Political Economy, Academic Progress, Rabbit Health

[tcpip]

Dove-tailing with the Henry Review Prosper Australia have a petition calling for a review of costs of home ownership and the role of land prices (which the Henry Review was quite smart about. I have written an article on such matters entitled The Spectre of Henry, and have started a group called Land and Labor in support of the Henry Review. I am of the opinion that this is the most significant social justice reform that has been raised for decades, but alas, discussions public finance is typically a cure for insomnia.

On a related issue I received assignment results back from my two MBA courses for this semester; an 80% grade for Economic Decision Making, where I wrote on the implementation of an emissions trading scheme and subsidies for the electricity generating industry (where I suggested that they be treated like the tabacco industry) and 92% for Business Law, which was analysis of a recent Service Level Agreement. The former grade was docked a few percent because I forgot to include proper citations for two graphs - although in the process of tidying this up I did get in contact with one of the authors who seems to be a delightful chap.

One of our rabbits, Astaroth, has stopped eating which is a particular problem for a grazing animal. A visit to the local vet has diagnosed a sore tooth and has provided the usual medicines (anti-inflammatory and anti-biotic) for such a problem. At the moment we're feeding him baby food via a syringe, which he is hardly thrilled about. If he is not eating of his own accord by Monday it'll be off to the vet to get a tooth extracted. Presumably in the wild a toothache is a death sentence for a rabbit.

Comments

[mr-figgy.livejournal.com]

With hedgehogs, tooth problems often occur at or after age 3. In the wild, they're expected to live for two years, so I guess geriatric hedgie problems are a luxury and I should be honoured to have made them possible for my pet.

[tcpip.livejournal.com]

Rather like the problems of old age in humans I suppose...

Life in the wild is, as Hobbes said, "nasty, brutish and short".

[kremmen.livejournal.com]

From The Spectre of Henry (which already has a spammer response on it):
"Undeniably, the resource tax is a good thing"?

That first word really doesn't belong there. It is totally deniable.

Mining exploration companies go through periods of risky searching, during which they lose massive amounts of money. If they are successful, they then may become successful producers ... at which stage those who risked capital will now face exceptionally high taxes. What a brilliant way to discourage mining, which has largely pulled us out of the GFC, and cause potentially massive long-term damage to our economy. After all, why would anyone bother to perform high-risk exploration in Australia when they can do similarly overseas for a better long-term return?

Then, there's the issue that our really huge mining companies are present in almost everyone's superannuation, as well as in every well balanced investment portfolio. The population at large is already receiving a share of what naturally belongs to them. This new tax (were it to become law, which is very doubtful anyhow) simply sidelines some more of that share to the government instead, which may or may not distribute it any better.

[tcpip.livejournal.com]

which already has a spammer response on it

Shared IP address.

Mining exploration companies go through periods of risky searching, during which they lose massive amounts of money. If they are successful, they then may become successful producers ... at which stage those who risked capital will now face exceptionally high taxes.

This is not denied. That is standard business risk, and does not alter anything previously written about (a) the fixed supply of economic land and (b) the fact it was not produced by the mining companies.

Then, there's the issue that our really huge mining companies are present in almost everyone's superannuation

Yes, the share value of mining companies is overvalued due to monopolistic advantages. In the long run this is not sustainable, as Ken Henry knows.

In economics, all comes down to productivity.

[kremmen.livejournal.com]

The "standard business risk" for mining companies is way higher than other companies. Many collapse or get bought out. A few are very successful. A penalty on success is a fantastic way to discourage the enterprise altogether. Whether we like it or not, one of the few things that brings Australia actual revenue from overseas is raw materials.

One problem with the "fixed supply of economic land" is that it is not contained entirely in Australia. Taxing Australian profits at a higher level than overseas profits can surely only encourage companies to invest in mining ventures in other countries in preference to local ventures. Unless you can get all other countries to raise their taxes too (fat chance!), shifting a cost and profit advantage to other countries appears quite likely to be harmful to our economy.

I believe your idealistic position is valid, but that implementing it in such a heavy-handed way has the potential to be economic suicide for the whole country and the advantage is so minimal as to not be worth the risk. The time to tinker with things is when everything is stable and you can validly measure the results, not when the world economy is looking precarious.

[(Anonymous)]

The "standard business risk" for mining companies is way higher than other companies.

[[citation needed]]

Taxing Australian profits at a higher level than overseas profits can surely only encourage companies to invest in mining ventures in other countries in preference to local ventures.

In the short term, yes that is a possibility. Keep in mind however that the resource rent proposed in the Henry Review is only for abnormal profits, and secondly other countries also have fixed resources. It's not as if mining companies can make more minerals, all they can do is find them.

If what you are proposing is true, then a company with a higher resources tax would be less attractive for a mining company with a lower one. Yet, the Botswana experience is one immediate example where that is not the case and I suspect it is largely because there are always other effects to the implementation of such a method of public finance.

(Botswana has the highest GDP in southern Africa, the lowest crime rate, the lowest taxes on labour and capital, the highest level of literacy, and a stable constitutional democracy. Given how bad it was at the time of independence, this is nothing short of an economic miracle).

The time to tinker with things is when everything is stable and you can validly measure the results, not when the world economy is looking precarious.

Actually, when things a precarious is often the best time to engage in fundamental change. We needed a fundamental change to the tax system precisely because it penalises production, and encourages mis-use of natural resources. We need to increase our productivity and this is certainly one the quickest and easiest methods to implement the change.

Consider the advantages of shifting the public finances off the work that people do. Of every good and service you purchase, how much of the consumer cost do you think is taxes? About 40% or more? Add the GST, add in the income taxes to pay the workers, payroll tax, transaction duties, company tax for the business etc.

[tcpip.livejournal.com]

That was me btw.. Session cookies expired.. *mutter*

[kremmen.livejournal.com]

In the short term? "Short term" in regard to mining might well be way more than our lifetimes. Technology is creating new mining methods, so who can tell? While mining companies can only find minerals, the methods to extract them economically are changing all the time.

As for "Abnormal profits"? They've defined that as anything over the long-term bond rate. You can get that by putting money in an online bank account! Any investment that doesn't beat the long-term bond rate isn't worth having. So, it applies to any profit above the absolute minimum that any investor should be prepared to accept, and (with royalty charges, etc) amounts to a overall tax rate (according to various sources) of around 57%.

Here's an opinion that not only would the mining tax cripple our recovery, but hurt the whole world's recovery.

[tcpip.livejournal.com]

What is particularly amazing about this article is that it points out why a Resource Rentals Tax is so beneficial.

It is always better to derive public income from resources, which are both fixed in supply and with no moral justification for ownership. This is certainly better that produced goods and services which add to the cost, carry deadweight loss etc.

But even when natural resources are targetted there is an efficient and inefficient way of doing it. The inefficient way is the existing Royalties method, which, as the article points out, is based on a fixed value of tonnage regardless of market prices.

This means that in times of low resource prices, mining companies are doubly punished driving many of the small, competitive, companies out of business. In times of high prices, the companies that make hay will be those with the big economies of scale. It is little wonder then that outside of Rio Tinto and BHP, many mining companies support this change.

So the tax actually makes life more secure for the smaller mining companies, and will be massively more efficient. Let's have a look at the relative efficiency of taxes

http://taxreview.treasury.gov.au/content/html/publications/papers/Final_Report_Part_1/image/01_Part_1-6.gif

See the one at the top? That's the current method. See the one at the bottom? That's the proposed method.

Anyone who argues against the Resource Rental Tax is arguing for an inefficient tax base (which means that higher taxes are needed) and against the interests of small,competitive mining companies.

[kremmen.livejournal.com]

I guess the implementation is the main worry, assuming that this ever passes. It appears the royalties are not being removed, so the proposed method is only being added on to the current method, not replacing it. I recently saw that they are perhaps going to reimburse the royalties, but what a shambles. Sounds like it'll just employ lots of accountants.

[tcpip.livejournal.com]

Royalties are state-based legislation, so the Feds can't legislate them out of existence. They can, however, allow companies to claim royalties as a tax deduction until the states get rid of them.

One of the things that the Henry Review pointed out is that most of the regressive and inefficient taxes are state based - payroll tax, property transfer taxes, stamp duties on vehicles, fuel and rego charges etc.

[kremmen.livejournal.com]

It seems overly optimistic to suggest the states will ever get rid of them. If royalties become tax deductable, surely that's just an incentive for the states to raise them and claw back some extra revenue from the federal government by a back door.

[tcpip.livejournal.com]

Nah, the Feds will stare them down on that one. The States depend on at least 50% of their revenue from Federal grants (although that includes GST) and they know it.

[tcpip.livejournal.com]

That first word really doesn't belong there. It is totally deniable.

Also, it is obviously deniable but so is a (roughly) spherical earth, but presumably not from a planetologist. I am unable to find an economist, of any disposition, which thinks that public finances should not be derived from resource rents whenever possible - for the various reasons that I listed.