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Off the Bench: Tax debate reveals gulf between the parties


In our opinion series Off the Bench, two of South Australia’s brightest backbench MPs – one Labor, one Liberal – trade arguments on key issues. Today, Liberal MP Stephan Knoll argues that the state doesn’t need more tax income – rather it needs more efficient taxes.

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People often lament that there is no difference between the two major parties, that we are two sides of the same coin. On issues such as indigenous advancement and disability services, where there is broad consensus on the way forward, they would be right. But a clear difference is found in the current tax debate being had at a state and federal level.

Beneath the headlines and the rhetoric this debate goes to the core philosophies of Liberal and Labor. It’s about the higher taxing bias of Labor versus the lower tax, limited government agenda of the Liberal Party.

The Liberals believe that people should be able to keep as much of their own money as possible. This idea is underpinned by an inherent trust in people and that governments are not omnipotent, they are human and are not better when it comes to where money is spent.

This idea is not debated in absolute terms; it is relative. It is about more tax versus less tax, not tax versus no tax. It is about whether your government simply reaches into your pocket for more instead of looking at what they already have and finding better ways of doing things.

Premier Jay Weatherill is unashamed in his quest for more revenue. Indeed, his proposal is that an increase to the GST by itself is not enough, that he needs access to a tax that grows faster: income tax. Yet he has failed to make the case for needing the extra money. The Premier talks about health expenditure increasing but analysis shows that health expenditure has plateaued: in 2011/12 health was 31.7% of the state government’s budget and in 2015/16 health spending is predicted to make up 30.9% of the budget. At the same time grants from the Commonwealth and the GST continue to rise with growth of 28% over the forward estimates. Labor is suggesting a solution to a problem that doesn’t exist.

There is no doubt that in Chris Picton’s response he will cite the supposed $80 billion in cuts to state grants. These “cuts” promises made by the Gillard/ Rudd governments the bulk of which came outside the forward estimates. These promises came with no plan of how to pay for them. The Federal Labor government were writing cheques that future governments couldn’t cash without huge tax increases.

We should be looking at ways of collecting revenue that are less distortionary and lead to a more fair society. The focus should be on reform that provides growth and security in employment.

Labor is completely confused about this issue. On the one hand Treasurer Tom Koutsantonis praises Labor for being fiscally responsible and managing its budget, while on the other we have the Premier complaining about not having enough revenue.

This debate needs to shift.

With this renewed focus on tax we should not miss this opportunity for reform.

We should be talking about better, more efficient taxation, not higher taxes. We should be looking at ways of collecting revenue that are less distortionary and lead to a more fair society. The focus should be on reform that provides growth and security in employment.

In South Australia we cannot afford to miss this opportunity.

As I’ve previously argued in this series, the only way that we are going to recover the South Australian economy is by encouraging small business: encouraging them to take risks, to seek new products and markets or to take on an extra employee or two. These changes happen when small business feels confident and confidence comes when things don’t feel like they are getting harder and more expensive all the time. If things were to get just a little easier, or a little cheaper then we will see a positive change. If taxes went down instead of continually going up this would send the clearest of signals that the government was here to support businesses rather than just take from them.

If Labor and Premier Weatherill are truly looking at ways to fix their budget they need only look to themselves.

It is fiscal laziness to just ask for more money. There is a $17 billion budget in South Australia that can be better utilised to advance South Australia and its citizens. Since 2002 the Labor government has blown over $4 billion in unbudgeted expenditure and the opposition has also identified over $1 billion in wasted expenditure. From cost blowouts to failed IT programs to excessive spending the government should look at itself first to ensure that it is getting the most from the resources it has.

South Australians don’t need a bigger tax burden. Ideas that seek to reduce that burden – along with those that stimulate economic growth and reduce the distortionary impact of tax – have to be part of the discussion. Regardless of where this debate heads, South Australians are realising one thing: no matter the circumstance, Labor will always look for ways to take more money out of our pockets.

After 14 years it is time to try a different approach.

Labor’s Chris Picton will respond to Stephan Knoll’s argument tomorrow.

For more of out “Off the Bench” debates, go here.

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