Ideas@TheCentre – The Centre for Independent Studies

Ideas@TheCentre

Ideas@TheCentre brings you ammunition for conversations around the table.  3 short articles from CIS researchers emailed every Friday on the issues of the week.

ACT's tax reform test case

Robert Carling

21 October 2016 | Ideas@TheCentre

land tax housingElections for the ACT Legislative Assembly do not normally attract national attention, but the one held last Saturday has done so — in part because the government was returned despite a bold tax reform project that led to large increases in municipal rates. Some post-election commentary has been along the lines that voters are open to well-argued tax reform — and even tax increases — after all. Higher GST, anyone?

Not so fast. Elections are always about bundles of issues, and it is difficult to discern the influence of any one issue on the outcome. Moreover, it can hardly be said that the ACT electorate is representative of Australian voters in general. What flies there won’t necessarily fly elsewhere. In NSW, the Carr Labor government’s attempt to expand coverage of land tax (similar to rates) was reversed in the face of a taxpayer revolt.

It is true that the increase in ACT rates is part of a broader, revenue-neutral tax reform package combining higher rates with abolition of stamp duty on insurance (already implemented) and — eventually — on property transactions as well. The territory is five years into a planned 20-year transition from stamp duty to higher rates. This is a tax reform most economists have called on all the states to adopt for its economic efficiency enhancing qualities.

Although the ACT model has survived its first electoral road test, it remains to be seen whether the 20-year transition is completed as rates become a heavier and heavier drain on families’ annual budgets. It also remains to be seen whether the transition is truly revenue-neutral. It has not been for all taxpayers, as its implementation has come with a socialist twist — the reductions in stamp duty being proportionately much larger for low value transactions than for high value ones.

State governments have become hooked on stamp duty — for example, NSW now rakes in $9 billion a year from it — and replacing it with rates or land tax would require hefty annual imposts on ordinary households. The ACT experiment is interesting to observe, but even if completed as planned would be a big challenge to replicate in other jurisdictions

Light railroaded

Michael Potter

21 October 2016 | Ideas@TheCentre

urbos canberra act light railWell aren’t we glad that we figured that out. Canberrans have decisively voted for a light rail! This is a prominent interpretation of last weekend’s ACT election result. But the better lesson is that governments can easily ignore facts and bamboozle the electorate to support useless projects. Because the projects are infrastructure. And infrastructure is good.

Never mind that the project cost has already blown out, and may blow out more (as all infrastructure projects do). Never mind that the total cost, relative to the size of the ACT economy, is estimated to be 6 to 12 times larger than the NBN. Never mind that there were alternatives with a much greater benefit-cost ratio, such as improved bus infrastructure, according to the ACT Government’s own analysis. The government’s decision to ignore the greater benefit of buses has been criticised at length by the Productivity Commission. But trams are more exciting than buses… don’t we understand?

Never mind that the need for more public transport is not clear, given many Canberra bus routes are currently oversupplied. Never mind the environmental degradation caused by the construction of the supposedly environmentally friendly project. It is apparently okay for Greens-inspired projects to cut down more than 860 trees, even if they are being replaced — but good luck mounting the same argument with your local council. And a busway arguably has lower not higher greenhouse emissions than the light rail.

Never mind that the proponents argue the project will create heaps of jobs, while ignoring the people who leave other jobs to work on the rail project. Never mind the benefits being heavily dependent on dubious assumptions about non-transport benefits such as economies of scale and increased tax revenue, assumptions that have also been questioned by the ACT Auditor-General.

Don’t worry about all these issues. The ability to do a snow job on the electorate has helped win an election again.

Increase risk appetite to grow Indigenous economy

Sara Hudson

21 October 2016 | Ideas@TheCentre

aboriginal indigenous business economic developmentSometimes you need to take risks… to make difficult decisions. Do you continue along the familiar well-worn path you have always taken or do you take a gamble and try something new?

Listening to speakers at this week’s Indigenous Economic Development forum in Darwin, I was struck by how the Australian government is caught in this co-dependent relationship with Indigenous Australians; where it cannot bear to consider it may not be needed and the status quo needs to change.

One of the delegates asked a government speaker what they meant by the word ’empowerment’ — and the speaker’s response was “informed decision making.” Then a New Zealand Maori woman got up and explained what real empowerment is.

It is so much more than just having the capacity to decide between two different options — especially when those options are a Clayton’s choice — as they so often are for Indigenous Australians. ‘Do I agree to the government controlling the head lease over my community in exchange for new housing, or do I make do with existing dilapidated social housing?’

The Maori woman explained how her tribe, the Ngai Tahu, had reconstructed their relationship with the New Zealand government following treaty settlement negotiations. Instead of having ‘options’ imposed on them by government, they were developing their own opportunities — moving away from dependence on government to a self-sustainable future where their business enterprises were funding social and education programs for their people.

Here in Australia, the chances of Aboriginal and Torres Strait Islanders being provided with the opportunity for such independence is a still long way off.  The Aboriginal Benefit Account — which consists of funds generated from mining royalties in the Northern Territory — is administered by the federal government, not by the communities themselves.

Allowing local Indigenous people control over their own money is considered too risky.  But isn’t it time to take a gamble? Until the Australian government is ready to cut the apron strings and the red tape restricting Indigenous land use and resources, Indigenous Australians are unlikely to experience real empowerment.