The year of dumb tax ideas

There have always been dumb tax ideas, but 2016 has been a standout year for them.

Governments and tax advocates seem more eager than ever to reach for the tax lever. Put it down to revenue hunger and an eagerness to meddle.

If we were handing out awards, a good place to start would be the huge extra tax on Pilbara iron ore production proposed by Western Australia’s National Party leader Grylls. A political stunt if ever there was one, if ever implemented it would inflict great economic harm.

We have also seen in Australia a proposal to tax the sugar content of soft drinks, which would penalise the great majority who consume such drinks in moderation and do very little to achieve its stated objective of reducing obesity.

The backpacker tax at least had a logical basis, but the ‘spin the wheel’ process of arriving at a figure was farcical. And Scott Morrison’s decision to fund his retreat from 32.5% by jacking up the quaintly named Passenger Movement Charge (aka the Sneaky Departure Tax) made no sense at all.

One of the dumbest tax ideas was imported. The government of British Columbia in Canada imposed an extra 15% transfer tax on residential properties in Vancouver sold to foreigners. In Australia, the state governments of New South Wales, Victoria and Queensland quickly followed, figuring there is no tax increase better than one whose targets can’t vote against you.

What is it about Vancouver? Now, the city’s government has followed up with an extra annual tax on residential properties deemed, under a mind-numbingly complex set of rules, to be ’empty’. This idea may yet be copied down under.

But the prize for the dumbest tax idea of 2016 must surely go to the American city of Portland, Oregon. (Bear in mind that in the US local government can tax business income, which is pretty silly in itself.) The Portland city government has imposed a tax surcharge on any business operating in Portland if their CEO is paid above a threshold multiple of their lowest paid workers.

Thomas Piketty — the inequality guru — has predictably given it his seal of approval, while noting that the threshold is set too high! The only other likely achievement of Portland’s empty gesture is the impoverishment of its citizens as business moves elsewhere.

Any of the above may be considered smart politics in the age of populism, but they’re dumb policies. Expect more in 2017.