'Super Tax on banks? No thanks

There are some days it would be handy to know who the people are that make up the criteria for opinion polls and survey's.

You'd think having spent my entire career in finance, I'd be just the sort of person they're after for any marketing survey or opinion poll when it comes to Australia's finance sector.

However, as it turns out, working in finance disqualifies me - either that or the companies conducting the polls are regular readers of Money Morning.

So you can imagine my surprise - and I'm sure you'll be surprised too - when the latest survey revealed that nearly two thirds of Australians want a 'super tax' introduced to our banking sector.

Even the executive director of the company that conducted that poll was surprised. 'It was a concern Australians would accept higher taxes,' said John Roskam of Institute of Public Affairs. Oddly enough, the company is very firmly against any form of 'super profits' being applied to any industry.

What could make these 60% or so of Australians want a bigger tax imposed on them? Supposedly, this survey has '...exposed a lingering hostility towards banks and the huge salaries of some executives.' Not only that, but this survey shows that some Australians resent the banks raking in theses enormous profits and think the government should tax them more to teach those greedy banks a lesson.

But here's the thing. The banking industry will just pass their new increased costs onto the consumer, which is, er, you and me.

It's actually pretty straight forward.

In fact, in response to the article, pretty much all of the sixty odd bloggers were against anything like this being introduced. They all seemed to understand exactly how any sort of 'super tax' on banks would affect them.

And the banks wouldn't lose a cent. They'd make sure that anything that ate into their profit margin would just mean the cost of their products would increase. Like I said, it's pretty straight forward.

But it makes you wonder why this, presumably small, group believe that taxing a profitable enterprise is a solution. I mean, did they honestly believe the Rudd government's slogan that taxing the miners would create a 'fairer Australia'?

Why is taxing a profitable business the only way to keep Australians happy? And what makes these few think that more tax on any business would be better for us?

When the super profit tax was in its infancy, there was never a mention of reduction in personal income taxes. And not one politician suggested lowering the GST. The only 'bonus' was that business would pay 2% less tax per year. Chances are that your local 7-11 isn't about to pass on the new tax saving to their customers. No, it probably would have kept the extra 'profit' for them.

Or, that extra money from lower taxes might mean 7-11 can employ another person.

But this is the problem with taxing a business more because they make more money than 'normal' people. It's not a solution, and at the end of the day, just because the government might have more in its bank account, doesn't mean you get a say in how it's spent.

I mean, for example, how many millions of dollars has been wasted on Senator Conroy's internet filter? And so far not one single member of the Australian public has had a say in how their tax dollars are being spent on this project.

In fact Australians haven't even been consulted on this.

Or if you live in Victoria, over one billion dollars has been spent on the Myki debacle. And the transport ticketing system didn't even need 'fixing' or upgrading. But the state government believed that was an investment of your tax dollars and yet pretty much every commuter on public transport in Victoria would disagree.

And this is the biggest problem of allowing the government to tax you more.

If something like a 'super tax' was applied to the banks it's actually going to discourage you from spending any more money.

Think about it, if your personal banking costs get higher, it means that you have less money to spend on yourself. And we all know how important our spending is to the government! Or, all the extra costs of banking might now mean that you don't save as much.

The more money the government takes from you in the form of taxes, is, in the long term, only undermining your ability to choose how you want to spend or save your hard earned cash.

Taxing the banks won't stop them making less profit.

The only thing a 'super tax' on the banks will achieve is more money for the government to waste and less money in your pocket.

Shae Smith
Assistant Editor
Money Morning


Comment:
Australia is in full swing of a short election campaign so the associated spin and bull dust will be intense, promises being made that will never be kept and a cash strapped government putting out feelers to see what they can get away with if elected.

Diversions will be many, voters need to be aware that anything shelved ( hidden from discussion ) previously will be back on the agenda once balances of power have been sorted out.

The cancerous ugly carbon tax is making headlines again and won't be sorted until the masses have given a resounding no to this attempt to divert huge wealth rescources to banksters, fraudsters, dictators, "movie stars" like Al (Waterfront) Gore, hot air merchants and financial manipulators.

Will the Government Super-Tax You Next ?

Will the Government Super-Tax You Next?

We laughed yesterday.
We laughed the day before as well.
So yesterday's laughter was nothing new.
And surprise, surprise, we had another laugh this morning.
The reason we laughed yesterday was down to the front page of the Australian Financial Review (AFR).
Yes, sometimes Australia's premier business newspaper produces more laughs than the funny papers.
"Henry sees super profit taxes for all", yelped the headline.
That's what treasury secretary Ken Henry sees does he?
We've labelled Canberra's top pen-pusher as Emperor Henry in the past due to his apparent craving for power.
But it looks like we need to give him a new nickname.
What about Mystic Ken?
Or Madame Henry, the world famous fortune-teller.
If the federal budget needs topping up perhaps Lindsay Tanner could sell tickets for a Mystic Ken palm reading, "I see you paying more tax... now hand over the cash before I set the boys on you!" [puffs hard on cigarette].
Of course that wasn't all Mystic Ken had to say. It seems he's had enough of free speech too and wants to clamp down on it. Unless you happen to agree with his point of view naturally.
As reported by The Age, Mystic Ken blurted:
"Whenever an idea is ventured in public by a person... there's at least a handful of academics who will contest it... it is unbelievably frustrating, incredibly frustrating... there are occasions on which economists might, at least for a period, put down their weapons and join a consensus."
You can see why we laughed so much.
I don't know about you, but we always thought that a consensus was reached after discussions. A consensus is reached after everyone puts forward a point of view. Then there's a bit of give and take, followed by agreement of some sorts.
A consensus doesn't mean shutting up and just agreeing with the pen-pusher extraordinaire.
Besides, we don't like the consensus approach. We'd never agree to anything unless it was full blown free market capitalism. No compromise.
Incidentally, if you click on this link, it will take you directly to the article in The Age. The article is now headlined, "Back the tax, Henry tells economists". But that wasn't the original headline, as you can see from the link. Originally it was, "Keep shtum Henry tells economists".
Our resident German and editor of the Weekend Daily Reckoning, Nick Hubble tells us that, "Stum (pronounced shtum) is the German word for 'shut the hell up'."
We think that pretty much sums up the Mystic Ken approach. Perhaps he thinks he's created the Eleventh Commandment, 'Thou shalt not speak.'
Our laughter this morning was due to another The Age article. This time quoting Reserve Bank of Australia (RBA) board member Warwick McKibbin.
It's a lengthy quote but it's worth repeating. Just for the fact that it's coming from a mainstream economist who is in such an influential position:
"I also disagreed with the scale of the stimulus package... It wasn't evidence-based policy; they panicked. The government rammed those decisions through the economy even though they were fraught with risk. No one was consulted about an alternative view and if you did say anything you were attacked by the Treasurer and the Prime Minister in public."
He went on:
"The stimulus created a problem. The government overspent but they had enough in reserve. Then they decided that because of politics they had to get their spending back so they could claim they had fiscal surplus - for which there is no economic basis, by the way - so they come up with a really badly designed resource tax to try and get the position to look good three years from now, and in the middle of a sovereign risk crisis exposed the economy to a reassessment of sovereign risk.
"The review of the tax system should have been independent of the Treasury and then critiqued by it and other economic agencies.
"Treasury, as far as I can tell, has become an arm of political policy. Historically they have always been the ones who have said, 'Wait a minute, this policy of subsidising green cars to try and save the constituents of a particular electorate is not a very sensible way to spend $8 billion.' You just don't see that now."
Look, I don't agree with everything McKibbin says, it's just good to see even the mainstream economists giving the stimulus spending a bit of a poke.
But anyway, as we see it, the Mystic Ken tax-'em-to-death approach is just all part of the idea that Australia has a bullet proof economy. Nothing ever could possibly go wrong. No amount of government fiddling and meddling could ever stuff things up.
As long as all the bureaucrats stick together everything will be fine.
In fact, as they see it, the private sector with its stupid profits and dopey productivity would have ruined the Australian economy for everyone.
Much better to take the money from the private sector and individuals and spend it on school buildings.
Or spend billions on housing insulation.
And billions on inflating the property bubble.
That's just the way it is.
Now Mystic Ken has had a fabulous thought. If the Resources Super Profits Tax is such a great idea, why not make all businesses pay it.
After all, it must be a good idea otherwise the government wouldn't have come up with it.
Make every business which earns so-called super profits pay a super tax. Remembering that anything above the risk-free government bond rate of around 6% is now considered a super profit.
Incidentally, that got us thinking. We checked out the term deposit rates yesterday afternoon. Turns out, would you believe it, that it's not only mining companies earning super profits...
It's those bloomin' scavenging pensioners too. Ooh, words can't disguise how furious your editor is that some pensioners and even ordinary people out there are earning a super profit.
Get this, Dutch bank Rabobank is even aiding and abetting these individuals by offering 6-month term deposit rates of, wait for it, a super profitable 6.31%. If the government doesn't come down hard and tax that super profit it'll be a disgrace.
But if you think that's bad, it gets worse.
Those greedy saving pensioners are earning anything up to a whacking great 7.3% on a term deposit with Rabobank. And what have they done to deserve that super profit?
Nothing.
Sure, they've worked thirty, forty or maybe even fifty years. And sure, maybe they've paid a whole bunch of taxes along the way.
And sure they've put their neck on the line, but heck, what are they doing now? Nothing. They're sitting back and earning interest like, erm, interest earning do nothing-ers.
It's time for the savers to be punished for saving. Those savings are really other people's money.
I mean, where does that interest come from? It comes from exploiting those that go into debt just so these savers can lord it up at the bowls club or at the bingo. Has there ever been a greater sin than living in retirement off the proceeds of interest?
We think not. Tax it. No, don't tax it. Super-tax it.
In fact, super-tax the whole darn economy.
Except housing of course, because we don't want that bubble popping do we...

Article courtesy of Money Morning