Browsing today’s news we came across an article entitled “Government says 50,000 jobs lost if Holden and Toyota shut down”, by the Australian newspaper The Daily Telegraph which comments about car makers and job losses in Australia.
The Australian government increased the Fringe Benefits Tax. As a consequence, car sales are dropping like stones. Because of this Toyota and Holden are considering leaving Australia altogether. The government is attempting to step-in to subsidize these manufacturers to prevent massive job loss. The FBT is a tax that hits people receiving non-cash payments in order to restore fairness and equity to those people who are paid only in cash... or so the government says.
Got that? Yes, it’s that stupid.
The government, in it’s infinite greed, decides that even a small glimmer of free market is too much. People are being paid non-cash benefits! The horror!!! Look at all that tax revenue left untapped! We must do something about it! Let’s tax it now, now, now!
So they modified the FBT. That is, no more vouchers or discounts for you. What are people to do? What are people to do? Hold on, we know, something totally revolutionary and unexpected: they stopped purchasing goods! And which goods will be dropped first? Luxury items, of course! Stuff that is nice to have but not necessary, namely cars.
And if car sales drop, there is no need for that many cars. Revolutionary logic, we know, so give the government a break.
And then, catastrophe strikes! The government realizes that car manufacturers are not in the business of providing Australian jobs, but in the business of selling cars. No car sales no manufacturing and no manufacturing means no jobs. How could they have possibly overlook this? It was not in the script.
Never mind. Let’s do something about it. Yes, we have the power. Remember all those new tax revenues coming in from the new-and-improved FBT? Well, we don’t really need them. We can give them to car manufacturers for free! That will teach them… and save our political carer at the same time.
Yes. Truly a win-win situation. Taxes are high, car manufacturers are staying in Australia and we are keeping our political jobs. Nice.
Well… not exactly. Car manufacturers are now subsidized for life, people are paying more taxes, their purchase power just took a dive and the same idiotic government is staying in power. It’s a lose-lose proposition from our point of view.
This type of situations is precisely why an Absolute Austro-Libertarian system is necessary. There is no other solution that to get rid of governments altogether.
In a situation where governments do not exist, companies would have no incentives to close or move plants. Plant closures or moves are expensive propositions. They affect the bottom line and are avoided at very high costs. That is why companies do extensive market studies before committing to building a plant. They want to make sure it will be profitable. Moreover, once in production, they keep updating their products to make sure they remain profitable and the plant viable. This is a monumental task.
Yet, with the stroke of a pen, a useless government bureaucrat-politician can destroy all that work, all that wealth. What’s even more insulting is that this person (we would like to call it incompetent idiot but we don’t want to sink to the same level) has nothing to do with the company whatsoever. In other words, he is dealing with somebody’s property as if would be his own!
Now let's get a step further. Let's say that in an AL System a company decides to move or close a factory. Is it a tragedy? Certainly not. If you are a worker you have the option to move anywhere in the world! No passports, no visas, no taxes. Yes, moving is hard, but starving is worst. In an AL System the option is always yours, never theirs.
Is it becoming clear now that the main purpose of a government is to steal money and waste it? Governments do not produce wealth, only people do. That being the case, why do people still believe in governments? Excellent question which we will address in an upcoming lesson. Stay tuned.
Note: please see the Glossary if you are unfamiliar with certain words.