1. CAN THE POLICY ADEQUATELY FUND SOUND, SUSTAINABLE GOVERNMENT?
Only by mobilising the full resources of a country can sound, sustainable government be achieved. The financial integrity of the 2% Expenditure tax is demonstrated in an analysis of the computer modelling of the Australian economy by Unisearch working out of Queensland University of Technology in the 90′s as fully described in the book Your Future in Your Hands by John McRobert.
2. WILL IT LEAD TO GREATER PRODUCTIVITY?
People are motivated when their efforts are rewarded and they have control over their lives. The ‘tragedy of the commons’ is the tragedy of communism. When the community ‘owns’ everything, the fruit is picked while it is still green in case the neighbour spots it first, and there is little incentive to plant new fruit trees because the neighbours are not doing their share unless a policeman tells him to do it. Progressive rates of taxation under the current system are a penalty for doing more than your share. To avoid this unjust penalty, industrious people may even work under false names and go to extraordinary lengths to split income to drop into a less punitive tax bracket. A low, single and fair rate of taxation will allow the natural human trait of improving one’s own lot, to be channeled into productive areas with low bureaucratic overheads.
3. WILL IT CUT INFLATION?
Too much money in circulation in relation to the amount of goods and services being traded, is Inflation, too little is Deflation. The market is volatile, and the amount of money in circulation must be kept in tune with the goods and services with which it is exchanged. Banks create credit against proven assets or performance as one way of keeping the money supply in tune with the market value of goods and services. 2% Expenditure Tax will allow Government to have timely and detailed information on monetary turnover making it better equipped to maintain the growth of money (the money supply) in tune with the market it serves.
4. WILL IT HELP THOSE DEPENDENT ON GOVT TO STAND ON THEIR OWN FEET?
The current system locks a growing number of people into Government charity. The inbuilt means test in the 2% E.T. allows a self controlled exit from the pension trap. Lowering the cost of employing labour, provides more job opportunities. The cost of a loaf of bread will also drop, this alone will alleviate poverty. Bread is the time honoured example—the cost of all foodstuff and other commodities would also drop.
5. WILL IT REDUCE UNEMPLOYMENT?
The cost of employment is so overloaded with PAYE and Payroll tax surcharges, that unemployment can only grow under the current system. Cut the tax on labour to lower its price, and the demand for labour will rise—it’s simple economics, it’s self-evident.
6. WILL IT REDUCE VISIBLE TAXES?
2% E.T. will eliminate thousands of pages of unnecessary and unworkable Governmental rules and regulations and reduce the tax required to pay for this. ‘Visible’ is used in preference to the ambiguous word ‘transparent’.
7. WILL IT REDUCE INVISIBLE TAXES?
The term ‘invisible tax’ is used to cover the cost of complexity and compliance with archaic and punitive tax laws. e.g. the paper war in the administration of fringe benefits and capital gains tax, which wastes valuable productive time.
8. CAN IT BE ACHIEVED DEMOCRATICALLY?
Over 50% of voters are dependent on government income, either being employed in the public sector or dependent on social welfare. All would enjoy increased spending power under 2% E.T. Also this method of taxation would automatically cut the need for social welfare and would have greater voter appeal across the board than a policy of simply cutting social welfare to address our current problems. Encouraging exercise to allow people to walk is better than kicking away the crutch.
9. DOES IT APPEAL TO THE ENTIRE COMMUNITY?
Once the credibility gap is bridged and the level of tax proposed at 2% is seen to be not preposterously low, there will be support across the entire political spectrum for this major breakthrough in taxation. The cost of commodities would be lower. 2% E.T. would reduce taxes and the cost of taxes (the cost of employing teams of lawyers and accountants, and the time constraints on market decisions to fit with feared Federal Budget changes or the most propitious Tax year) on both the higher income bracket and low income earners, with no unfair demarcations.
10. IS IT EFFICIENT TO ADMINISTER?
The 2% rate is low and spread over a wide tax base and its fairness would encourage honesty and voluntary compliance. Augmented with random spot audits and punishment to fit the crime of non-payment, administrative inefficiencies of the current system would be eliminated. Provisional payments and withholding taxes would go.
11. WILL IT HAVE DIRECT IMPACT ON A MORE EFFECTIVE FIGHT AGAINST CRIME?
Under 2% E.T., about 20,000 Tax Department employees would be freed of the administrative burden of enforcing deemed rulings and obscure interpretations which abound under the current punitive system of artificial thresholds and demarcations. They could get on with the more rewarding job of detecting undeclared peaks in the income of criminal elements. The spotlight would come onto declared bonanzas of ill-gotten gains. Criminals would be faced with 2 choices after a bank job or a drug drop, either declare it and pay the tax due—and leave an indelible trail for investigators— or not declare it and be subject to a tax audit. Capone was jailed by the IRS when the FBI failed. The current tax system is making criminals out of honest, productive people, and letting the real criminals go free.
12. WILL IT BE A CONSTANT REMINDER OF THE COST OF GOVERNMENT?
As a service sector, Government has a cost. Under 2% E.T. every voting adult pays a visible contribution towards this cost in direct proportion to their use of money.
13. WILL IT DIRECTLY IMPACT ON AN EFFICIENT ANTI DRUG CAMPAIGN?
2% E.T. provides a two way impact. First, reduced unemployment and restoration of the incentive to work honestly would remove much of the need for quick thrills and fast hopeless living. Boredom breeds frustration. Second, a new task force of redeployed Tax investigators would be an effective deterrent.
14. WILL IT PROVIDE A CONSTRAINT ON THE COST OF GOVERNMENT?
By bringing the major tax collection into the 2% ambit—Government economic activity can be closely tied to the country’s economy. To increase it to 2.1% would be politically difficult simply because it is not so easy to calculate, and with this tax visible on every receipt and viewed daily more than 14 million taxpayer/voters, the divide and conquer tactics historically used to introduce tax increases would be impossible. To increase it to 3% would represent a 50% hike in taxes and would be politically more difficult. A referendum could lock 2% into the Constitution and put Government on a strict economic diet. Then if the economy prospers, so will Government. Government policies should provide a fair field with no favours and not distort investment decisions in annual hunts for ostrich farms and other tax havens in Australia and overseas.
15. WILL IT IMPROVE OUR MANUFACTURING CAPABILITY AND SLASH OVERSEAS DEBT?
By reducing the cost of labour, the cost of production will drop and improve our export potential. Once this is done, and not before, tariffs can be phased out. With a fair and simple tax base, we could import the world’s best technology and tools to become a great manufacturing country. Forget the cheap labour illusion—one dragline does the work of 20,000 workers with shovels. We need an educated, motivated workforce with access to the best tools to be internationally competitive. And with 2% E.T. we would be deluged with offers from the world’s best brains for a place in the sun with employment opportunities opening across the entire spectrum from baby sitters to bridge-builders, from house renovators to highway constructors, trainees and trainers—the opportunities are endless.
16. WILL IT REDUCE POVERTY?
By eliminating the tax barriers to employment, between 1,000,000 and 2,000,000 jobs will be created through the private sector. There can be no better way of reducing poverty than by allowing the dignity of labour to prevail, and to reduce the cost of living as shown by the loaf of bread example.
17. WILL IT INCREASE PROFITABILITY?
Under 2% E.T. there are no penalties on profit. A well equipped and motivated workforce can also do wonders for a balance sheet. The tax rate does not increase for overtime or extra jobs.
18. CAN IT BE ACHIEVED IN ONE POLITICAL TERM OF OFFICE?
A three year implementation is practical.
19. WILL IT MOBILISE THE RESOURCES OF PENSIONERS FOR THEIR OWN BENEFIT?
The spending power of pensioners will increase e.g. bread will be up to 20% cheaper. Also there will be no taxation barriers to pensioners obtaining jobs to supplement their pension.
20. CAN IT TAX INTERNET TRADE EQUITABLY WITH OVER-THE-COUNTER TRADE
This is another pressing reason for introducing the 2% E.T. now. Electronic commerce is instant and passes over border gates, not through them. Profit and VAT based taxes are too slow and archaic for trade into the future, all having complicated tax refund arrangements. Also the heavy tax on labour drives investment to high-tech, low-labour solutions, or the investors follow the silk road to countries where the total cost of labour, including tax, has least impact on the cost of the tradable commodity. The interchangeability of goods, services and labour has never been more apparent, and one would wonder why the taxes on labour are different from the taxes on the goods made from that labour, or why electronic trade should be taxed on a basis different from trade over-the-counter. One simple tax on each trade at source allows easy implementation with low compliance costs and efficient spot checks for audit purposes. The country which first adopts this will have a huge competitive advantage in world trade. Rogue traders could still avoid it, but when the cost/benefits ratio of compliance is better than the cost/benefits ratio of evasion, voluntary compliance would be much higher than with the existing system in every field of endeavour. All sales including imports are taxed lightly and fairly under the 2% E.T. proposal, and under 2% E.T. there is no comparative advantage by moving offshore. On the contrary, there would be a strong incentive for industry and commerce to start up here or relocate to Australia.