a low tax country.
Tax of $18,108 per capita should be more than enough for the legitimate demands of government, but it isn't nearly enough to satisfy the governmental appetite even in Australia. Government spending in 2012-13 was more than $24,000 per capita, with the gap between spending and tax being filled by $4,500 per capita in non-tax revenue and $2,000 per capita in new borrowings.
Out of the tax and non-tax imposts, some $5,400 per capita flows back to households in cash benefits (such as pensions) and another $1,700 per capita in non-monetary benefits such as subsidised health care and pharmaceuticals. Of course, the bulk of these cash and non-cash benefits do not flow back to those who pay the bulk of the tax, which is another way of saying the tax/transfer system is highly redistributive.
A great deal can be said about the ABS figures, but a few points stand out. One is that governments can't go on borrowing another $2,000 per capita year after year. Something must give.
Another key point is that government spending is becoming more and more skewed towards social spending, with 61% (and rising) going on social security and welfare, health and education. If the problem of excessive borrowing is to be tackled from the spending side, as it should be, these functions cannot go untouched, notwithstanding the post-budget outcry against relatively modest savings measures.
If excessive borrowing is to be tackled from the revenue side, it means adding to an already heavy load of taxation on households, with all that implies for incentive and productivity. Yet just about the only budget measure that seems assured of being implemented is an ill-conceived income tax increase on a small minority of high income earners.
Robert Carling is a Senior Fellow at The Centre for Independent Studies.
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