Post #34 – GST From the Perspective of a Fluffy, Comfy Pillow

Hi there, I’m a pillow. Mr Comfy McPillow to be exact.

You may know me from mundane life experiences such as sleeping, providing comfort and support for a Netflix binge, or a weapon to whack someone over the head with when on camping trips. However you decide to remember me, I know you reminisce of me fondly. In fact, you may be taking comfort from me right now.

My mates and I come in all shapes and sizes plus a multitude of different designs, forms and levels of softness. Sometimes we’re just for decoration, sometimes we’re ergonomically designed for therapeutic needs. Occasionally we’re stuffed with something called memory foam, or feathers, or possibly latex and we can even assist with circulation and a good nights sleep. So yeah, we do heaps of cool shit.

But what’s the best part about being a pillow? I cater for everybody! ‘Leave no weary head behind!’, I always say. Whether you’re young or old, black or white, male or female, rich or poor – I’m there for you, I’ve got your fucking back. Literally!

So what’s all this talk got to do with a Goods & Services Tax (GST) I hear you ask? Well I aint just a pretty piece of sponge and I’ve been thinking about some of my fellow plump pillow friends. Specifically my mates manufactured in a pillow company over on the west coast of the U.S.

There’s a pillow company over there called Pacific Coast Feather Company, owned by a venture capitalist by the name of Nick Hanauer. Now Nick, I love him! Why, because he makes pillows, and to be brutally honest the world needs more inanimate fluffy objects like me. I also like Nick because even though he’s a self-confessed capitalist, he’s also a shrewd businessman.

He recognised that because I’m a pillow, I want someone to lie on me. Unlike Tony Abbott and Joe Hockey, I don’t mind ‘leaners’, in fact they’re my favourite! The problem is that even thrifty consumers may pass me by in the store, simply because they can’t afford me in their discretionary expenditure – even though they know their current pillow may be raggedy, stained and falling apart. As a pillow, I want that consumer to buy me from the store and take me home for a little pillow talk, whilst Nick wants me to be sold so he can make a buck. He recently summed up the industry I’m in by saying this,

The pillow business is quite tough, as it is for many, many industries, because fewer and fewer people can afford to buy the products that we make.

Now the reason fewer and fewer people can afford to buy a pretty pillow like me is that people are simply running out of money. In Australia, the wealthiest 20 per cent of households now account for 61 per cent of total household net worth, whereas the poorest 20 per cent account for just 1 per cent of the total. So whilst the wealthiest Aussies outbid each other for a finite amount of resources, those people at the bottom sadly have to make do with the crumbs. Granted, a gap between rich and poor will never be closed, but weird things start to happen when the gap between the ‘have’s and the have-nots’ grows too large. To refer to Nick again,

The problem with rising inequality is that a person like me who earns a thousand times as much as the typical American doesn’t buy a thousand pillows a year. Even the richest people only sleep on one or two pillows. We can only go out to eat so many times a year, we can only get so many haircuts a year, and three pairs of jeans will do ya, you don’t need 300 pairs.

So as a pillow who wants nothing more than to be hugged, rested upon and loved, it saddens me greatly when I know I can provide so much comfort and joy (and a good nights sleep) to so many people – but due to rising living costs my mates and I are left on the shelf in the bedding section of the store. Do you know how seriously fucking dejected that makes me feel?

So getting back to the GST itself, here’s a few facts for my non-fluffy friends:

1. It’s a regressive tax of 10% on all goods and services – this means that it is essentially a flat tax, as opposed to a tax that progressively increases in line with your income. On the surface it’s seems fair that everybody should pay the same level of tax for things, until you actually remember that the world isn’t fair and any regressive tax is a terrible fucking idea.

2. The effect of such a tax falls harder on middle and especially lower income earners. Why is this? Well, as Nick noted whether you’re rich or poor your head only needs one of me. Same goes for your toothbrush, your phone, your kitchen table, your laptop, your… well you get the picture.

3. It’s a tax that is a regulatory minefield. Which is odd, because Tony Abbott has repeatedly stated his disdain for any ‘red-tape‘ and has sought to repeal as much as possible since coming to office. For example, fine cuts of Wagyu beef that sell for $249.00 a kilo are currently exempt from the GST, however a Big Mac from McDonalds is not exempt (and considering that predominantly poorer people eat fast-food is this therefore more of an anti-poor tax?). Furthermore the exclusion of fresh-food, education and healthcare from the tax highlight the farce it already is. All this red tape adds cost to the implementation of the GST, because a complex framework managed and policed by a bureaucratic overseer must be in place for the tax to function smoothly. It sounds like a conservatives’ nightmare doesn’t it? But yet, this is exactly what they want more of.

4. Because GST unfairly targets poorer people and small businesses the government has to then apply even more ‘red tape’ (like redistribution) to alleviate the problems that the tax caused in the first place. According to Financial Review economist Geoff Carmody the process of properly returning the proceeds of the tax back to the middle and lower classes would produce a “wasteful and ineffective redistributive policy”. The government essentially taxes poor people with the oblique promise of returning the proceeds to poor people, which is a dangerous game to play with a government notorious for lying through its teeth.

5. Another factoid about the GST is that it actually hurts business and dampens consumer spending. After the GST originally came into effect, consumer consumption and economic growth declined so much that by the first fiscal quarter of 2001, the Australian economy recorded negative economic growth for the first time in more than 10 years. Fast forward to today and the economy is already starting to stutter without an increase in the GST. It would be unwise to provoke further uncertainty in the economy.

So really it’s not that the rich spend too much of what they earn, paradoxically it’s that they spend too little. The rich tend to hoard their cash and wait for something to come along that provides them with the highest return and the largest profits. For the most part, the middle and lower classes don’t have that luxury – they earn, they spend. But if they’re not earning enough, and they’re being taxed too high on the items they need or want to consume, then it’s logical that they also won’t be spending enough to adequately stimulate the economy.

As a pillow I know a thing or two about comfort. I know the discomfort that comes from a rise in the costs of living, and I know the reciprocal rise in comfort levels when tax breaks are offered. So the suspicious side of this pillow can’t help but notice that in the same week that Tony Abbott was pushing for an increase in GST our Treasurer Joe Hockey was talking up the possibility of tax cuts before the next election. What you’re witnessing here is the shifting of the tax burden from the rich to the poor, with the dangling of a carrot laced with ‘tax relief’ in a shameless bid to win votes before an election.

Despite the fact it’d be a broken promise if Tony Abbott increased the GST, it would also be a ridiculously terrible idea compared to the other options available to plug the deficit. Collecting tax isn’t necessarily a bad thing, but it follows reason and evidence that the burden should fall on those who are best able to contribute the most. Getting rid of negative gearing, stopping the super concession rort or simply just killing Gina Rhinehart and re-appropriating all her shit would be a start. Any of those options would be better than an increase to the grossly inefficient and unfair GST.

So next time Mike Baird or Tony Abbott start bleating about the need to raise the GST I want you to remember that unlike me they’re not stuffed with soft, cuddly goodness. The only thing these men are full of is shit.

Regards,

Comfy McPillow

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