The missing $24 billion

budgetBudgets are usually summarised with clichés: smoke and mirrors, robbing Peter to pay Paul or the devil is in the detail. If this budget had a cliché it would be ‘missed opportunity’.

The government, having locked itself into a political commitment to ensure the budget is in surplus by 2013, was forced to confront a choice: find savings or pursue the horrific prospect of increasing the amount of tax it collects.

In the words of the Treasurer Wayne Swan  “in the coming year tax as a proportion of the economy is just 22.1 per cent, compared to the 23.7 per cent we inherited from our predecessors – that’s $24 billion less tax.”

In coming to office the then Prime Minister, Kevin Rudd, pledged to keep the amount of tax below that collected by the Howard Government. At the time this was seen as a missed opportunity by many who had watched the Howard Government steadily cut taxes and, in turn, public investment in health education and social infrastructure.

If only they knew. The Rudd and Gillard Governments have gone further, steadily reducing the amount of tax collected in Australia. This is a budget of contradictions: prefaced as being tough, and then as being about a fair go, and finally “Labor to its bootstraps”. Yet, in reality, if the Gillard Government collected the same rate of tax that the previous Liberal Government did they would have an extra $24 billion per year to spend on their priorities.

With such additional revenue, the Gillard Government could comfortably fund the proposed Gonski reforms for education, fully implement the National Disability Insurance Scheme, fully fund a public Denticare scheme and still have some money left over for investment in nation building infrastructure.

As shown this week by The Australia Institute, Australia is one of the lowest taxed countries in the developed world but, surprisingly, most Australians believe the opposite to be true.

Of course in a democracy we are free to make whatever choices we wish but it is impossible to have world class services if we are determined to shop in the bargain bin for our tax system.

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