Governments to live off Passive Income??

[Alan H]

Why not?

A passing thought..............

Many if not most of us aspire to get ourselves into a position where our passive income will at least cover our living expenses.

A responsible attitude I would have thought.

No pats on the back for us if we spend more than we make and surely we can do better than only make enough to cover what we spend.

To achieve this we look to make intelligent investments from the money and equity we control.

Now, let's look at Government.........

If we look at the history of 'tax', it's gone from being a novel, localised idea to cover a few costs to something that now pervades every area of our lives.........and the percentages only seem to be increasing!!

What if........just what if.........Governments were forced to adopt a "Richest Man in Babylon" etc type approach whereby they had to responsibly invest the first 10% of tax receipts with a view to investment returns eventually growing to a point that a significant percentage of 'required tax' was paid for out of the return on investment? In effect, the Government were to modify its approach to have to live off passive income within a certain timeframe?

Seems impossible? Unreasonable? But with the continual reduction in future pensions and the need for increased self-funded retirees, isn't this exactly what most Australians are expected to do in the future? We're meant to budget, invest, save etc in order that the return on our savings and investments can cover most of out costs. In most cases, very ordinary, average Australians with only limited resources are meant to do this, so why would it be unreasonable for Government with infinitely more resources to do the same?

Sure there's the argument that Government should be involved less rather than more, but all I see is taxes continuing to rise and little or no true economic accountability of what sort of Return on Investment we are getting.

If the tax level is inevitable for the services we demand, why not make Governments pay for much of them in the same way we are meant to in the future? Make them accountable. Make them go to the electorate with real performance figures.

Hmmmm..........Warren Buffett for Primeminister........now wouldn't that be interesting?



Oh........what was that? I think I just saw of pig fly by the window........

 

[geoffw]

The government had some excellent well earning investments going. Telstra was the last. But the quick cash from a sale was far too tempting- think of all the tax cuts you could give the voters. (And I suspect a private employer may have been able to run it more efficiently than some of the earlier efforts when it was a government organisation).

 

[Alan H]

The government had some excellent well earning investments going. Telstra was the last. But the quick cash from a sale was far too tempting- think of all the tax cuts you could give the voters. (And I suspect a private employer may have been able to run it more efficiently than some of the earlier efforts when it was a government organisation).

Good point Geoff. We get the Government we deserve.

The more normal reaction to a Government 'making money' from an investment is an outcry rather than a pat on the back.

As I said, this was just a passing thought, and I'm not necessarily proposing a whole lot of majority Government controlled enterprises. However, I see nothing wrong with Government having to significantly improve their investment return on OUR money to lessen ongoing tax burdens.

 

[geoffw]

Good point Geoff. We get the Government we deserve.

The more normal reaction to a Government 'making money' from an investment is an outcry rather than a pat on the back.

As I said, this was just a passing thought, and I'm not necessarily proposing a whole lot of majority Government controlled enterprises. However, I see nothing wrong with Government having to significantly improve their investment return on OUR money to lessen ongoing tax burdens.

Alan,

Just to provide a contrast with the government way of doing things.

Peter Spann was very fond of the Salvation Army. They were one of the few people who werfe willing to persist with his mother in advanced stages of alcoholism.

But they were also an organisation who used their investment dollars wisely, and (apparently) produced enough from investment income to cover all admin expenses, to ensure that donations were user 100% towards the intended recipients.

But their investment income is not at all publicised. A pity- I do like to see an efficient use of charity money.

That's my memory anyway.

 

[Aceyducey]

Vote with your feet! - move to Singapore

They even run their transit system at a profit (the only public one in the world to do so)

Cheers,

Aceyducey

 

[Peter Parker]

I vote no no no!

Why?

1. Smacks of state socialism

2. Politicians aren't necessarily the smartest businessmen

3. Increases scope for political patronage/corruption

4. Unfair competition with private sector

I lived through the WA Inc years during the 80s. The idea was that Labor could get into business so it could fund their social programs without increasing taxes. It failed and a huge debt was the result.

Far better that the state stick with government, not running businesses, and derive its income from reasonable taxes (ie a low but broad tax base that applies to all, no exceptions).

Peter

 

[Andrew]

Didn't work too well for Nauru, now they are giving up half of their
future equity to the white knights who've bailed them out, soon
enough those white knights will own the lot methinks.

andy

 

[Alan H]

I vote no no no!

Why?

1. Smacks of state socialism

2. Politicians aren't necessarily the smartest businessmen

3. Increases scope for political patronage/corruption

4. Unfair competition with private sector

I lived through the WA Inc years during the 80s. The idea was that Labor could get into business so it could fund their social programs without increasing taxes. It failed and a huge debt was the result.

Far better that the state stick with government, not running businesses, and derive its income from reasonable taxes (ie a low but broad tax base that applies to all, no exceptions).

Peter

Hi Peter.

Yes......I certainly take your point about Government not always making the best business people........but then ironically, they ARE running the biggest business in Austalia now anyway aren't they? The horse has already bolted on this one. I'm sure changing political parties wouldn't make the slightest difference either. I guess I'm talking about fundamental, possibly radical shakeups in the way Governments spend and make their money.

Because we tax payers continually expect more and more things to be given to us out of tax revenues, the Government now receives massive sums of money per year and I for one am not at all convinced they spend it efficiently.

As far as I'm concerned, they should either be receiving less tax(with improved operating efficiencies and probably less direct services) or if they are to receive and manage such massive funds, then they need to be running it in a much more businesslike fashion. Self funding opportunities seemed one logical extension to this but I acknowledge there maybe other/better ways.

As far as the couple of Government stuffups goes, maybe that should simply be lessons as to guidelines that need to be put in place. If losing a few billion dollars here and there was a reason to throw the baby out with the bathwater, then a number of other Institutions such as NAB, Telstra etc should also have been done away with?

I'm not sure what the answer is. Perhaps they should only be allowed to take minority interests in various companies/projects etc and do the very thing you suggest.........leaving it to others to run the business?

As far as being unfair competition for the private sector, again, maybe they should only be allowed to be minority investors and provide valuable financial input into the private sector without necessarily being a direct competitor to anyone? If the Government did need to receive the current level of taxes and a good return is being received, I could live with the Government buying shares in Telstra, or in the past CBA etc up to 20%.

Perhaps the Government could setup an arms length, independent investment body, under strict guidelines, whose responsibility it was to make such investment decisions along the lines of a Managed Fund??.

Ahhhhhh.........I don't know if I feel comfortable with all the above either........I guess my frustration with the massive amounts of taxes we pay wants me to look at ways of it being done more efficiently before it gets even worse.

Also, as far as State Socialism goes, continual increased taxes and demand for services, is almost promoting this by default anyway.

I remember being involved with a Value Management Study a few years ago on a Project that had been meticulously developed , albeit often independently, by a mumber of experts. Costs had been kept very tight. As part of the Value Management Study, all the players were bought together(probably for the first time) and given a couple of objectives. The first was that by the end of the day we would have identified at least a 10% cost saving, but still had to produce exactly the same end result. There was a bit of a snicker around the room when this was proposed. So much time had already gone into rationalising this Project, it was fine tuned as it was. Guess what? A bit more than 10% was found and the same product was produced.

Ok......maybe this should be the challenge to Government............

Within ten years you will have reduced taxes by 10-20% in real terms, but not reduced any essential services. Now get to it and come up with some innovative solutions!!

The current pathetic appoach would be......."if we increase services by 10%, then taxes will need to rise by 10%.........if taxes drop 10%, then services will need to drop 10%......". BULLS**T!!

Why do I think if I set the same task to the likes of a Gates, Branson, Packer, Buffett etc. that they would demand to increase the 10-20% figure to at least make it a bit of a challenge??