Howard our heaviest taxer



Australian Financial Review

24th October 2007


John Roskam pertinently asks why the  coalition doesn't believe in small government any more ("Pressure on to spend up big", October 19) but, at the same time, he accepts Finance Minister Nick   Minchin 's claim  that "this government has constrained the growth in government spending more than any government since World War ll". This is a bit like the chap who, while admitting an addiction to drugs, claimed he  hasn't increased his usage at the same rate as druggies did in the past. 


In reality, for reasons explained in my May 2005 report to the Australian Chamber of Commerce and Industry and in the Spring 2006 edition of Policy , the official published budget figures for spending and taxes do  not provide an accurate historical picture. If historically consistent Australian Bureau of Statistics data is used , discretionary spending  has increased under the coalition and, since 1998-99,   has been running at a higher level (relative to GDP)  than under any previous government  and 7 to 8 percentage points of GDP higher than in the final year of the free-spending Whitlam government. (Discretionary spending excludes unavoidable payments of interest and is thus open to change by government decision). Moroever, these figures do not include the very large tax expenditures, which are concessions made through the tax system.


It is also clear that the  coalition is the heaviest taxing government we have ever had in Canberra.  The tax cuts now proposed and those made since 2004-05 are estimated to  reduce the burden of taxation by about 0.8 percentage points of GDP by 2010-11. However, this would likely still leave the overall level close to the highest ever reached in 1986-87.


With both major parties having virtually the same aggregate "conservative" (sic) spending policies, perhaps the only way to stop vote buying is to incorporate constraints into a constitutional structure.