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:
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:
â€“ insurance taxes;
â€“ payroll tax;
â€“ property transfer taxes;
â€“ stamp duties on the purchase of motor vehicles;
â€“ resource royalties, replaced by the rent tax;
â€“ luxury car tax;
â€“ the tax on superannuation contributions in the fund;
â€“ income taxes on all government pensions, allowances and benefits; and
â€“ 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
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?