Opinion & Commentary
Still no freedom from higher taxes
Robert Carling |
23 April 2008
From the taxpayer's perspective, the earlier Tax Freedom Day occurs the better. This year, it is one day earlier than last year, which in turn was one day earlier than the year before. But don't get too excited about a favourable trend; after all, this year's Tax Freedom Day is still the equal third-latest date on record. The latest was April 24, just two years ago.
In the long sweep of fiscal history, Tax Freedom Day has become later as the role of government has expanded. As recently as the 1970s, it was still in March.
This year's small advance in tax freedom does not mean that the absolute tax burden has retreated. In fact, the average amount of tax paid per head of population has gone up in the past year from $14,490 to $15,335, an increase of 5.8%. The only reason Tax Freedom Day falls slightly earlier in the calendar is that the economy has been booming; the fruits of your productive activity have expanded at an even faster pace than your tax bill.
You might think that the personal income tax cuts in recent federal budgets would have done more to advance the cause of tax freedom. A Tax Freedom Day calculation for personal income tax on its own shows an improvement of four days in the past two years. But half that gain has been lost through the growth of other taxes, especially company income tax and state payroll and property taxes.
In an economic boom, the surprising thing is not that tax freedom has improved, but that it has not done so at a faster pace. Sustained advances in prosperity, such as Australia has experienced over the past 15 years, provide the best conditions for the relative size of government to take a step back. Governments could have done more over that period to restrain their spending and lighten the tax burden.
It is clear that the 2020 Summit wants a review of the composition and structure of taxes. It is less clear whether it is concerned about the overall size of the tax burden. But the review, if it happens, should embrace both aspects, because, from where we stand now, there is plenty of scope for the relative size of government to retreat and for tax freedom to advance.
Robert Carling is a senior fellow at the Centre for Independent Studies.
