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Apr 10, 2012

The Greens incoherent subsidy stance.

“If, from the more wretched parts of the old world, we look at those which are in an advanced stage of improvement, we still find the greedy hand of government thrusting itself into every corner and crevice of industry, and grasping the spoil of the multitude. Invention is continually exercised, to furnish new pretenses for revenues and taxation. It watches prosperity as its prey and permits none to escape without tribute.” – Thomas Paine.

Cartoon: By Pickering.

Fuel excise was designed as method of extracting another tax from the people under the pretext that such a tax would pay for the construction and maintenance of roads. This fails to explain vehicle registration, which costs the average owner hundreds of dollars per year, in return for which we receive a sticker for the windscreen and a set of numberplates the first time around, but hey, the states want a slice of us too.

In the case of diesel there is a rebate that applies to off road use of this fuel which ensures that business’s that use fuel in production of goods and for heavy transport are not burdened with an extra tax that would impact on the CPI. The Greens have taken aim at these exemptions, calling them a subsidy:
A Treasury brief released under Freedom of Information declared the rebate was “not a subsidy for fuel use, but a mechanism to reduce or remove the incidence of excise or duty levied on the fuel used by businesses off-road or in heavy on-road vehicles.”

But Greens Deputy Leader Christine Milne said the rebate “walks like a subsidy and quacks like a subsidy.” “In anyone's understanding, a payment or avoided payment that helps one technology or business choice over another is a subsidy,” she said.

“What we've got here is the government using taxpayers' money to make it cheaper for miners to use diesel fuel, meaning there is less in the pot to invest in the things we really need, such as putting dental care into Medicare, supporting people with a national disability insurance scheme, and rolling out smart technology for a changing world like big solar power stations and high speed rail.”
Curiously, Milne seems to miss the cognitive dissonance in this statement in which she abhors subsidies to sections of the economy she has no time for, while advocating the heavily subsidized “rolling out smart technology like big solar power stations” and the would be heavily subsidized high speed rail. What she seems to contend is that a failure to implement a tax is letting people off the hook she wants them impaled on.

This is a common misconception among all politicians although mainly from the left. On the right, there seems to be, not only a total intellectual incapability to mount any real defense against such illogic, but a tendency to see their desire for spending initiatives as a justification for additional taxes. The Liberal Party intend to pay new mothers six months parental leave at full pay of up to $150,000 per year by imposing a 1.5% increase on company tax on the 3,200 most productive companies in Australia.

The language of government has become spun beyond any reasonable rationality or logic. We now live in an era in which, since the rise of fiscal conservatism as an issue, politicians and some economists tend to argue that new or bigger taxes are really a free market mechanism rather than an impost.

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