Posted by: graemebird | March 16, 2009

The 11th Commandment: Thou Shalt Not Tax Profits.

Second time brought to the front May 2010. This in light of some experience gained in investing in extraction companies, and seeing what terrible things the current regime of royalties and company taxes does to management decision-making and to the structure of the industry. What we would want ideally is high royalties, as the government is proposing, but no tax on profits, and further, no income taxes for people in the extraction and refining industries. Or at least perhaps a tax free threshold for such people of $200 000 or something. What this combination would do is it would

1. Bring down the upfront costs of starting a new mining project. No money paid to the government until such time as product is being sold.

2. Reduce the purchase price of mines, putting smaller companies on a more competitive footing.

3. Eliminate conflict of interest between the public and foreign mining companies. Meaning that after such changes we really could feel happy about foreign countries mining here SO LONG AS THAT COUNTRY DIDN’T SEND SPIES AND THE COMPANY WASN’T A GOVERNMENT FRONT OUTFIT. Communists need not apply.

4. While economists aren’t trained to think like this, its at least possible we may be extracting too much and selling it at too low a price. Sounds leftist, but we’d have a better idea of the optimum extraction rates with the combination of high royalties, homesteading, and no company tax.

5. Company tax destroys the management decision-making objectivity and makes our companies vulnerable to bad luck and hard times. Its unbelievable how frustrating this can be as an investor. By destroying management objectivity it also multiplies agency effects.

I was going to write on the Henry Tax review. But this issue brings up what is wrong with it all the way through. So these comments might be seen as my replacement for the thread I’m not going to write. The Ken Henry’s ideas are all good as one-step ideas. All bad in context of high government spending and dovetailing effects. Because this one-two abuse of higher royalties AND pre-existing company tax will be a one-two blow for wealth creation in this industry.

One thing most gratifying is that Terje Peterson has seen the light when it comes to the hatefulness of taxation on retained earnings. Hatefulness amounting to sin. It ought never be contemplated. Not ever. Not ever between now unto the end of time. Terje has taken up this righteousness, even going so far as to make a submission to the Henry Review. Hopefully his submission is still on hard disk and can be reworked and brought out on future occasions. Inflation and company tax together makes our capital markets powerfully inefficient. These two features magnify agency effects. They magnify the damage done by any other bad interventionist policies. They make us a sick and feeble economy and are instrumental in this creeping public service feel to our corporations. This is no small issue this is central.

Skip over this next section and go to the original essay. I’ll also bring a few other threads to the front which relate to the current scene.

This one first written in July 2007. Brought to the front March 2009. I’ve brought this one to the front since its relevant to two debates going on at the moment.

1. The reader ought to compare the taxing of profits to the carbon-tax. That is to say to taxing the positive advent of the release of CO2, which is a tonic for the biosphere. Taxing profits is very very bad but hopefully the reader will judge that taxing CO2-release, in the face of an upcoming energy crisis, is much worse. The carbon-tax is a powerful tax on capital accumulation and specifically in those companies (Linc, Cougar energy, Carbon energy Australia……) that we will be relying on to help mitigate the new energy crisis. One reason carbon tax is even worse than a tax on profits is that the costs will fall on these companies even prior to them making any revenues. The carbon tax will absolutely devastate our small-cap mining outfits who use a great deal of energy early on and rely on the patience of their shareholders to see them through.
Yesterdays paper has mention of Californias employment rate diverging from the nations more generally and it could be that some of this anti-CO2 persecution is to blame.

I suppose its only fair to say that the carbon-tax might have been less-bad then taxing profits, if it was 1950 and if we were already destined to have perfect worldwide property-rights in nuclear. Or if it were 2050 and if Australia was absolutely ringed in nuclear power stations to saturation point. In the latter case (in other words) when we already had capitalised up in an alternative. The key to carbon-tax is it will destroy capital creation and particularly in the energy sector.

The carbon tax will also further devastate any chances we have of major nuclear power. Since the commissioning of nuclear power is a lengthy and energy-intensive task.

2. This old thread is relevant also to the debates over reindustrialisation. Where the subtext amongst our economists is that we don’t need manufacturing. Humphreys has claimed this openly. His claim is that we don’t have a debt problem, never did, and we don’t need manufacturing. He would also throw in that we don’t need primary food production no doubt. With his crowd these bizzare and idiotic ideas allow them to call their failed track record a success.

3. You might also compare it to Sinclairs excessive biast against the Land tax. Its true that the land tax is probably a second best way of dealing with some of the realities that Henry Georges insights have brought to us. A tax which with many qualifications, I’d consider to be about the worst tax imaginable in the short run, but in some regions a lot less harmful than many other taxes some decades later when the original damage has already been done. The Land tax debate is split 3 ways between the stupid, the merely naieve and the evil side of the debate. Sinclair is taking up the hopes and dreams of the stupid side. Since as a technical matter substitution towards land-tax in a region like Java or in most of India would likely be a good thing depending on the detail.

July 2007

I’m going to cut and paste a few repetitive posts from Catallaxy which outline the massive damage that taxing profits must be doing. The basic argument runs like this.

For economic science to be a valid way of describing how business actually works the profit motive must be very strong indeed. Because otherwise the institutional flaws inherent in human endeavours will surface and invalidate some of the conclusions of economic science.

Anyhow I’ll repeat two of those posts that work hard on this theme and its not a bad thing that its repetitive in that with ideas that you haven’t heard before going over and over the same idea makes it easier to comprehend.

The upshot is that it has to be a top priority to get rid of any tax specifically on PROFITS. And that this is such a high priority that we must fire enough public servants to pay for it post-haste.


Well of course if you went down that road of not applying INCOME-TAX to companies…then I would expect no income taxes for ’sole traderships’ either. And you’d just be paying tax on your drawings.

So you wouldn’t even really have to worry about deductions and depreciation and your tax accountant and such.

You’d simply have your company bank accounts that were sterilised against your personal use. But then once you pulled the cash out of these for your own use then it would have to be recorded and you’d get taxed once you went above what I hope would be a very high personal income tax threshold.

I very much think you OUGHT-TO be able to split your income up for tax purposes with your dependents.

Like that would in effect be the case if the thresholds were $30 000 plus $20 000 per registered dependent. As I think Baby Jesus and Ahura Mazda would wish for this outcome from the very first day a responsible Australian government won an election.

A registered dependent is someone willing to hand over their threshold to you and be taxed from dollar one.

So under that system you could split up your income with your ageing dad. Your nursing wife and the squalling kid………your brother who you’ve brought from overseas who isn’t earning $30 000 yet. And that second wife you keep in the flat next door- from Brazil.

All this without incorporating.

Its not just the wasted money spent on tax accountants that gives me the shits. Its their wasted expertise. We ought to be using them solely for the cost/management-accounting function.

For helping us arrange our accounting for decision-making purposes.

My Buddha…… don’t I just hate all this crap associated with the income tax.
I’d want to get rid of it entire.



I liked Pauline Hansons cascading tax to get rid of most of the rest of these put-upons and effronteries. But 2% was too high.

The idea there, as I would envisage it, is you take your legal entity. And if a sale is made between one legal entity and another the guy who receives the money ships 1% of that off to blood-sucker-central.

Very simple. But people objected for many silly reasons.

The only two valid ones being that it was too high (my objection) and the other being that it would encourage vertical integration. Hardly a bad thing if you ask me. But something perhaps requiring a balancer if we don’t want big corporations dominating everything.

The other thing is that it had a 70 billion alleged-shortfall. Now that appears to be a heresy that you don’t have things ‘income’ neutral.

If so its a ridiculous heresy. Since the whole idea is to fire public servants and wind up spending programs ………… pay for any shortfall.

What I think would be a good balancer is some sort of system of assets tax. As well cascading. As well with a threshold.

So what we really are talking about here is on the one hand an INCOME STATEMENT tax of 1% for each legal entity….

… And on top of that a BALANCE SHEET tax of 1% for each legal entity.

Although for reasons that quickly become obvious it would really be a non-financial assets tax…..this balance-sheet-tax…. You wouldn’t charge or deduct for accounts payable, cash or accounts receivable.

And perhaps for a human legal entity you get a $200 000 assets threshold plus another $100 000 for each registered dependent.

Perhaps an incorporated company gets $100 000 assets threshold as well just to keep some sense of balance and so that you can divide up your various pursuits and have businesses that are independent of family influences, the influences of your other activities…. And that are incorporated with their own rules and mission statements.


Its just easier if you boil it down to these more massive aggregates but with a very low low rate.

1% sounds alright to me in both cases. 3% would likely destroy the economy in both cases.



There few things so poxy as taxing profits. If the UN was any use it would have a committee warning people about the taxing of profits as a human rights issue.

Because taxing profits affects resource allocation in a more direct way then mosts other sorts of tax.


The taxing of profits enfeebles business ardour for the pursuit of efficiency.
For verily it is the attempt to go after profits that creates wealth. Making money is economic development under conditions of a level playing field and clarity in property rights.

Its not the absolute level of profits in the economy that creates wealth… Actually quite the contrary. But its the vigourous pursuit for these profits.

And to tax profits is therefore to dull competition…. To take the competitive instinct from vigourous rivalry down to plodding professionalism..

To tax profits is to allow other more human and institutional factors to take the edge of this maniacal drive for cost-cutting and innovation….. as a relentless crusade… and it takes the ardour off efficient resource allocation that forces the decision-maker to put his own predjudices aside and do the right thing for the sake of maximizing the profits of the legal entity concerned.


I rather like the concept of the boss-man having his own fiefdom and that being a business owner is like being a Klondike adventurer or a pioneer heading West to the frontier to homestead some land.

We do want this all to be neutral vis a vis companies and human-legal entities as-it-were. Or if not neutral erring on the side of the humans.

Erring but only a smidgen. Perhaps the bias against bigness something that has an irrelevent effect in the medium-term but a pervasive one that adds up to something over some decades.


Now it might be argued that a 1% balance-sheet-tax would cause companies to offload assets to trusted employees for tax purposes. So they would in effect be exempt.
If that was the case I’d say that these assets had to be uncaveated and not to be locked in by any employment contract or WILL or anything.

So that if you produce a loan for your forklift driver to own the forklift he drives for you and he has to pay back the loan…

… Then I say if the asset is exempt of the yearly 1% for tax purposes it ought to have his name on it…. And if he gets pissed off he ought to be able to drive it next door and use his fork to work for someone else for tax purposes.

If anything this could make business more competitive and be a route for the little guy to accumulate capital.

But in the final analysis 1% would be too small to alter things all that much. Still it might give the little guy some sort of edge over the long haul.



But she wanted 2% yeah?

I’m not concerned with her mercantilist/nationalistic tendencies right here. I’m talking about the tax in question.

But put her aside for a minute. Appraise it at a few levels of severity.

I’m supposing 2% would be a killer but 1% wouldn’t be that bad.

Now you take the income tax.

40% would destroy everything but for deductions.

Even 20% without-deductions is just horrible though a powerful medium-term revenue-raiser I’m sure.

Only when we get down to 10% with thresholds are we in a region where it might not cause that much harm without deductions.

So if thats the level for personal income tax (lets say) whats the level for cascading tax?

I would intuitively think that a cascading tax would hit absolutely fucked up deadweight loss at anything much above 1%.

So I’m guessing 10% for income tax and 1% for cascading.

What is your thinking on this Mark?

Like its the same for any tax I think. If you absolutely cannot escape from it…… it can only go so high before its like carpet bombing as to the effect on the economy.

If only the non-employee rich-guys can escape from a 30% income tax rate, with their various trusts and things…. then the economy might hum along with the poor and high-income employees paying most of it and the bigger businessmen getting off almost home-free.

.. The economy might hum along at a continuing clip and adequate for those lacking vision and having low expectatons….but thats obviously grossly unfair.

So its a matter of:

1. Never buying into income neutrality.
Because no matter what maths you have and how you intellectualise it one shouldn’t be trying to produce MATHS-MAGIC to show that all the bludging and parasitism thats going on can continue….

2. Even under a reduced burden overall we could still have a tax that caused untold harm. As much harm as a fully-enforced Nato embargo…. If it was set above a certain rate.

So what I’m saying is what is that cut-off-region for the cascading tax?

Perhaps I’m wrong. Perhaps even if we got rid of income and GST that the cascading tax would hit super-destructive level when it went above .5% per year.

But I’m thinking 1% would likely be OK-in-transition if there was no income tax or GST.
But I’m willing to be turned around on this.

Its just that it seems less of a hassle. Its just that little bit closer to natural law.

Because you buy a TV for $500. You pay $5 dollars. And thats like saying that the government is protecting your new contract rights and new property rights. The money is going to the protection of these rights from international and local criminals. And also to the arbitration of a potential dispute between the buyer and seller.

But in this context maybe only $1 or 0.2% is the acceptable level and we have to work harder at throwing more taxeaters our on the street.

For there is no way to ethical and effective reform without massive sackings… or as I said yesterday with halving a lot of the thieves work-hours, and cutting their income by two-thirds… as you totally cut off the funds to a lot of the other thieves… Putting many the thieves on shift work.

This pursuit of income-neutrality has got to go the way of vaudeville or alchemy.
Its just attempted cleverness for its own sake and no good can come of it.
It actually reaffirms the position of the oppressors and deliquents.
(Go back and do your book over Saunders).

Post 3.

“Andrew, the majority of people DO earn less than the (mean) average wage. In a progressive taxation system, they therefore ARE net winners at least w/r/t other taxpayers (ignoring for the moment whether they believe they are getting value for it).”

They aren’t net winners from all this bullshit.

They are human so they are affected as to their motivation. You can know about this effect. You could be an expert on this effect. Its doesn’t make you immune to this effect.

If your parents don’t help you when you have a clear and present danger or improving your cash-flow but help you instead when you have a clear and present danger of sleeping on the streets then this will effect your motivation though you might know this fact 100%.

So too with our welfare system that keeps folks alive but draws them away from independence.

And company taxes, the inflation tax and most particularly the way they dovetail together……….THESE ARE REALLY TAXES ON THE WORKER.


Because both of these taxes serve to dull resource allocation and capital accumulation. And they therefore come right out of the workers real wage.

ITS ABOUT AS DIRECT AS THAT. But it doesn’t seem that way. I understand that it doesn’t seem that way. And here’s why:

Now it might not seem to be that this is the case. We used to watch in amazement as failing companies would vote the upper management ever-increasing salaries. For there is some flawed institutional human agency going on here.

But thats the whole point. This churning doesn’t redistribute income down. For it is part of a wider parasitism that funnels income up.

Take the inflation tax just for example. In the first instance the recipients of this thieving are the taxeaters who spend other peoples money like they live for nothing else.

But secondly it increases the agency factor in the large corporations. Thanks to the fact that interest is a tax deduction and the loans are denominated in debasing currency nominal profits are overstated…

… Thanks to the fact that profits are taxed then the ardour to pursue profits is compromised and expenditure on tax-deductible items is in effect (the effect being on management motivation) “SUBSIDISED”

……..((((((( Now this is NOT a subsidy as such. No thieving is not the same thing as subsidising…. But what I’m saying here is that for MANAGEMENT-DECISION-MAKING-PURPOSES tax-deductibility has the same resource allocation distortions as a subsidy would)))))))))))

And there is the other thing that if prices are always rising profits are always overstated in nominal terms.

What this extra fat creates for managment is a tendency for them to use their human agency, so that their crusading and obsessional pursuit on behalf of the shareholders….. is dulled.

Such a crusading pursuit in management is so rare under current circumstances, that having found this sort of managment in a company…. Warren Buffet will sniff around for years if not decades waiting for the price of THAT extraordinary companies shares to be undervalued so he can accumulate accumulate accumulate.

Warren Buffet will find companies that for one reason or another cannot expand but have these characteristics and he will negotiate with the owners to buy them outright.

But I maintain that under good policy virtually ALL management would act in this way.

Virtually ALL management would be of a sort AKIN to the management of the companies that Warren Buffet will watch like a hawk for decades.

Its the Christian observation that all our human institutions are flawed that is to the fore here.

But I maintain that an undiluted profit motive and tight money can overcome these flaws.

You see when there is all this fat and ennui that is created from this thievery then the profit motive cannot overcome institutional dysfuntion.

So from our personal experience we doubt the Austrian-Economics-conclusion that a tax on profits is pretty-much a straight tax on the worker.

The Austrian Economists have sorted this out straight from deductive/inductive reasoning and they might not be taking into account the institutional imperatives.


FOR CLEARLY the emergence of the management-agency and institutional-imperative effects to:

1. dull the profit motive and
2. To produce a situation where we perceive the idea of managers as usurpers akin to a gardener who now thinks he owns the estate…..….

….FOR CLEARLY…the domination of institutional imperatives comes into being BECAUSE of the regulatory burden and the wider parasitism.

So in effect I’m saying that the Austrian Economists are MORE RIGHT then they even realise.

THEY ARE MORE RIGHT in their contention that a tax on profits is really a tax on wage earners then they themselves know…..

…But I would say that they may have trouble explaining why a tax on profits is really a tax on workers… because they aren’t taking these inherent institutional flaws into account.



  1. […] Graeme Bird argues that Thou Shalt Not Tax Profits. […]

  2. “The 11th Commandment: Thou Shalt Not Tax Profits.”

    For once we agree, deficits should be taxed 🙂

  3. I’m not sure what you mean Lyam? How can you tax deficits? For a minute it sounded like a neat idea. I was getting interested. Excited even, although thats too strong a word.

    But now I think you really must have not meant DEFICITS at all right?

    Now it think what you really meant was NEGATIVE EXTERNALITIES.

    But if someones property is impinging on their neighbour its not a tax you want. Its for them to cease and desist. Or to compensate you directly and not the army of taxeaters. Or you want them not paying the tax, but rather putting it aside for an investment that will mitigate this violation to your property. A tax isn’t going to do anything. The taxeaters are just going to spend the money. The victimised alleged polluter has been rendered less effectual at dealing with your problem and his… and what you have here is SADO-PIGOUVIANISM.

    In the case of industrial-CO2. Well thats a massive positive. Unless you like to laugh at people starving and paying too much for their food.

  4. Damn Sinclairs black heart. He bans me and leaves my stalker on his site. You would think that him letting a couple of my posts through would get me off his case. But thats never going to be so as long as my stalker is allowed on his site.

  5. An excellent way of handling matters put forward by Michael Fisk:

    “It’s unspeakable what these people are doing. The Premier of Western Australia should demand the immediate sacking of Henry and his allies as a condition of continued membership of the Commonwealth.”

  6. So you’re banned from Catallaxy? Sinclair has a”black heart”?

    When you call people liars and stupid cunts, as you have done to Sinclair Davidson and me and many others, then you’re not gonna be too welcome on their own forums.

    Who is your stalker btw?

  7. You know what Ritchie? Mr B just calls ’em as he sees ’em.

    If you act like a cunt, Mr B will call you a cunt. No point whingeing about it – just lift your game.

    If you stopped lying and brought some evidence, you’d be treated with Respect.

    Ball’s in your court.


  8. Birdlab is the stalker. He used to show up every day just to talk about me. Finally as a result of him I changed my lax blog policy of never banning people. Since him and Cambria were being absolutely and repetitively vicious to Philomena. So I put the ban on them.

    After I accidentally dragged back a lot of bully boys from the PZ Myers stupidtown, I found myself having to put all these people on hold. On the other hand I do let a lot of posts through after the fact when and if people lift their game.


  10. Here’s something for you to investigate.

    “The male non-human was interrogated by teams of AFOSI special agents over several weeks and in total was questioned and intensely interrogated for many months by other agencies.”

    “It was during this time that the male non-human disclosed its race, its resident planet and the reason it came to Earth. The male alien basically cooperated and provided details of its life on his alien home world.”

    “The non-human entity was released on the direct orders of then President Carter in late 1980, and subsequently left Earth and returned to its home planet.”

    “The male non-human originated from the star system Delta Pavonis, 20 light-years from Earth where it was the 4th planet from their sun. It is roughly the same size as our Earth.”

  11. I know nothing about this so I’d be starting from scratch. Naturally I would suspect it to be nonsense.

    But then we have to be a little bit openminded about this subject generally. Since after all Lloyd Pye has in his posession a hybrid skull, only 900 years old. Hence this implies that there was a breeding program as recently as about 1000 years ago.

    Its somewhat perplexing that reports one considered bullshit in the 70’s are still coming to the surface. So I don’t know what to think. You never know. Some of this stuff could be intelligence action to humiliate, neutralise and paralyze people in preference to killing them.

    For the most part I take a skeptical position on these things. Or I’d assume that if people really did see a flying saucer its could be black projects experimental vehicles. Generally speaking I’m ignorant of the subject. Occasionally I look at the alleged debunking efforts and they turn out to be very feeble. But feeble debunkings do not prove a positive case.

  12. Ritchie, that’s because Ron Pauline Hanson, Richard Glover and a number of others are actualy morphs of Graeme Bird because even he realises that any more than 25 out of 27 thread comments just being him becomes pointless.
    And he will only show any words you write which are 100% in support of his lunacy.

  13. You may suspect this is bullshit for example. But my goodness, its an impressive lecture nonetheless. This fellows American-Australian story checks out from the way he talks at least.

  14. Crikey. Can anyone make out what on earth Soon is on about here? I can make neither head nor tail of it:

    “I think some perspective is needed on the RRT. It was obviously a mistake for the govt to market it as an ‘excess profits tax’.

    The fact is it replaces a tax which would have been collected regardless of the ex post profitability of the project and would have increased production costs. Under the previous scheme the more marginal projects would be discouraged. All well and good ex post but of course in going into a project people may not know for sure how marginal it is. In a way the taxation the RRT replaces discourages risk taking. The RRT or excess profits tax replaces it with a profit sharing scheme.

    There may well be kinks in its implementation like in how investment costs are recovered which make it undesirable but there is nothing objectionable in the principle itself.”

  15. Anyone figure out WHY he’s saying this:

    “anyway the tax rate may increase without increasing disincentives to exploration – that’s the whole point of taxing supra-normal profits”

    How is this possible? What about real resources reinvested? I think Jason has truly lost the plot here.

    He seems to be thinking that if the royalties could be higher, you can make that up by a tax on profits. This makes no sense in economic theory.

    Its like he doesn’t understand that the mode of stealing counts since it affects resource allocation and management decision-making.

    I remember this lack of understanding came out in spades once before. Since we had had trade barriers and subsidies to our car industry, he wrongly concluded that we could not have a viable car industry. As if subsidies would have worked as opposed to long-term tax exemptions.

    Like he seems to think that corporate welfare ought to work. But why would that be? Its certainly not been shown to be the case empirically.

    Its like the difference between a 20 year tax exemption on energy-saving investment versus the anti-economics of the governments industry-destroying subsidies that our government did pass.

    Its as if Jason is saying: “Economic science doesn’t matter. But we have reason to believe that not enough has been stolen from these people.”

    No wonder the failed analyst couldn’t see the death-trap that the carbon tax would have been. Dumb bugger just doesn’t understand economics.

  16. Here is the idiot Mark Hill:

    “In the next breath you’ll be whingeing about market concentration.”

    You get this endless idiocy from these guys wherein, because someone has argued effectively, that high levels of market concentration, would not be an issue if it derived out of a free market situation …….

    ….. All of these morons assume that therefore high levels of market concentration is not an issue.

    This category of logical error may be brought to the attention of the Catallaxians maybe 100 or 200 times….

    Doesn’t matter. They will be making the same error tomorrow. They will make that same category of error when it comes to open borders in the US. When it comes to continuing trade deficits in Australia.

    They are just so fucking dumb.

    And it is all about the acceptance of their position in the priesthood and their total rejection of logic as the final arbiter. Although it might be in this one case Mark is talking about something else. Still the phrase reminds me of the endless ability the Catallaxians have to make the exact same type of logical error endlessly.

    Like when they and the moron Humphreys insisted black and blue that our continuing trade deficits were due to comparative advantage.

  17. Not tax profits? This is a commandment?

    Problem is that in this case in particular, mining, most Australians do think that the most profitable extractive export industry should be vigorously taxed and strongly regulated for environmental, social equity and national considerations.

    In other words, the operations of this market have transmitted to government information about democratic wishes that no sensible or ethical government can ignore. That this market information may constitute an inconvenient truth to minority economic cultists of the political far right is your problem, not ours and hardly relevant.

  18. Well in which case the tax ought to be on royalties. Not retained earnings. Big difference.

  19. Stealing ought not be just about majority vote you know. We need some sort of idea of rights. The stealing may start with the bigshots. But we wind up being rifled by these thieves all the time now. Poor people even. Their pockets emptied by thieves, and by the same token they are controlled and made dependent to the same villains.

  20. How are profit levels to be normalized throughout the economy? Well we don’t need to know. Because Jason Soon has reverted to the static-equilibrium, Frank Knight, view of economics:

    “remember this is 60% of above-normal returns, not 60% of returns to compenate for the opportunity cost of investing in mining…..”

    Where is capital accumulation over time in this model?

    Its not there. Here Jason is assuming that everything is OK, fine and dandy. Because the mining companies will still have an INCENTIVE to mine. No harm done. Because there is still enough impetus to get these people out of bed in the morning.

    The crudeness of this fellows economics, I find simply unbelievable.

  21. Mark Hill is the ultimate fuckwit. Bear in mind that this is a mindless dork who has been taken in by the Keynesian multiplier:

    “I’ve got no doubt most of Henry’s recommendations are good. I may not see eye to eye with him on everything but he’s still a Ph D with Treasury ..”

    Mark Hill is a dummy. He was an ignorant dummy when he first got on the PHD stream. He’s an ignorant dummy now.

    For fucksakes. A PHD is just a research project on a specific matter. You get on the, you jump through a few hurdles, you pay the money, you get the PHD.

    “I’ve got no doubt most of Henry’s recommendations are good. I may not see eye to eye with him on everything but he’s still a Ph D with Treasury..”

    Mark Hill. The ultimate fucking moron. He even went so far as to suggest a 30 year tax exemption for those firms who were “carbon neutral.” For what purpose? What problem is there that this scheme would solve?

    Mark Hill. The morons moron.

  22. Mr Bird,

    Make no mistake, this attack on miners is not to do with budget deficits or revenue raising, its not to do with economic efficiency or the upcoming election. It is the implementation of Chinese communist policy to destroy Australias big and profitable miners after they resisted the Chinalco takeover of Rio Tinto.

    Rudd, ever at the beck and call of his Madarin masters, has used the Henry Review as a smoke screen to unleash phase 2 of the China-coms attack on Australian miners, that begun with the kidnapping of Stern Hu.

    Once they are crushed and weak, their capital value reduced to a pitance, just watch the chinese money flow in to buy the valuable assets at dirt cheap prices.

  23. Mr Bird,

    I have long called out Soon as a China-com agent and this only serves as more evidence once we look at who is behind this policy. He covers his marxist goals with a veneer of economic rationalism but make no mistake Mr Bird, these are just jesuitical arguments. The real goal of agent Soon is international socialism and oppression of westerners.

  24. “Graeme’s down on me about market concentration when I was merely pointing out how vaccuous it is to complain about it if you drive away competition by usurious taxation. ”

    Okay fair criticism. The statement wasn’t wrong in and of itself. It just reminded me of this nightmare of repetitive logical error from Mark, Jason, Humphreys, the house-husband in Singapore and others.

  25. “Rudd, ever at the beck and call of his Madarin masters, has used the Henry Review as a smoke screen to unleash phase 2 of the China-coms attack on Australian miners, that begun with the kidnapping of Stern Hu.”

    You would think so wouldn’t you. Thats the power of zeitgeist for you. Anyone touched with government largesse is always going for these bait and switch numbers. I remember Michael Fisks frustration with this feature of these people as well.

    Like one might agree wholeheartedly that under the perfect market conditions free trade may be a moral good as well as an economically beneficial policy. But then they do the switch on you and are in favour of illegal South American migration to the US and not controlling ones border.

  26. Can someone tell me what the fuck is Jason Soons point here?

    “Let me highlight that link again


    In contrast to some of the state-based royalties, the resource rent tax would not be levied until all the exploration and development costs associated with a project had been paid for and would be levied only in years in which the project made a profit.

    Treasury calculations show that had the system been in place in the early years of the past decade, it would have raised less money than royalties because many mining projects were not making profits.”

    I mean its no mystery why these firms have a business strategy that stops them from earning profits. When they earn profits they get taxed. But under growth deflation, running your business in order to maximize profits amounts to WEALTH CREATION. Ergo any tax on profits causes management to follow strategies that are, comparatively speaking, WEALTH DESTRUCTION POLICIES.

    This fucking bad habit that Soon has of not spelling out what his argument is has become more than annoying. Its typical taxeater evasiveness.

  27. HIgh royalties, combined with both an exemption on company and personal income tax, combined with homesteading rules …….. this is the ideal.

    Because this bring down the up-front costs of the project, forces big business to come out of small business success, neutralizes the downside of non-communist foreign investment.

    Economic science gives us the answers. You don’t need to fuck around with what we know to be the right way of doing things.

    You over at Catallaxy ought to admit I’m right. Instead Jason Soon appears to be justifying a bait and switch. He’s saying that royalties are better for a nano-second. Then he has decided to switch to an even higher tax of profits is justified by this option? And why? He seems to be saying that the bait and switch is justified because it would raise LESS taxes???? Go figure??? Causes more wealth destruction, and yet raises less taxes. Because of his inability to make his arguments explicit he’s come to the point of view that is diametrically opposite to what economic science would tell us. He’s gone for MORE WEALTH DESTRUCTION/TAX REVENUE. He’s actually advocating the least amount of tax raised for the greatest amount of wealth destruction.

    He wouldn’t have made this mistake were he intellectually honest and not evasive.

  28. Submissions to the Henry tax review had to include an address but they said they wouldn’t publish the address if you requested privacy. So on the front page of my submission I put my address in red text along with big text saying do not publish my address. So they published the lot on their website including that cover page with my home address. I was livid and told them so and they took it down and wrote me a we are sorry letter. Since then I don’t think my submission has been listed on the website at all (happy to be proved wrong). Silly bunch of bean counters.

    Thanks for the plug Graeme.

  29. Amazing? Is this is convenient way of eliminating submissions that they don’t like?

  30. Private profit levels are the least consideration for working families and singles i.e. the majority of Australians.

    Taxing profits is not a disincentive to investment and does not cause unemployment – as a rule. This is all rubbish. The mining industry here claims it is already the highest taxed and yet both its profits and employment levels are at record level so that is obviously bullshit. If companies say they won’t explore or mine well good luck to them. They’re obviously not in the business of running a business and can piss off elsewhere thank you very much.

    The super tax on mining companies’ private profits will be strongly supported by most Australians because it is just and sensible and sound economics. Commonsense really.

  31. Graeme, what the far right types you read on one minor if not negligible Oz blog miss is that there is an indelible strain in the national Australian psyche of antagonism towards big business and private profit.

    I recall most of the dudes on ‘Catallepsy’ routinely championing the interests of big business against the people were either not born in Australia and/or spent most of their lives in/around bourgeois, banking or corporate circles in the US, England, Singapore and the like.

    Deracinated Boers, Sicilians, Malaysians, Chinese and Pom and Yankee mutts – whoever – transplanted here mid-life are simply not going to have much of a clue about all this Oz history and sensibility unless they’ve studied and understood our historical and literary heritage. And that’s a huge problem for them and their politics.

  32. Taxing profits is unacceptable because it leads to resource allocation, in such a way as to destroy wealth. Its not a case of getting poor people to pay taxes and letting rich people off the hook. Business profits is not the same as rich-guy income. A company is really just a few files in a drawer somewhere. We can find ways to reduce inequality. This is not the way to do it.

    If one wants the profit share of national income to be less and the wages share to be more the way to do that is to have less monetary expansion and run surplus budgets. Deficit spending and monetary expansion increase profit-share. These leftist policies actually boost before tax profits.

  33. I can see that my explanations against the sin of taxing retained earnings are not particularly satifying.

    I’ve got to get into resource allocation for wealth creation. But I’ll also have to write something on how a minimalist government might prevent bigshots from tying all business opportunities up, and also see to what extent a minimalist government could or should work towards a more egalitarian distribution of wealth and income.

    In that context it might be easier to see why taxing retained profits is so very bad. You’d rather they were taxing:

    1/ Total assets at maybe 1% with a threshold for humans and small companies

    2. Total revenues at maybe 1% with a threshold for humans and small companies.

    3. Land value on top of that with a threshold. Although for the next few decades there are probably better ways of handling Henry Georges economics insights then a straight land tax.

    4. Income tax with such high thresholds it only hits real bigshots in such a way as to barely affect peoples lifestyles.

    The most important measure is the monetary system. Where you have growth deflation you have improvements in lower end incomes and anyone who makes a fortune has done something pretty extraordinary.

    Like for example Steve Jobs has done extraordinary things that have been good for everyone. Whereas all these idiots in Goldman Sachs have done nothing. Well it might be that their venture capital wing has done worthwhile business sometime in the past.

    But pretty much everything else they have done is useless or actively harmful. And that is the case with a great many rich people. But could not have been the case if we were in the “growth deflation” pocket for the last few decades. Its this fractional reserve and unstable and high rates of monetary growth that gives these bigshots a free ride.

  34. “I bet Birdie would love to meet Dear Leader. They both seem to have a lot in common. Same ideals and body shape: short and pudgy.”

    The stupidity of this idiot Wop primitive never ends. This is the fellow, who for three years posed as a libertarian, but came out full-square in favour of corporate welfare and the eternal subsidising of banking interests.

    Surely we have not seen anyone more the belly-crawling lick-splittle then this stupid wop.

    As a man, you would have to say that Joseph Cambria is an even worse example then his cowardly Cosa-Nostra cousins. More of a belly-crawler. More determined to have one rule for some and another for the rest of us. Even so much of a house-nigger to want these different rules and subsidies for scams he himself is not a part of.

  35. It just dawned on me that Tarantino named his main gangster, in the movie “Pulp Fiction” after two of the people involved in the Kennedy hit.


    Woppy lowlife Godfather type, Carlos Marcellos. And LBJ’s friend the murderer: Malcolm Wallace. So you bring the two names together you get Marcellus Wallace.

    The thing is that, like Vito Corleone, Marcellus Wallace, while a very bad man, exhibits dignity and statesmanship. Lets not be fooled by these fictional accounts. As we see by the more true-to-life versions, like in Goodfellas, these people are cut from the same polluted cloth as Cambria.

  36. “Humphreys has just returned from North Korea. No kidding.”

    Setting up funding for his assault on the electorate. People will remark at what a big affair his campaign will be. But no-one will take it further than that. The Asians don’t have a lot of experience intervening in Australian elections quite yet. So they may treat this as practice. After all the Chinese communists intervened against the former Prime Minister in the last election. They may wish to get better at it.

    More seriously, if American history is anything to go by, you see twenty people like Humphreys and probably one of them is a full-blown traitor. The rest are operating on the zeitgeist that the traitor and others have established.

    When we are talking about people like Humphreys, we are talking about fellows who look like they are batting for the right side on a superficial level, but strenuously betray the cause when it comes to absolutely crucial matters.

    He and Rudd are two of a piece. Both narcissists, interested in triangulating only for their own career. The chances of him being a traitor, as you see, I have rated fairly low. Before you all at Catallaxy get all excited, you will see that from the above it is implied that I am rating this as a 2% probability. Asked for formal odds, I would probably make it lower than that. Still he stands out as a person, that ASIO ought to look at. Chinese agents of influence, showing up with bags of cash, ought to be something ASIO could look out for. Catching even one traitor would scare the pants off anyone trying this sort of thing on. ASIO ought to infiltrate his volunteers if they are doing their job.

  37. Hey Graeme

    Video of everyone’s favourite economist

  38. Thanks for that. Now be honest. Compare Lindsay Tanner to what we know about Barnaby Joyce. Lindsay responsible for FINANCE (!@#$%^&*) and fucking DEREGULATION (!@#$%^&*).

    Just compare these two blokes on both these issues. Tanner is a gaudy and spectacular failure. Joyce talked fair dinkum and would be fair dinkum, given the chance.

    Gruen looks like he may have done something about his face. He may have responded to my jibes about him being the portrait of Dorian Gray. Not Dorian Gray but the actual portrait.

    Note that Gruen looks to two total failures, in the world of finance and policy, as examples.

  39. “A company is really just a few files in a drawer somewhere.”

    Oh Mr B you are a true original and with such a wonderful sense of the absurd.

  40. Australia

    Last sea-thing dredged by sailor Time from Space,
    Are you a drift Sargasso, where the West
    In halcyon calm rebuilds her fatal nest?
    Or Delos of a coming Sun-God’s race?
    Are you for Light, and trimmed, with oil in place,
    Or but a Will o’ Wisp on marshy quest?
    A new demesne for Mammon to infest?
    Or lurks millennial Eden ’neath your face?

    The cenotaphs of species dead elsewhere
    That in your limits leap and swim and fly,
    Or trail uncanny harp-strings from your trees,
    Mix omens with the auguries that dare
    To plant the Cross upon your forehead sky,
    A virgin helpmate Ocean at your knees.

    Bernard O’Dowd (1866-1953)

  41. Well yes you can argue it either way. Given that small companies face the same fixed costs, in terms of regulatory overhead as the large ones, and given also that large companies have an outsized influence over politics, it might be necessary to disproportionately tax the bigshots. This goes against economic theory but economic theory isn’t the whole of life.

    But one of the main problems with taxing retained earnings is this: The big guys have already accumulated capital goods. The little guys have to be able to accumulate capital goods to take these bigshots on. Ergo a tax on retained earnings is something the bigshots have never opposed. Its existence locks in place old money. And this we cannot tolerate because we have learned that kids born into great wealth seem then to go after political power. This nasty trait of human nature mean we have to be more egalitarian than any economics-alone analysis would mandate.

  42. Hopefully the continent of Australia can break free of the malign forces controlling the rest of the world and be a floating island on its way to a more perfect liberty.

  43. Mr B I have decided that of all the birds I love the most you most resemble the magpie.


    Along the road the magpies walk
    with hands in pockets, left and right.
    They tilt their heads, and stroll and talk.

    In their well-fitted black and white
    they look like certain gentlemen
    who seem most nonchalant and wise
    until their meal is served-and then
    what clashing beaks, what greedy eyes!

    But not one man that I have heard
    throws back his head in such a song
    of grace and praise-no man nor bird.
    Their greed is brief; their joy is long.

    For each is born with such a throat
    as thanks his God with every note.

    Judith Wright (Australia’s best ever poet yet)

    • Oh I agree Philomena, that is a wonderful poem.

      You are right, Birdy is much like the magpie, especially the fairly rare magpie (Cracpoticus tibicen deluditis) who calls his close cousin magpies (Cracticus tibicen normalicus) a bunch of stupid cunts and dumb morons for not believing his assertion that kookaburras are descended from aliens who took advantage of female emus, after their spaceship crashed in Australia 12000 years ago.


  44. One and three quarter hours of mandatory viewing. Every word true. And the most important problem that faces us today. How do we break the power of these people, and redirect the resources these people scam, into the over-production of capital goods…

    When capital goods are over-accumulated then human labour is always scarce. Then even poor workers have the lifestyle of Midas. A much worse scam morally then government waste. And actually the root cause of most government waste. And yet the bigshot filth at the top of this scam always manage to shift the blame to business more generally. Here we have a free-enterprise advocate. And yet what he’s saying is completely consonant with what we learn from Mr Perkins, in his confessions of an economic hitman.

  45. THR’S Compulsive lying continues. Now he’s whitewashing the left of the charge of being soft on communism? Go figure?


    Pol Pot was indeed wildly popular on the Left.:


    That trash in the National Review will rot your brain, Fisk. Chomsky wasn’t at the ‘Kampuchea Conference’. The claim that he supported Pol Pot was dispatched literally decades ago……

    Meanwhile on THR’s hate site he continues his practice of compulsive lying and reversalism on Iian Hall.

    Here is Sinclair banning me, but allowing compulsive liars onto his site.

  46. “Henry Ergas’ verdict on the RRT

    The truth is that the new tax could be more efficient than relying on royalties. But royalties are not likely to go away any time soon. And adding the two could make matters worse.

    So could flaws in the way the proposed tax is designed.”

    Its unbelievable I know. But this is Jason Soon proposing that we go ahead and slug the mining companies. The idea of someone asserting that the RRT might, under some special circumstances, those circumstances not likely to come about, be better than the current system, constitutes a green light for Jason.

    There is no resource rent tax proposed. There is an extra tax on profits proposed and this is unacceptable. Calling it a resource rent tax doesn’t change the fact that it is not a resource rent tax its a tax on profit. Taxing profit is sin.

    So we see the mental flaws of Jason Soon right here. Words matter more than reality. A government to government deal becomes indistinguishable from a free trade deal because someone named it a “free trade deal.” A tax on profits becomes a resource rents tax because someone named it so.

    And in Jason Soons world we ought to go for it because someone asserted that it may be better under circumstances that are not likely to come about.

    I shit you not. This is his “thinking.” Being public sector-evasive he never gets to spell things out and therefore never gets to analyse his own thoughts.

    Meanwhile Sinclair quotes the blockhead Garnaut from 1975. Why Sinclair would need to hide behind Garnaut is a telling insight into his mode of thought. Reminiscient of him hiding behind the equally useless Mankiw in his presentation to the Senate.

  47. “Let me put this another way –
    The information problem forms part of the tradeoff of such a tax but is not decisive just as saying a tax has compliance costs alone isn’t a knockout argument against it, nor that a tax significantly distorts investment (as existing State royalties do).”

    Kind of makes one wonder what in Gods name could make a tax a bad tax doesn’t it?

    All of these arguments are knock-out arguments against a tax. Each of them, and any combination thereof.


    Taxes ought to come

    1. at the very beginning of the process, for things that are inherently limited in supply (land close to good infrastructure, high-grade ores close to infrastructure)

    2. right at the end of the process (goods and services tax)

    3. be very close to being user-pays (eg. congestion tax) …….

    4. Be a tiny tiny tax rate spread as broadly as possible (1% total assets or balance sheet tax, 1% total revenue or income statement tax)

    5. …… on bigshots and at such a rate so as not to distort their investment decisions or materially bugger their lifestyle …. (15% income tax after monetary reform for individuals earning above 200,000 …. But up to 30% prior to monetary reform going ahead.)


    Anything outside the above ought to be sent to the fires. Any tax reform contemplated without explicit plans to reduce the size of government ought to be treated like leprosy.


    The whole point of the armed forces is to protect your civilians from external threats.

    Israeli civilians are targeted but this isn’t a threat?


    Sure they threaten Israel, you nimrod in the same way as a neighbor would threaten you if they fired rockets at your house.

    What the fuck do you think happens with those things, you eternal mentally deranged goose?

    They hit people’s homes.

    Don’t you think the Israeli state has a right to protect its citizens from attack?

    SO I SEZ:

    You know I don’t mind my tormenters when they start talking sense.

    “Don’t you think the Israeli state has a right to protect its citizens from attack?”

    The right? They have the absolute duty to do so or if not they ought to close their act down, and formally announce that the territory of Israel is, in theory and “anarcho-capitalist region.” And then leave matters as a free-for-all.

    Protecting Israeli citizens is the only justification for the Israeli state. If they cannot do that then what are they good for?

    Now there was a time when, and not so long ago, when the Israeli armed forces, trained by a particularly innovative British commander, it is rumoured, could pistol-whip the entire Middle-East. Part of the American presence has been principled and worthy. Part of it has been bribery, to force Israel, to sit on her hands when one atrocity has been piled on any number of sundry humiliations.

    As many Greek Cypriots were displaced as Palestinians, and a lot of these Greek cypriots came here. Anecdotally such people seem to have been a boon to the Australian scene, let us not go into their voting record, which to me in any case is unknown.

    Now it is the case that many of these Greek Cypriots were robbed and dispossessed by the Turks and were for many years, and may be still, seeking compensation. The international community ought to have leaned on the Turks for that compensation. And leaned on everyone else, to allow open access to Turkish exports should the Turks have agreed to pay that compensation.

    I wish the dispossessed Greek Cypriots luck in their efforts to seek compensation. Sadly I think they will be frustrated. But note. They are not murdering Turks as we speak. And why not? Because terrorism with any geographical reach, is almost always a state sponsored/created/or at least approved sort of deal.

    Government is “at best a necessary evil….” A righteous people may make for a reasonable government, in some times and places. Lee Kwan Yew’s Singapore would seem to have fit the bill. But there was some nastiness there as well.

    But the fact is that the natural tendencies all push towards governments growing wicked and dysfunctional.

    Why should we set such a high bar for the Israeli government?

    Sure they do repulsive things. But they are not the problem in the Middle East. Its the scum that rises to the surface in these other Middle Eastern governments. They are the main problem. Individual crimes of the Israeli government aside.

    When the Israeli government had the capacity to pistol-whip the Middle East, the way we could have helped them get out of their predicament, is if we had the norms and sensibilities to encourage them to murder only bigshots.

    There has been way to much bully-boy behaviour in Palestinian territories and not enough killing in Tehran, Riyadh and Damascus.

    And how we could all have suffered to have that !@#$%^&* Arafat die in his bed, or at the hands of the other side, I know not.

    I don’t know. I don’t know. Maybe the opportunity is over. But always if you can you try and hit the decision-makers. You hold the bigshots responsible.

    Israel ought to retaliate to any incursion or atrocity big or small.

    But she ought to hold off on the real nasty stuff, if she is not ready to murder bigshots.

    Something I saw on TV was rather disturbing. I saw Australian Jewish nationals fighting for Israel. Actually one of them got killed. Which is very sad of course.

    But I found two disturbing things.

    1. A Jewish Australian who had a non-front-line job fighting for Israel was honest enough to say he was not sure if he would fight for Australia in the same way. Now I would not force anyone to fight for Australia. I would just devote a ridiculous amount of resources to support those who were willing to do so. And compensate them a massive amount were they hurt. And their estate even more if they were killed.

    But it does seem a bit rich that he’s over there giving his all for Israel and he’s not so staunch when it comes to us. Perhaps he’s copped a lot of abuse in his time?

    But that was minor. That was a minor thing. The other thing I saw was far more disturbing.

    2. And Australian Jewish boy was walking into battle for Israel. And he had his rifle and his uniform. WHERE WAS HIS DRAGONSKIN!!!!!! Where was his high-tech clobber.

    This we cannot forgive. If we are supporting these people, and we want them to act morally and spare as many civilians as possible, then their soldiers have to go into the field with the best clobber money can buy. And so you see here the dysfunction and wickedness of the Israeli government …. and how it is similar to the dysfunction and wickedness of the Australian government.

    They are all fucking useless. They are all fucking evil. This does not permit us to single out one government for particular abuse.

    You send a soldier into the danger zone you better fucking have everything that money can buy to make the odds good that you can then send him home to his Mothers arms.

    And yet we find in all Western governments today they won’t even close down a single government department, or reduce even in a little way bankster subsidisation …….. they won’t do the right thing in order to provide the resources to stand firm with that principle.

    I don’t think our guys ought to be in Afghanistan. But if they are there, and fired upon, the resources ought to be available, such that the very memory of their assailants be wiped away.

  49. I hear you. Here in the States we’ve got all sorts of ludicrous hikes in taxes and the cops don;t even work right. All I need is my supplies and my gun. But try telling that polecat in the White House that. He’s a fucking comunist. You might think I’m joking but I’m not.

  50. Well I disagree that all you need is your supplies and your gun.

    No-one can function if they are reduced to a situation, akin to a caveman, looking out for the saber-toothed tiger ……. And then the rain comes at night, and finally after being on edge he relaxes, because “The Lion Sleeps Tonight” (on account of the rain.)

    We can live like that as hunter-gatherers. And perhaps when we think of the individualists, within our networks, we suppose, that we true lovers of liberty, would have a comparative advantage in that sort of world.

    But the fact is that a modern, high-tech setup cannot work like that. And we must have a situation free from fear.

    Because you cannot keep your wife and children safe from predators and go to work at the same time. And if your wife is hot you cannot keep her safe from another type of predator, except from the more pre-emptive over-fulfillment of your various commitments.

  51. Think about the sense of calm we have out there in the country. When the fire burns, and with three blankets, but outside the hard rain, she falls on the corrugated iron.

    Friends would come around to my place and be so scared ….. what with all the woods around. and after we’d watched some old black and white show (before we had colour TV perhaps) of some zombie or ghost movie……

    Then they would want to go to the toilet. Then they may wake me up. Because it was pretty scary. When you think about it.

    Its instinctual. But no-one would be scared if it was raining. Because the lion, he sleeps, tonight.

  52. Nothing beats the original version by its Zulu composer and his group, Solomon Linda and the Evening Birds.

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