by Kris Sayce

“It is understood the fight broke out during the Tuesday trading session over a line-of-stock transaction. The drama started with a ‘gentle shove’ between the two men that quickly intensified.

“The pair reportedly tackled each other and had to be separated by their UBS colleagues.”

The fight – as reported by News Ltd – was between two traders at investment bank and broking firm UBS, in Sydney.

Clearly it’s an emotional time for brokers and traders.

We can honestly say that your editor has never resorted to fisticuffs with any of our colleagues in the editorial office here on Fitzroy Street. The closest we’ve come is seeing the odd outbreak of… erm… emotion from residents of the nearby Gatwick ‘Private’ Hotel as they scrap over cigarette ends and near-empty wine bottles!

We’ve often said that the only difference between most in the middle and higher classes, and the homeless is the availability of credit.

In fact, on a net worth basis, we’ll guess half the “inmates” of the Gatwick have a higher net worth than most in Melbourne’s mortgage belt.

But anyway, what’s this?

Another Monday morning, another tax.

During the next tax year you’ve got the flood levy to pay. This is based around the lie that the money needs to be raised to pay for the rebuilding of Queensland.

In reality it’s just an excuse for government to pull at the heartstrings of the population to grab more cash. To play on the guilt of good people – “You wouldn’t begrudge those poor suffering souls in Queensland just a measly 0.5% of your income would you? Would you?”

Cue the puppy dog eyes and tears of the politician. Meanwhile, behind their back is an iron bar to club you over the head and threaten you with gaol if you dare try to avoid paying the levy.

If that wasn’t bad enough, from 2012 you’ll have to cop a carbon tax.

Yet more guilt, “You wouldn’t want to be responsible for killing the planet would you? Think of your children and grandchildren…”

Only a cynic would claim the flood levy was a warm-up for the carbon tax. It’ll give them the excuse to say no-one will be any worse off in 2012 than they were in 2011. Because the carbon tax will just replace the flood levy.

By the way, your editor is a cynic… if you hadn’t figured that already.

But we’re still stumped on something.

According to the News Ltd reports, Greens senator Bob Brown says:

“Our job is to ensure that the average Australian household and car user is not punished by a carbon price.”

Er, OK. How’s that going to work then?

“The idea here is to make the polluters pay.”

Of course. In the world of the politician there are no knock-on consequences. No unforeseen events. Everything they do can be neatly packaged into a box with no unintended consequences.

In the pollie world, only the polluters pay. In their world there are completely separate and isolated economies. There is no interaction. There is no concept of costs being incurred by one group filtering through to other groups.

As you can guess, the real world isn’t like that.

In the real world, when the politician meddles, there are unintended – or even intended – consequences. Simply because of the politicians’ inability to correctly predict how individuals and the free market will behave.

You’ll often hear about loopholes and people exploiting the system. And how these loopholes should be closed. And how people who exploit the system are “low life”.

No they aren’t. They’re simply acting within a law created by politicians who are too thick to consider all the angles.

Actually, that’s not fair. It’s not that the pollies are thick. It’s just that no single human – or even a committee of a couple of hundred Parliamentarians – have the mental capacity to anticipate precisely how the market will react to something.

Even mega-brains such as Einstein, Newton and that Stephen Hawking character on The Simpsons couldn’t predict everything.

This isn’t surprising. There are billions of people and millions of markets. Each having an impact on the other. It’s just not possible to work out precisely how each of those markets will behave and interact.

You can have a stab at guessing. But the margin for error is wide.

However, it’s possible to pick out some consequences in advance. Such as the further distortion of the Australian economy.

You don’t have to precisely know how people and markets will interact to know that a carbon tax will make the Australian economy even more lopsided. Although we’ll admit there will be other consequences we haven’t considered too.

Bloomberg News reports the comments made by Bluescope Steel CEO Paul O’Malley:

“This is clearly economic vandalism. It clearly says we don’t want manufacturing in Australia.”

Mr. O’Malley is talking his own book. He has a vested interest. But he’s also completely right.

Government red tape and trade unions have already succeeded in banishing productive industry from Australian shores.

And now government taxes and Green Party socialist statism is set to banish the rest of the Australian manufacturing offshore.

What’s left?

A huge mining sector that is left to prop up the economy. And a huge services sector which serves as the outlet for people to spend the credit created by the banks from the mining sector.

There’s nothing in between. And of course, if the government and Greens have their way, there won’t be much left of the mining sector if the “super profits tax” is revived.

As you may know, we like to think of any economy as a squishy ball. It starts off perfectly round and kinda nice looking.

It works… it rolls nicely.

But then, along come a bunch of folks who just plain don’t like it rolling along nicely. They want it to roll in their direction a bit more.

So they lobby the government and convince them that the beautiful round ball is ugly and a blight on society. That it’s unfair that this round ball should roll in a straight line, “We deserve for it to roll our way more, if you can make it happen there’ll be something in it for you .”

And so the pollies fall for it. They start blabbing about it being unfair that the round ball rolls in an uneven line when there are battlers or special interests that deserve more.

So what do they do? They prod and poke at the ball. They try to influence the roll so that it goes in the direction of their lobbying buddies. They pick winners and they pick losers.

And mostly their plans work. But not to the benefit of everyone. Only to the benefit of those that lobby the hardest.

Meanwhile others miss out. Not because they’ve failed at business or because they don’t work hard… but rather because government has decreed certain individuals and businesses will get favours at the expense of others.

In this instance, the government and the Greens have decided they don’t like productive industry. They prefer industries that are clean such as the service industry – especially the housing industry.

What they haven’t banked on is the fact that even though they may reach their emissions targets, it won’t make a jot of difference to global emissions.

They’ll only meet their targets because Australian manufacturing firms will go out of business and the slack will be taken up offshore.

So really, a carbon tax is just a subsidy. A perverse subsidy at that.

Normally governments use protectionism to try and help out local businesses at the expense of importers. In this case, in their rabid devotion to green-ness the bright sparks in Canberra are providing a subsidy to offshore firms and a penalty to Australian firms.

It’s similar to the spat with the retailers. As you know, we think the Aussie retailers can take a hike with their campaign to impose GST on imports.

But we don’t completely blame them for their predicament. After all, if it wasn’t for the red tape, including economy-killing minimum wage rules, retailers would be in a much better position to compete with imports.

What it comes down to is this: only the free market can innovate and provide solutions to problems.

Governments are incapable of doing either. All it can do is tax and subsidise. Neither of which is a solution to anything.

We noticed a comment from PM Gillard claiming that if you tax something people will use less of it. Maybe that’s true, who knows?

What we do know is that tobacco and alcohol have been taxed in Australia since the early to mid nineteenth century.

Yet according to Quit, in 1945 72% of the male population smoked. So much for taxation cutting usage. But what about government health messages?

Again, according to Quit, from 1945 through to 1986, the male smoking rate had halved from 72% to 34%. In other words it was already in a steep decline before the government spent millions on advertising.

The same goes for pollution and the so-called – unproven – danger of carbon emissions.

A tax won’t stop carbon emissions, just in the same way that taxing tobacco wasn’t the cause of a reduction in smoking.

The behaviour of individuals changes all the time. Governments think that by waving the taxation wand it will have just the impact they want.

In reality the imposition of taxation will either be ignored or will just cause the market to readjust – in the case of the carbon tax, it will simply lead to an increased exodus of manufacturing from Australia to overseas.

Many claim the Clean Air Act 1956 was responsible for the banishment of pollution from many UK cities. Maybe that’s true. But then again, maybe industry was changing anyway.

And maybe the Clean Air Act just pushed the problem elsewhere – to countries where there wasn’t a Clean Air Act. Perhaps it’s just a coincidence that the industrial decline of England accelerated around that time, while the industrial growth of Asia began.

So as we say, a carbon tax won’t make a blind bit of difference to overall carbon emissions. For a start, by the time the legislation passes through parliament it will contain so many opt-outs and concessions to make it pointless.

And anything that remains will do no more than push penalised companies out of business or offshore.

The one thing that’s certain is that you as a taxpayer will ultimately pay for it. You’ll end up paying for something that handicaps and distorts the Australian economy even more.

And once the billions are raised and spent on reducing carbon emissions, guess what, there will still be carbon emissions. And if history is anything to go by, the response of government will be to deny failure and instead just increase the tax.

It’s happened before with other taxes and it’ll happen again with this one.

Source: http://www.moneymorning.com.au/20110228/taxing-the-economy-to-death.html