In this, and many other countries, we have a situation with taxation that doesn't make a whole lot of sense.
The people have needs that are being met, or at least someway to being met by government service provision. This of course has to be paid for by taxation.
So what is tax? It is the fee we have to pay as citizens for the services we require. If this taxation is to be fairly weighted, then the higher wealth citizens would pay more, as they, as a rule get to use more of the services and benefits provided by Government. In a compassionate society this is a necessary subsidy.
There is an onus on Government to use these funds wisely. This is a matter of quality of management.
Unfortunately, there is a mindset that has crept into the debate over taxation, that taxation should be minimised. To do this, services are cut, or allowed to drift into an underfunded position as inflation eats up their budgets. Same result. I have no problem with reviews into wasteful practise and previous pork barreling.
The reality is, if we require these services then we have to pay for them. If we do not have them provided by the public sector, which I support for many reasons including the cost effectiveness as there is no need to put a profit margin on top of the cost of provision, then they have to be provided by the private sector. This is a less than ideal situation because of the aforementioned profit margin, the drive for that margin leading to aggressive cost cutting that degrades the quality of service. This is understandable from the perspective of the private (corporate) entity, as their prime motivation is profit. However it is not good for the recipients of the given service. There is their other option which is to increase the price that consumers have to pay. This is often by those least able to.
Now we come to the crux. Under the private provision of these services there is no subsidy,unless some special deal has been struck, and therefore the wealthy avoid their societal responsibility of helping those less fortunate. Many of those that whine about having to pay a little extra for the health care of the old and sick, fail to take into account the welfare that they receive through child support and education (even private schools are subsidised by the taxpayer) etc. The well to do also get to use the infrastructure more, as they have a higher level of activity. Then there is the welfare/subsidisation of business, both private and multinational corporates. Fuel subsidies, special provision of infrastructure, and all sorts of handouts.
So why do our politicians have this pathological fear of raising sufficient taxation for our needs?
It's actually even worse than that. Whilst degrading many services because of the undefined "need to cut government spending", they hand out tax cuts. (mostly biased to the well off). We see even in the situation of the current flood crisis, when the possibility of raising a bit extra to help the recovery was floated, the chorus of " cut spending instead" was wheeled out again. How cutting services in one area to pay in another is overall effective, is beyond my comprehension. These people need help, and the general population seems keen to provide it. The politicians once again turn the needs of the hurting into a cheap plastic football. Shame on you all.
Lets look at the US situation at present. They are running huge deficits to pay for the previous administrations tax cuts to the wealthy and their aggression in Afghanistan and Iraq, whilst handing over large sums to the banking industry and trying to stimulate the economy after the GFC. Now the people that set up this debacle are trumpeting spending cuts, not to their military adventure I might add, and tax cuts. How one stimulates an economy by applying the brakes, I don't know. It seems to me that the current problem is reduced activity caused by fear. Admittedly some have reduced ability to participate at previous levels, but many do have the ability and don't. You can't increase activity with borrowed money for too long without ending up in a debt hole that will take forever to get out of. This appears to be the US situation at present.
The solution. Raise taxation to fund increased activity. No debt, no interest, and the money ends up going around and ending up back in tax receipts. The funds dispersed by Government through increased service provision end up in the hands of the people( we won't go into the imbalance now), who then spend it etc etc etc. Each step of the flow is taxed.
I suggest the wealthy and the super wealthy should be the prime benefactors as they have the ability to put funds aside, which to an extent chokes the flow, whereas the less well off spend every cent they get which keeps the flow running. Some say that taxation chokes the flow, but this is a misunderstanding of energy dynamics. Provided the money is returned to the flow through provision of services, it is not the case. It is taking it out of the flow that chokes the system.
We have to remember that Money does not exist as a discreet entity. It is an abstract symbol that represents the energy flow through society.
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I thought I would join you on your site (your territory). This might put me at a distinct disadvantage but I am happy to be involved. I should have realised that you had done some serious thinking on corporations verse government and taxation. I enjoyed this post.
ReplyDeleteI basically support your ideas here (as I did elsewhere) but I feel you are slightly misguided on the role of private enterprise(here I mean small and large business).
Profits are not evil and are a necessary component of business (if companies are to survive).
I would like to suggest that companies (making a profit) may be more efficient and effective at delivering certain services (say to the public). The increased efficiency could adequately compensate for the inclusion of a profit component in a company's P&L.
I suggest (as you would) that profit levels need to be sensible and reasonable and if being taken from the provision of a public service might need to be "controlled" or at least agreed upfront.
Government can learn a lot from private enterprise and this is a primary reason to encourage cooperation and the sharing of responsibilities in service provision to the public.
One area (of interest to me) where good habits could rub off on government is "Innovation".
Refer http://innovativecouncil.wikidot.com/what-is-innovation
Hi Dassa,
ReplyDeleteI actually have no problem with profit in the private sector, provided it is resonable.I have owned a number of businesses over the years as well as worked in the Bureau of Statistics(a while ago) As you say, business needs it to survive. Private enterprise in it;s simplest form is the sole trader, and the profit is the wage. As the enterprise gets larger that relationship does breakdown somewhat as the wages are taken as costs and the profit is on top of that.
The only reason that private enterprise could be more cost effective, for equal service quality, is management. There is no reason why public enterprise can't be managed as well as private enterprise, and if so would be more cost effective by way of no need for the profit margine and tax, which I forgot to include in the original critique.
My main thrust in this debate is to try and negate the fuzzy thinking bought about by Ideological entrapment. I guess I may be a little guilty of Ideology myself in that I work from the basis that we should act with compassion as our Primary and ruling motivation.
My main crtisisms of "private" and "corporate" enterprise is the design of the regulatory structure. The Pty Ltd company has been somewhat bought into line, the directors are now more liable for debt etc and therefore need to conduct themselves in a more responsible manner, but this still doesn't stop the shonkies putting everything in the wifes name and trashing the business so they don't have to pay out on debts. As we know , this sort of behaviour is fairly common in the building industry.
In the "corporate" sector, this avoidence of responsibility is even more extreme, and when the company is a multi-national with it's head office in another country, we as a society have very little ability to reign in bad practise, especially as some of these have greater wealth than many counties.
This design fault of course is mostly neutralised by good and responsible management, we we see all the time that these "corporate don't always act in this manner.
I personally don't care that much if services like banking and utilities are provided by the private and corporate sectors, though I think we have been badly done by in some of the sell offs. But when it comes to the "caring sevices" Health, welfare, education,I think the profit motive is a dangerous component, leading to dimunition of services.
Have you ever looked into the horrendous state of health care in the US. They also have a pretty poor public education system. We see the results all the time of that.
AN addition.
ReplyDeleteI think it could be quite beneficial if the public service recruited more from private enterprise. I've been out of the service for a long time, but in my day there was a lot of dead wood that needed trimming, so I don't know if that's been dealt with properly. I get the impession that it is probably not as bad these days
PPS
ReplyDeleteThe other BIG problem, especially with the large corporations, is the power that they wield in society with no Democratic input.
Synaps
ReplyDeleteI may be looking at government from a different perspective to you (I think). Perhaps I am tainted a bit by my experiences with local government over the past few years. I have been involved in helping Councils (from the inside) sort out the mess they are in by virtue of their poor asset management in the past.
Management is the issue!
Yes Councils could (should) employ more people from private enterprise, but their pay structures basically preclude this (or at least for attracting the numbers they need).
The asset management debacle is a classic case of poor management and poor planning (not "putting money away for a rainy day").
Some reports put the "obligation" for asset renewal across all Australian councils (450+) at some $150B. Some councils are in more trouble than others (generally representing smaller communities), in that they will not be able to maintain services at current levels with the amount of "renewal" funding required to bring assets back to an appropriate level.
There is no quick fix and the primary infrastructure (supplying the services) is not assets that corporations want to buy (necessarily). There are services at the local government level like playgrounds, parks, libraries etc that councils (some form of government) need to deliver.
How do we do this?
Councils need to be more innovative. Councils need to understand and practice innovation to provide mechanisms for generating new ideas, leading to new practices and new solutions that fit within realistic budgets and provide social well-being and social good.
What can deliver this necessary reform?
INNOVATION!
But there is a long way to go to realise the ultimate "dream" - but it is achievable.
An initial step has been made to introduce "innovation" to government (in general) but specifically to local government. A compilation of what is happening globally is being put together.
Visit the Innovative Council web site.
http://innovativecouncil.wikidot.com/forum:start
Any constructive input to the debates here would add value and be greatly appreciated.
Regards