Cutting public service comes at a cost, page-74

morning jant,

my apologies - I thought I explained why this is not so in my previous post

"We’re much better off paying them at Centrelink rates and keeping the rest of our taxes for us to spend, "



let me try again - because - no, we are not any better off - we are in fact - worse off - here's why


A department has a $1B budget.

the sack - say 500 workers - giving them a saving of apx. $30 M. (est. a sal. of $60K each as eg.)


Come next budget -- you do NOT get a budget of $970 M - because of the $30 M saving (governments do NOT work that way)


you get a budget of $1B as before - or higher. NO saving to go back to taxpayers - not a cent.

Then - you have (your idea) put these 500 people on welfare -

so - the results of that move are

Higher welfare payments - probably apx. $10,400,000 P/A additional.

Then LESS income tax revenue (you now get ZERO) from these people - so, guess? -

say $6.11 M (calculated on each worker sal. of $60k and the F/N withholding rates)


So - so far - you have saved $30 Million in wages -

but cost yourself $$10,400,000 in welfare and lost $6,110,000 in tax revenue

Sub Total $16,510,000

So far your savings are now down to $13,490,000

But - remember - the budget is still the same - so, you really haven't saved anything yet - you have actually cost yourself $16,510,000


But, there's more -

you have to factor in the GST that they would have given the states - when they spent the difference between their previous salary and Newstart (or sickness benefit because some would be on stress by now) --

so - you lose in revenue an additional 10% of every dollar they would have spent in that amount (bar where gst does not apply).

this would amount to many millions again - bit hard to do the calc. on that one - too complex.


Then - wait - there's more - it just gets worse.


The money they now can't spend (which you can't get gst on) ---- also doesn't go back into the economy -

so - the butchers revenue goes down, so to the cake shop, so to the dress shop, so to the new car sales, so to pretty much every single business in the country -

and, if their revenue goes down - again - so does your tax take from the business - so too does the income tax from salaries from those businesses - and then, the flow on from those businesses to other businesses - their suppliers -

it's just a merry go round.




Now ----------- do you still think you have saved money and it's coming back into your pocket?



have a great Sunday morning

Pinto