Why not raise taxes to slow inflation?

[Carn The Berries]

It would appear that ship has sailed.
We now have a Gettysburg thread. An under manned, under resourced Confederation competing against a Union.

But back to the thread topic topic.

What has alwats concerned me was your luck when entering the borrowing market. Which in turn, has a direct correlation to when you are born.

Born at the right period and you have capital growth and low borrowing costs. Wrong period, depreciating capital and higher borrowing costs.

Now, I am not diminishing the risk of borrowing/investing. But the impact of when you are born (and link to you purchase property), to me, seems an unnecessary requirement to control inflation.

So, the debate should be
is a problem shared a problem halved, or now two people with a problem!

It's not even as macro as when you were born. Bought my first place about 2 months before the GFC with little savings and the ability to borrow 97.5% of the purchase price (albeit with steep LMI). Had I waited another 6 months, that option would have been gone and I expect it would have taken another 3-4 years to get into the market (once I had a sufficient deposit).

As I've said before, interest rates are the best way (at present) to control inflation in the short term. There simply aren't any other levers that can pull that sort of money out of the economy that can be turned on and off with minimal notice.

 

[Carn The Berries]

I love how you can be called again and again on genuinely and completely misleading bs you present to the forum and the best you can do is continue this nitpick that the person involved with has acknowledged.

It’s almost like you think that it’s the same.

Odious little chap arent you?

DaBarz

I'll just leave this here and call the debate closed.

 

[DaBarz]

DaBarz

I'll just leave this here and call the debate closed.

Well done on putting down that shovel

 

[kranky al]

It's not even as macro as when you were born. Bought my first place about 2 months before the GFC with little savings and the ability to borrow 97.5% of the purchase price (albeit with steep LMI). Had I waited another 6 months, that option would have been gone and I expect it would have taken another 3-4 years to get into the market (once I had a sufficient deposit).

As I've said before, interest rates are the best way (at present) to control inflation in the short term. There simply aren't any other levers that can pull that sort of money out of the economy that can be turned on and off with minimal notice.

Ive seen an alternate idea that involves increasing the amount of super paid by both employee and employer.

Takes money out of the economy but at the end of it all you benefit with extra super.

 

[Carn The Berries]

Ive seen an alternate idea that involves increasing the amount of super paid by both employee and employer.

Takes money out of the economy but at the end of it all you benefit with extra super.

No way known that would get through. Chamber of Commerce and BCA would make sure that idea never gets off the ground.

It also has the same issue as changing the tax rate, its a permanent/long term solution to a short term problem

 

[kranky al]

No way known that would get through. Chamber of Commerce and BCA would make sure that idea never gets off the ground.

It also has the same issue as changing the tax rate, its a permanent/long term solution to a short term problem

Well its not, you can also lower the rate again once inflation is under control.

Just like they raise and lower interest rates….

 

[Madas]

How about instead of the banks pocketing the entire windfall of the interest rate rises a percentage of the interest rate rise is set aside and put into a future social housing fund ?

It’s like a tax on the banks profits but the money ends up circulating back into society and the capital to fund social housing grows rapidly

 

[Madas]

Well its not, you can also lower the rate again once inflation is under control.

Just like they raise and lower interest rates….

As much as I like the idea of increasing super it doesn’t capture self employed people and companies with complex structures therefore only wage earners with mortgages would bear the burden .

Unless there was a way to enforce everyone to provide a certificate of extra super contribution to the tax office during times of inflation reduction or face some kind of penalty ?

 

[Carn The Berries]

Well its not, you can also lower the rate again once inflation is under control.

Just like they raise and lower interest rates….

The administration involved in that would be astronomical. You're not going to get businesses on board if you tell them:
a) You're going to have to pay more; and
b) You're going to need to devote more administrative resources to facilitate it.

Changing super rates every month (or even every quarter) just isn't practical.

 

[Carn The Berries]

How about instead of the banks pocketing the entire windfall of the interest rate rises a percentage of the interest rate rise is set aside and put into a future social housing fund ?

It’s like a tax on the banks profits but the money ends up circulating back into society and the capital to fund social housing grows rapidly

What exactly is the windfall? (Generally) the banks only increase their rates in line with changes in the cash rate. If there was, all that would happen is that banks would game the system so that there wasn't any surplus available.

 

[kranky al]

The administration involved in that would be astronomical. You're not going to get businesses on board if you tell them:
a) You're going to have to pay more; and
b) You're going to need to devote more administrative resources to facilitate it.

Changing super rates every month (or even every quarter) just isn't practical.

You mean entering a figure in an accounting program.

This month instead of x% it’s now x+1 %

Mmm I can see how that would be near impossible

 

[Carn The Berries]

You mean entering a figure in an accounting program.

This month instead of x% it’s now x+1 %

Mmm I can see how that would be near impossible

I'll let my payroll staff know how inefficient they're being when they have to update it each July. Knew that it shouldn't take them as long as it does

 

[Madas]

What exactly is the windfall? (Generally) the banks only increase their rates in line with changes in the cash rate. If there was, all that would happen is that banks would game the system so that there wasn't any surplus available.

Don’t know
I’m not an economist or banker

All I know is that the big 4 banks are making $10+ Billion dollars in annual profits ( whilst systematically providing less services to the consumer I might add ) then a percentage of that profit should be taxed and the proceeds of that tax be channeled directly to a housing fund .

They are only making more profits because the reserve is trying to curb inflation
They are doing nothing extra to earn it
Therefore it’s a windfall

Government needs the balls to call it out and tax them

 

[nut]

The Ponzi Scheme

https://www.news.com.au/finance/economy/australian-economy/ponzi-scheme-why-2023-intergenerational-report-sets-australia-on-path-to-ruin/news-story/7f574da3e36120e2be85c2ff47fcfc0d

 

[Carn The Berries]

Don’t know
I’m not an economist or banker

All I know is that the big 4 banks are making $10+ Billion dollars in annual profits ( whilst systematically providing less services to the consumer I might add ) then a percentage of that profit should be taxed and the proceeds of that tax be channeled directly to a housing fund .

They are only making more profits because the reserve is trying to curb inflation
They are doing nothing extra to earn it
Therefore it’s a windfall

Government needs the balls to call it out and tax them

That's not what you said though. You were talking about incremental profits that were made by increasing interest rates. Where is the evidence that this occurs? The banks have been making significant profits for many years in a low interest rate environment.

There might be an argument for a "super profit" tax of sorts (I don't necessarily agree with that, but can see the argument). But I wouldn't be trying to tie it to interest rates.

 

[Andre]

No way known that would get through. Chamber of Commerce and BCA would make sure that idea never gets off the ground.

It also has the same issue as changing the tax rate, its a permanent/long term solution to a short term problem

It wouldn't have to be permanent or cost business. If the intent is to take money out of PAYE taxpayers, which constitutes a bigger number than mortgage holders, then it could work by businesses setting aside the extra Super, but that coming out of the pay packet. E.g. if Super temporarily went to 15%, then the difference between the normal super and temporarily elevated super would be via less in the take home pay of the workers. There's a minimal cost to business for the 'paperwork', but not much.

To share it around further, pensions could temporarily be done similarly - if under aged pension age, paid into super, if at aged pension age, then 'put aside' by the government, to be paid back to the recipient once inflation is under control.

Cut PAYE and pension payments, BUT the money actually going back to people later, rather than disappearing into bank profits. It would have more cutting spending, rather than the current situation where those owning homes outright, with raised interest rates, actually having more money to spend and working against the intent of them, and spread the pain around more. With it spread around more, it should be less for everyone affected. Of course it's far easier for politicians to blame the Reserve bank and Banks, then risk voters blaming them for less money (temporarily) in their pockets.

 

[Carn The Berries]

I love how you can be called again and again on genuinely and completely misleading bs you present to the forum and the best you can do is continue this nitpick that the person involved with has acknowledged.

It’s almost like you think that it’s the same.

Odious little chap arent you?

And a PM to try and continue the supposed heckling...

I guess what they say about small things and small minds is true....

 

[kranky al]

I'll let my payroll staff know how inefficient they're being when they have to update it each July. Knew that it shouldn't take them as long as it does

Just rang my wife - who knows more than god about payroll and accounting systems and she said all the major ones would just send you an update each time it changed.

 

[greyhound punter]

Interesting graph. US CPI in the 70s v US CPI from 2013 to now.

Some amazing symmetry. Wowee. Boy oh boy.

There is nothing the left and right love more than low interest rates and mega mortages.

Next 5 to 7 years is going to be a bloodbath in real estate if this graph is correct.

Get around it.

 

[Blue Arrow]

The one election promise Three House Albo and his union masters will never break is increasing taxes.
Instead of being a great leader like Hawke or Howard this lightweight will just let the debt continue to grow and let our grandkids deal with the consequences.

 

[nut]

The one election promise Three House Albo and his union masters will never break is increasing taxes.
Instead of being a great leader like Hawke or Howard this lightweight will just let the debt continue to grow and let our grandkids deal with the consequences.

 

[Gough]

The one election promise Three House Albo and his union masters will never break is increasing taxes.
Instead of being a great leader like Hawke or Howard this lightweight will just let the debt continue to grow and let our grandkids deal with the consequences.

It's like the years 2013-22 never happened for you isn't it?

 

[JackOutback]

The one election promise Three House Albo and his union masters will never break is increasing taxes.
Instead of being a great leader like Hawke or Howard this lightweight will just let the debt continue to grow and let our grandkids deal with the consequences.

Who was responsible for the debt growing to $1 trillion?

 

[Power Raid]

The Covid stimulus is regarded as the main driver of inflation. Our national debt increased by 300 Billion.
The answer at the moment is simply to increase interest rates to combat inflation and push unemployment up… . banks are licking their lips.

Why?

Why punish a third of the population who have mortgages? Why punish Business and cause job losses?

Why not spread the burden and increase taxes on those that can afford it? Those that are benefiting the most from inflation…

I agree with your sentiment but offer the following:

1) this is about sharing the pain of the Ukraine war
2) this pain sharing is about slowing the economy of the world to reduce energy consumption compared to otherwise
3) this is part of a currency war to hurt Russia

Increasing tax, particularly income tax, achieves 2) but not 3). In fact it would likely lower interest rates and thus help Russia

 

[nut]

I agree with your sentiment but offer the following:

1) this is about sharing the pain of the Ukraine war
2) this pain sharing is about slowing the economy of the world to reduce energy consumption compared to otherwise
3) this is part of a currency war to hurt Russia

Increasing tax, particularly income tax, achieves 2) but not 3). In fact it would likely lower interest rates and thus help Russia

Russia is benefiting massively from the war… and so is every resource rich country …
It’s a bullshit war… Ukraine is the poor victim.