Australia's latest attempt to loot the productive sectors of the country to enable the continuation of the welfare-warfare state comes in the form of a "super" profits tax. They have justified it using typical Marxian rhetoric, the classic example being that Australians deserve their "fair share". I am not going to examine this tax through the lens of the opposition, in other words by attacking it on details (question their figures and so on) but will rather object to it on principle and economics alone. This tax, quite simply, is backdoor nationalisation and just steepens the road to serfdom which, it would appear, is the end game for the Labor party.
Profit, "Super" Profit and our "Fair Share"
"It is necessary to guard ourselves from thinking that the practice of the scientific method enlarges the powers of the human mind. Nothing is more flatly contradicted by experience than the belief that a man distinguished in one or even more departments of science, is more likely to think sensibly about ordinary affairs than anyone else." - Wilfred Trotter
If you listen to what the proponents of this tax say - and you have no choice now that they are spending $38m in tax dollars 'spreading the word'  - this tax is all about getting Australians a "fair share...a tax which encourages investment and growth in the industry." First of all, what is "fair" is completely arbitrary. Secondly, the logic used by Rudd is straight out of the Marxian doctrine of exploitation, where the "exploiters" are clearly withholding "unearned" profits from the people and therefore it is up to the government to curtail their generosity and reclaim some of this wealth. This attitude is in line with what every dictator throughout history has done: steal the property of people who cannot defend themselves against the encroachment of the state. As we will touch on later, this has serious repercussions that will - despite what is being promised by the government and their economic models - restrict investment in new capital, output, innovation and, consequently, the wellbeing of the average Australian.
Encouraging Investment and Growth in the Industry
Men are qualified for civil liberties, in exact proportion to their disposition to put moral chains upon their appetites: in proportion as their love of justice is above their rapacity." - Edmund Burke
The Labor party is under the impression that confiscating profit from the miners will improve the material wellbeing of all those not in the mining industry. Unfortunately, basic economics disagrees. By removing a large part of the profit motive, losses that might be incurred fall upon the miners while a significant share of the profits go to people not involved in the whole process (and in the end it goes to the government NOT 'Australians' - the issue of government vs. private spending will be omitted here). When profits are taxed away from productive enterprise and instead redistributed by the government, a larger portion of it will be consumed rather than reinvested. There is then less capital available for the establishment of new mines and the entire state of production and innovation, adjustment, improvement and progress is forcefully held back. This, contrary to the rhetoric we are hearing, will impoverish the average Australian.
The Greedy Miners
"Experience should teach us to be most on our guard to protect liberty when the government's purposes are beneficial. Men born to freedom are naturally alert to repel invasion of liberty by evil-minded rulers. The greater dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding." - Justice Louis Brandeis
The attacks on mining magnates such as Clive Palmer stem from an erroneous interpretation of the operation of the market economy. What makes a firm big in a market economy is how well it succeeds in meeting the demands of the consumer. If they fail in this task, they would not be big for long. Large profits are nothing more than a signal sent by consumers that the producer is doing a good job; it is proof that they are rendering a desirable service. These profits do not come at the expense of the average Australian; in fact, everyone is better supplied than they would have been in absence of this profit. If you remove the opportunity to earn profits in mining, then the incentives to innovate, cut costs, increase production and so on are stunted - the best and brightest people, the people who know how to utilise the factors of production in the best way - would simply not bother if a large percentage of gains they might make are to be taxed away.
Emotion for Political Gain
"When words lose their meaning, people will lose their liberty." - Confucius
The common view that mining companies are profiteering from non-renewable resources with little benefit to the average Australian is a strong emotional argument largely emanating from the government. The problem with this argument is that it serves to discredit the benefit that the average Australian receives from the development of these natural resources. The mining companies take the risk onto themselves by spending billions on exploring and studying the potential of mine sites; passing government regulations; raising capital; building infrastructure (this includes things like building new ports and providing access to electricity, healthcare, education and so on which all reduce the costs of future expansions, to other business ventures that might otherwise have been uneconomical and raises the standard of living of the people involved); and all of this occurs often before anything has been mined. While it is true that the non-renewable resources are more often than not sent overseas, the benefits come back in the form of cheaper cars and other goods that many Australians might not have been able to afford otherwise. After all of this value-add (and there is much much more before you even look at the taxes they already pay), the government still wants to take away an even larger portion of the benefits that the people who shouldered a share of the (considerable) risk - the people who voluntarily decided to cooperate with the owners through investing in the development of the mine - stand to gain if their investment pays off.
The End Game
"Fanatics may suppose, that domination is founded on grace, and that saints alone inherit the earth; but the civil magistrate very justly puts these sublime theorists on the same footing with the common robbers, and teaches them by severe discipline, that a rule, which, in speculation, may seem the most advantageous to society, may yet be found, in practice, totally pernicious and destructive." - David Hume
If policies like this one are continued - and believe me, if this gets passed their greedy eyes will relentlessly scour the land for their next target - eventually there will be no one left as profit will have been virtually abolished altogether. Every step toward the elimination of profit serves as a disincentive to the driving force of the market - entrepreneurship - which is based on real judgments and risk taking. Instead of progressing towards a higher standard of living for all Australians, this tax will do nothing but progress us further towards social disintegration. When you eliminate profit and loss it is impossible to have a non-socialist economy - but then again, is that not the ultimate end game for the Labor party?
 "Super" being defined as anything above the government bond rate. Source.
 I understand there might be some kind of 'loss floor' or loss compensation package in place. Once again, this ignores how the the market economy works. It operates on a profit and loss system - the carrot of profits and the stick of losses. Trying to counter balance the loss of the profit motive by lessening the punishment for failure will simply keep bad businesses alive for longer and delay vital restructuring processes. It will encourage moral hazard and - as we have noted in prior posts - if the China bubble bursts, this 'super profits' tax could end up costing the taxpayer through subsidies more than it brings in!