Infeasible for Qld Greens to pay for extravagant promises by only taxing property developers & big corporations

The Brisbane Times is reporting Queensland Greens, swelled by the newly enrolled, plan on ‘doing a Northcote’, and it appears that the Palaszczuk Government’s star performer, Deputy Premier Jackie Trad, remains at risk of losing her seat of South Brisbane to Greens candidate Amy MacMahon. Ms MacMahon has observed:

“There is a clear sense that people have had enough of the big parties.”

For many people this does appear to be the case, but that does not mean the Greens are a sensible alternative. From time-to-time, I have disagreed with particular policies advanced by the major parties, but the major parties are generally “wrong within normal parameters”, borrowing a phrase from P.J. O’Rourke. The Queensland Greens have no idea what those normal parameters are.

The Queensland Greens are putting forward a policy platform that, in the extremely unlikely event it would ever be enacted, would increase State government spending by at least $8-9 billion (or 13-14%) and result in either (a) a blow out in the budget deficit and total State debt of over $100 billion or (b) massive increases in taxes and charges on ordinary Queenslanders, and not just on the property developers and big corporations the Greens would like to target (see my 12 November post). And note my previous post was written before the Greens announced a child care plan that would cost at least an additional $1 billion annually. In its media release on its utopian child care plan, the Greens again identified property developers and big corporations as candidates for higher taxes:

“Our ambitious plan would cost $5.4 billion over five years. We would make property developers and big corporations pay for 200,000 Queensland kids to get access to free, universal high-quality childcare and kindergarten.”

I should note the Greens’ child care plan amounts to $5,400 per child annually, which seems like an under-estimate of what it would cost to offer free child care to each child, even it were only 3 days per week for 3 and 4 year olds, and 1 day per week for 2 year olds, as the policy states. Assuming annual out-of-pocket child care costs of around $15,000 for child care five days per week (see this Courier-Mail article), I would estimate that the Greens’ child care policy would cost at least $7,000 per child annually, meaning the policy would cost $7 billion over five years, rather than the Greens’ estimate of $5.4 billion.

Along with their other policies, the new child care policy suggests the Queensland Greens are living in an economic fantasy land. They can increase spending in the order of $10 billion p.a., at the same time as massively cutting the charges of its government-owned energy businesses and sacrificing billions of dollars of revenue each year, so they can promise lower power bills, while claiming that property developers and big corporations will pay for it all. This is pure fantasy.

In no way would it be feasible for a State Government, which lacks income tax powers, to increase its revenue by the $10 billion or more required to fund Queensland Greens’ policies annually. The Greens would need to massively increase taxes and charges to achieve a 60% increase in Queensland Government own-source tax and royalty revenue (currently around $17 billion) at least.

To illustrate how nonsensical the notion is that the Greens can raise a huge amount of money to fund their extravagant election promises by further taxing property developers, consider that the ACT Government has consistently failed (and massively so) to deliver the forecast amounts of revenue from its Lease Variation Charge (a 75% tax on the value uplift of a property as a result of a rezoning decision). I expect this charge would serve as a model for a Queensland Greens’ tax on property developers. These Canberra Times reports demonstrate the practical failure of the ACT’s special tax on property developers:

ACT government to review controversial developer tax, amid spike in applications

Development Tax raises nowhere near the amount predicted

At best, the ACT’s Lease Variation Charge was expected to raise $24M in one year. Scaling that up to Queensland suggests that a new aggressive tax on property developers might raise $300M p.a. if implemented effectively, and if it did not discourage development, but that is only a tiny fraction of the $10 billion+ of extra revenue the Greens would need annually to pay for their policies without sending Queensland on the path to $100 billion of debt.

A hypothetical Queensland Greens government might consider massively increasing royalty rates on resources, but given royalty revenue is currently around $3-4 billion per annum, while the Greens would need at least twice that amount in additional revenue each year, those rates would have to be increased to such high levels they would start compromising the viability of mining operations, jeopardising thousands of jobs. Clearly the Greens are yet to offer a realistic and sensible alternative to the major parties.

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16 Responses to Infeasible for Qld Greens to pay for extravagant promises by only taxing property developers & big corporations

  1. I’m going to mostly agree with you on this. The Greens have not thought through their complete policy package and I think they are doing themselves a disservice long term by further fuelling their ‘economic vandals’ label. It’s not that hard to propose smart and efficient incremental changes in the direction they want instead of what they have now put forward. However, they have proposed a State development bank (as has the Katter party, which is an interesting bit of common ground) which would help.
    One technical point. The ACT lease variation charge does not apply to land subdivisions, whereas in Queensland the betterment tax would. Most of the revenues on Queensland from such a charge would come from these types of developments. Alternatively, we could create a public body similar to the ACT’s Land Development Authority which would do land subdivisions, and its profits would be 100% of the land value gains. The LDA paid a dividend of something like $160million in 2014-15 in the ACT. Clearly, this is where most of the value gains are.

  2. Katrina Drake says:

    The Green’s don’t need to increase taxes and charges to implement their policies. All they need do is to somehow stop the plunder of our Common Wealth by large corporations to tax havens.

    Tax theft by multi-nationals is the reason we cannot provide education for our 0 – 5 years olds.

    Amy McMahon is a breathe of fresh air – a well educated, socially aware candidate, with Queenslands best interests her focus. We need more candidates like Amy McMahon. I hope she does well.

    On another ‘stop the rorts’ matter…..
    I see the Federal Government yesterday wrote off $2BILLION in wasted VET-FEE-HELP loans that Christopher Pyne as Education Minister doled out to shonky operators. (With another $4BILLION expected to be written-off) Just imagine what could have been achieved with that money if it had been properly allocated, or better still, just left in tax payers pockets.

    • Gene Tunny says:

      Thanks for the comment Katrina. I agree there are a lot of rorts we should crack down on. But the rort you’re referring to is a federal issue, as is the issue of tax avoidance by multinationals. I can’t see what the Qld Greens can do about it.

  3. Pity to see the Greens fulfilling their enemies worst fears. Often when I’ve looked, I’ve been quite impressed by the Greens economic policies – as has John Quiggin – but this looks like the worst kind of irresponsibility – as Cam says, it’s foolish.

    It’s not that we’re so good at knowing what we should be doing that we don’t need politicians to actually try rather than try to sell vapourware.

  4. Jason ODwyer says:

    Im in the Electorate Gene, and yes their policies are bad no doubt, but this is about a local electorate issue, nothing more. My suburb is rebelling against Ms Trad due to the West Village development. It got called in and as usual when a development get called in the outcome is usually worse for resident rather than better. I have not followed it all that closely but there were originally 5 building with one about 14 stories and the rest about 8 but what came out was 5 building all 20 stories. Needless to say the locals in West End particularly are not happy. Ms Trad has had a stall at the west end markets since the decision trying to convince locals that it was a good outcome but its falling flat as political spin usually does. Development is a hot topic but not many people realise that its the Land Court that deals out the judgement and politicians have very little say in the matter. You cant have it both ways no developer campagin contributions and then have the politicians decisding what goes up or not. People just dont seem to get development processes. The LNP on Saturday will get high 20% of the vote and it will be crucial where people put preferences most of the LNP votes Ive talked to have said they want Ms Trad out so they will probably preference greens over Labour. Not usually the way but thats what happens. So it will be close.

  5. Alan Davies says:

    None of this is new. Have a look at the public transport policy the Vic Greens took to the 2010 state election. Costings utterly absurd and outright deceptive.

    https://blogs.crikey.com.au/theurbanist/2010/11/14/does-the-greens-public-transport-plan-cut-it/

  6. cairnseconomy says:

    It’s foolish as Gruen says but also a red herring. Is there any prospect that the Greens will obtain the leverage to implement this? Meanwhile I would have thought the leverage of One Nation more relevant.

    • Gene Tunny says:

      Very little prospect I’d say. Yes, a minority LNP government supported by One Nation is probably a more likely outcome, and I’ve been meaning to have a closer look at their policies. From what I recall, they seem to involve borrowing billions of dollars to invest in new dams and a coal fired power station. Obviously lots of potential for white elephants there. Thanks for the comment Mark.

    • cairnseconomy says:

      Sorry. Why would anybody even waste time on this?

  7. The Greens very large infrastructure spend does appear to be rather nonsensical in light of their failure to embrace any sensible sustainable population growth. We are playing serious catch up with infrastructure yet the Greens are embracing an open border ideology with extreme levels of population growth?

  8. Jim says:

    Gene

    This election seems to be a competition between: one party that has demonstrated an incredible ability to achieve very little at a very slow pace (the ALP); the major opposition that has demonstrably proved they don’t understand economics or fiscal policy (the LNP); a divisive party of fringe-dwellers with no clue but a real chance of being kingmakers (PHON); some guys in big hats that haven’t moved on since 1979 that would see possibly billions wasted on regional infrastructure that isn’t needed (KAP); and a bunch of supposed progressives with the occasional good bat and inability to add up (the Greens).

    All pretty sad really.

    On reflection, perhaps the best strategy is to vote for a configuration of parties that minimises the risk that politicians bugger things up. That is probably the status quo, where nothing of substance will be achieved – and very slowly. That is infinitely better than the alternatives which are likely to result in dumb things being done quickly and possible badly.

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