The Beagle
Feb 15, 2019
Every day, on Twitter, on Facebook, even in the Bay Post and the Beagle, I hear of yet another imposition on “The Taxpayer”. This poor person is being forced to give up cash that has been earned from the sweat of their brow to support a lifestyle the rest of us expect. This taxpayer is truly a martyr to us all…or should that be a myth to us all?
The concept of the “Taxpayer” is useful if you want to build a narrative of the lifter and the leaner, or
build a divide between those who are more wealthy and those who are poor, but it is not a useful
way to describe how taxes work, or how public goods are funded.
Australia has its own currency, which people resident in Australia, or who do business here, must
use to pay Australian tax. The only way you can get these Australian dollars is through the Australian
Government, and the Australian Government controls how many Australian dollars are available in
the economy.
When we purchase goods and services, we use Australian Dollars as a convenient means of
exchange, and it allows us to collect the dollars we need to pay the tax imposed by the Government.
And of course, these taxes are collected to pay for Government services, right? No… wrong actually.
The taxes are collected to manage the ebbs and flows of the Australian economy. More taxes are
collected when there is excess demand, which fuels inflation, and taxes are reduced when there is
not enough demand in the economy. People who have better access to dollars are taxed more
highly because they are less likely to miss some of the dollars they have available, than someone
who is using every dollar they can collect to maintain themselves and their family. Once the
Australian Government collects these excess dollars, they no longer exist.
So how are Government services funded then?
They are funded by the Government deciding those services are needed, and bringing into existence the dollars that are required to fund the service.
The dollars are then used to purchase the service, either from private providers, or by the
Government directly providing the service. So long as there is a demand for the service, and no
shortages of labour or materials, there will be no inflationary pressure from these new dollars.
So when we are discussing funding Government services, we are not talking about taking money
from the put upon Taxpayer, we are talking about the production of public money to provide
services. As a result, the discussion we need to have about these services is not “can we afford
them”, but are they the best use of the labour and resources we have available in our Country.