Every day, on Twitter, on Facebook, even in the Bay Post/Moruya Examiner, I hear of another imposition on “The Taxpayer”. This poor person is 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 a martyr to us all … or should that be a myth to us all?
The “taxpayer” concept 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, which 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.
These taxes are collected to pay for government services, right? Wrong.
Taxes are collected to manage the ebbs and flows of the 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 government collects these excess dollars, they no longer exist.
So how are services funded? They are funded by the government deciding those services are needed, and bringing into existence the dollars required. The dollars are used to purchase the service, either from private providers, or by the government directly providing the service. So long as there is a demand, and no shortages of labour or materials, there will be no inflationary pressure from these new dollars.
We are not talking about taking money from the taxpayer, we are talking about the production of public money to provide services. The discussion we need to have is not “can we afford them”, but are they the best use of available labour and resources.