And its the same lesson that always occurs
raising taxes does not = rising revenue
raising taxes does not = rising revenue
For the latest tutorial on lousy tax policy, cast your eyes down—way down—to Australia, where the country's windfall mining tax has produced a gusher of . . . zero revenue in its first three months.
Julia Gillard's Labor-led government projected that its "minerals resource rent tax" on large iron-ore and coal companies (effective rate: 22.5%) would raise 10.6 billion Australian dollars over three years and allow Canberra to redistribute the gains of the country's China-fueled mining boom. The money was also supposed to help dig Australia out of a budget deficit that Ms. Gillard and her predecessor, Kevin Rudd, created through a spending spree.
When questioned in March about the wisdom of such a levy as China's growth was slowing, Ms. Gillard responded, "as a nation we're going to be earning a lot out of our mineral wealth. The question is should we share it or should we give it to a privileged few?" This is the kind of crack economics that kept Australia in the league of poor democracies until the Labor Party moved to the center and liberalized trade and investment in the 1980s and 1990s.
Now the economy is decelerating, mining company profits are declining, investment is going elsewhere, and there's less revenue for Canberra to seize. Ms. Gillard and Treasurer Wayne Swan are walking back their revenue projections and may have trouble balancing the federal government books.
This is what happens when government tries to raid business to fill a budget hole, rather than lower taxes to promote economic growth and rake in more revenue the easy way.