Taxation

There is a saying, Government’s view of the economy could be summed up in a few short phrases – if

it moves, tax it; if it keeps moving, regulate it; if it doesn’t move, subsidise it.

The records of Australian Federal Budgets in the last 20 years represent an accurate reflection

of the joke. More than that, we have allowed our society to be taxed and subsidised into nigh nihilism.

A merry-go-round where the not-in-need still reach in to take a bit for every circle simply because free

money is offered by government in advance of elections.

The U.S. Administration is expected to reform the U.S. tax regime fundamentally. The waste,

corruption and inefficiency found by the Department of Government Efficiency (DOGE) has been

endorsed by Congress to be dealt with in principle, with rescission packages to be submitted by the

White House for specific departmental budget cuts in the future. Politics is expected to delay efficiency

gains from being monetised for taxpayers. But the momentum for government waste reduction is

unlikely to be reversed. The Trump first term tax cuts have been pushed through, with a notional

increase in the national debt ceiling of about $2 trillion. This is notional because it is based on the

cautious Office of Budget Management’s modelling, which does not account fully for the net dynamic

positive effect of the tax cuts. Having found the DOGE cache, it is reasonable to hope for a taxpayer

dividend from the Government amounting to 10-20% of the Federal budget or, say, $US0.5 trillion.

This total amount might be returned in part or in full over the term of the Trump administration. Adding

to that savings from reducing parts of the Federal public service, the government could end up with

$US1 trillion savings annually looking forward to the end of the term. A total savings dividend of up

to $US7,000 on average per taxpayer in the next three years would set the benchmark for future

conservative governments. This could be implemented through further tax cuts or more services from

the more efficient bureaucracy.

The U.S. government has also flagged that it was looking at eliminating tax on income up to

$US150,000. Let’s not get too far ahead of ourselves and assume a zero-income tax rate for average

earners in the U.S. of around $US50,000. For Australia, this would equate to average earners of $80,000 not having to pay net income tax.