Hauser's Law in Application

Hauser’s Law states that tax revenues remain at about 19.5% of GDP. When higher taxes reap more revenue, GDP contracts due to the flight of capital investment to bring the yield back to ~20%. Today I looked at the application of this principle (not really a law) to tax revenues in the State of Queensland (where I live). Eg:

Total GSR – Government sector revenue (2008-9): $37bn
Total GSP – Gross State Product (2008-9): $224bn

Which is 17% and fairly close to the Hauser Law value, and so gives little support for changing the tax rate. Though we would all like to pay less tax, and the Henry tax review lists those inefficient State taxes.

In time the following taxes should be abolished and their revenues replaced by taxes
applying to the four robust and efficient tax bases:
– insurance taxes;
– payroll tax;
– property transfer taxes;
– stamp duties on the purchase of motor vehicles;
– resource royalties, replaced by the rent tax;
– luxury car tax;
– the tax on superannuation contributions in the fund;
– income taxes on all government pensions, allowances and benefits; and
– fuel and vehicle registration taxes, if replaced by more efficient road user charges.

These seem to be the States highest revenue sources.

Queensland State tax revenues in millions:
Total Payroll tax 1917
Transfer (b) 1963
Vehicle registration 269
Insurance (c) 328
Mortgage 297
Other duties (d) 73
Gaming machine tax and levies (f) 551
Lotteries taxes 183
Wagering taxes 34
Casino taxes and levies 59
Keno tax 14
Land tax 404
Motor vehicle registration 819
Fire levy 239
Community Ambulance Cover 118
Guarantee fees 70
Other miscellaneous taxes 57
Total taxation 7396

The intent of the Henry proposal, including the Super Mining Tax which will replaces State mining royalties, is largely revenue neutral but appears to propose the transfer State taxes to Federal responsibility, because the State taxes are ‘inefficient’.

Hauser’s law would suggest this is shuffling deck chairs. If gross revenue is not altered, then no boost to productivity ensues.

My initial thinking is that this is an intellectual’s mind game. Why not eliminate those miscellaneous taxes that for various reasons cost more to collect than they produce, get on with business, and let the natural growth in productivity substitute for the shortfall?

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0 thoughts on “Hauser's Law in Application

  1. Hauser’s principle has a distortion because the taxers can adjust rates to ensure that the outcome is on a target, however selected. Those who actually do the productive work that creates new-found wealth, like the miners, have little say about the tax rate.

    I had rather hoped against hope that Henry would go back to basics and identify those taxes appropriate for a Federal government with a constitution. Such functions, as we are taught, should be those that are more effectively performed collectively than individually, such as the armed services, diplomacy and some aspects of international trade.

    The overall tax rate can thus be reduced by removal of taxes that are not properly the in the efficient domain of the Feds. Under the present arrangement, there is an inhernent assumption that the taxers are more adept at spending money wisely than are the people who create it. This is plainly stupid.

    Another anomaly needing correction is the oft-quoted assertion that the minerals belong to the people and they should share in the proceeds of mineral sales. I spent several weeks with some QCs a few years ago, drafting a Bill for consideration by Parliament. Its key plank was that nobody owned undiscovered minerals, but that ownership of the minerals was to be vested in the discoverers, after compensation was paid to the land owner who might have been, for example, running a farm.

    It is not a given that people who have not lifted a finger to help find a mine should be beneficiaries of part of the profits from that mine. In nay case, in Australia, ownership of most minerals is currently by the States, not the Commonwealth.

    So yes, it is an intellectual mind game, but the dice are loaded unfairly.

    • You constitutionalist you. Would I be right then is saying that the Henry review is a grab at State revenues? Yes I don’t know how the idea that mineral wealth should be shared around got started. But perhaps the super mining tax attempts to pass the benefits from mineral-rich states to mineral-poor states.

      http://www.dme.qld.gov.au/mines/mining_royalties.cfm

      Royalty revenue has gone from 0.6bn to 3.3bn in just 5 years! Too tempting.

  2. Hauser's principle has a distortion because the taxers can adjust rates to ensure that the outcome is on a target, however selected. Those who actually do the productive work that creates new-found wealth, like the miners, have little say about the tax rate.I had rather hoped against hope that Henry would go back to basics and identify those taxes appropriate for a Federal government with a constitution. Such functions, as we are taught, should be those that are more effectively performed collectively than individually, such as the armed services, diplomacy and some aspects of international trade.The overall tax rate can thus be reduced by removal of taxes that are not properly the in the efficient domain of the Feds. Under the present arrangement, there is an inhernent assumption that the taxers are more adept at spending money wisely than are the people who create it. This is plainly stupid.Another anomaly needing correction is the oft-quoted assertion that the minerals belong to the people and they should share in the proceeds of mineral sales. I spent several weeks with some QCs a few years ago, drafting a Bill for consideration by Parliament. Its key plank was that nobody owned undiscovered minerals, but that ownership of the minerals was to be vested in the discoverers, after compensation was paid to the land owner who might have been, for example, running a farm.It is not a given that people who have not lifted a finger to help find a mine should be beneficiaries of part of the profits from that mine. In nay case, in Australia, ownership of most minerals is currently by the States, not the Commonwealth.So yes, it is an intellectual mind game, but the dice are loaded unfairly.

  3. You constitutionalist you. Would I be right then is saying that the Henry review is a grab at State revenues? Yes I don't know how the idea that mineral wealth should be shared around got started. But perhaps the super mining tax attempts to pass the benefits from mineral-rich states to mineral-poor states.http://www.dme.qld.gov.au/mines/mining_royaltie…Royalty revenue has gone from 0.6bn to 3.3bn in just 5 years! Too tempting.

  4. Sharing between States. Do we rearrange taxes so hydro power rich States pay hydro-poor states? Once you start on the slippery slope, where does it end?

  5. Sharing between States. Do we rearrange taxes so hydro power rich States pay hydro-poor states? Once you start on the slippery slope, where does it end?

  6. Mining Law is somewhat different in Australian to most other common law countries, including the USA. Mineral rights in Australia are held by the State and Territory Governments, and the granting of exploration and mining titles is administered by them under the respective State or Territory legislation. The Commonwealth Government holds rights to minerals on Australia’s continental shelf beyond coastal waters of the States and the Northern Territory, and to certain prescribed substances in the Northern Territory, within the meaning of the Atomic Energy Act (principally uranium). Mineral royalties Mineral resources are owned by the Crown in Australia, either by the State and Territory Governments within their borders (and up to three nautical miles offshore), or by the Commonwealth Government in offshore areas outside the three nautical mile limit. Accordingly, royalties are collected by State and Territory Governments for mining onshore and up to three nautical miles offshore, and by the Commonwealth outside that area.

    However, the above depends on the legislation that transferred the rights to the state. Apparently in Queensland, where freehold title is granted prior to 1 March 1910, not all mineral rights are vested in the state. Consequently, the state is not always the recipient of royalty revenue.

  7. Mining Law is somewhat different in the States to Australian Mining Law.Mineral rights Mineral rights in Australia are held by the State and Territory Governments, and the granting of exploration and mining titles is administered by them under the respective State or Territory legislation. The Commonwealth Government holds rights to minerals on Australia’s continental shelf beyond coastal waters of the States and the Northern Territory, and to certain prescribed substances in the Northern Territory, within the meaning of the Atomic Energy Act (principally uranium). The Commonwealth Government has constitutional powers with respect to international trade, customs and excise, taxation and foreign investment. Mineral royalties Mineral resources are owned by the Crown in Australia, either by the State and Territory Governments within their borders (and up to three nautical miles offshore), or by the Commonwealth Government in offshore areas outside the three nautical mile limit. Accordingly, royalties are collected by State and Territory Governments for mining onshore and up to three nautical miles offshore, and by the Commonwealth outside that area.

  8. Mining Law is somewhat different in Australian to most other common law countries, including the USA. Mineral rights in Australia are held by the State and Territory Governments, and the granting of exploration and mining titles is administered by them under the respective State or Territory legislation. The Commonwealth Government holds rights to minerals on Australia’s continental shelf beyond coastal waters of the States and the Northern Territory, and to certain prescribed substances in the Northern Territory, within the meaning of the Atomic Energy Act (principally uranium). Mineral royalties Mineral resources are owned by the Crown in Australia, either by the State and Territory Governments within their borders (and up to three nautical miles offshore), or by the Commonwealth Government in offshore areas outside the three nautical mile limit. Accordingly, royalties are collected by State and Territory Governments for mining onshore and up to three nautical miles offshore, and by the Commonwealth outside that area.However, the above depends on the legislation that transferred the rights to the state. Apparently in Queensland, where freehold title is granted prior to 1 March 1910, not all mineral rights are vested in the state. Consequently, the state is not always the recipient of royalty revenue.

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