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effectively unearned windfalls

Oh, you mean apart from the billions of dollars the companies spent on exploration, establishment and infrastructure? Over and above the billions of dollars in royalties and taxes? And the fact that over the long term mining is a risky business with shitty returns? Yeah. Those thieving bastards.

I’ve been to the Pilbarra where BHP and Rio Tinto are digging up mountains and sending them to Japan and China. And I can tell you that they build more and better infrastructure than the WA Government has. Between them those two operate the largest private rail network in the world, run the longest trains with heaviest loads, have efficient private ports built with their own funds and so on and so forth.

Given a choice between letting the mining companies build their own infrastructure or letting Canberra airily promise that they’ll do it, I know how I’d prefer it go.

Im currently at a mine with an interesting little boom,bust,boom history so i hope you dont mind a bit of an inside view.

The mine im working at was owned by western Mining, at one time one of Australia’s mining powerhouses. However they made 2 stuffups which pretty well saw them bankrupted in a year. (there is a shadow company of what it was still going).
They first solf forward (hedged) a substantial amount of their projected gold sales for a year ahead. Then the price of gold crept up above what they had hedged at, AND the mine they had pinned the sales on was found to not contain anywhere near the bullion it was supposed to.
They were forced to meet the hedged gold by buying it at market cost and selling it at a loss to meet the contracts. They began to close down/mothball marginal operations first then eventually their “crown jewels”. By the time the hedging sales were done they were finished as a company

Then came my bosses, one a small mining company doing mostly nickel, and 2 brothers who were geologists. They brought the mine Im on for (it turns out) a steal, not based on what was thought to be left, but based on their knowledge of the ground.
They then spent about 1 year getting the mine back into running condition (it had been shut for about 10 years) and began mining the existing orebodies. They also started an aggressive exploration program which last year found ore reserves well over what has been pulled out of this hole in the previous 25 years it had been running.
WMCs’ drilling and exploration program missed this ore body by 10 meters…

The company also caught the huge boom in nickel prices last year, at one stage $50,000 a tone for the stuff (now back around 20). This money has been used to acquire more ground for mining as well as fast track development which was otherwise scheduled to happen over a couple more years.

The 2 brothers had their share of the company brought out by an overseas mining group and have joined the board as members.

Thats what can happen both upside and downside in the mining game. To treat increased profitability as a cash cow would be quite short sighted. However putting the onus for road/rail/infrastructure etc costs back onto existing mining giants is a more efficient way of “gaining” money in my opinion.

Most people don’t think they’re actually going to win 20 million dollars on saturday night, and really aren’t going to complain that much if they had to pay tax on it and only end up with 10 million dollars.

I would. But then I wouldn’t buy one if that was the case, and I expect most wouldn’t either. I’d confidently extrapolate that to an overnight $100k Saturday night prize, and the government getting only $50k. i.e. no gambling industry whatsoever, and subsequently no government revenue from it. It’s better to have 10% of a huge pie than 50% of a tiny pie.

It’s no tragedy. People gamble with after-tax money, and they give the government a substantial cut when they buy a ticket. Governments get more than their share.

Anyway we’re a long way from talk about windfall profits tax. It’s not often I agree with Katz, but in this case I do 100%.

A few reasons:
a) because then logically lottery ticket purchases would be an expense incurred while earning income and would then be tax-deductible.

Its not actually required though is it? AFAIK lottery gains in the US are considered to be income, but you can’t deduct gambling losses from your income.
You could for example quarantine gambling losses and winnings so winnings through gambling can only be offset against losses from gambling (much like some want to do to rental properties).

c) If the government took half the winnings, they’d have to double the winnings to maintain sales. That’s not feasible.

I don’t agree here – people aren’t going to stop buying lottery tickets because they might have to pay tax on the winnings. Most people don’t think they’re actually going to win 20 million dollars on saturday night, and really aren’t going to complain that much if they had to pay tax on it and only end up with 10 million dollars. How much is the tax free status of gambling costing the government?

If you only taxed windfall winnings of say more than $1000 you wouldn’t burden organisations running raffles etc but still pick up a substantial amount of revenue.

Speculation on the stock market is also a socially useful thing (providing capital by those willing to take a risk) whereas I’m not sure gambling has much social value at all.

Well on that basis you’d make speculation on the stock market tax-free and tax gambling winnings.

Buying a lottery ticket or betting on red at the roulette table is not that much different from buying a random stock on the ASX.

A few other points:

Few people buy stock at random.
It is a great ( and damaging ) myth that betting on the stock market is the same as gambling. The results from the roulette wheel (or poker machine) are entirely random and over time a gambler will lose roughly 1/36 of their money whereas betting on the stock market is more accurately called speculation and someone who knows what they are doing will make money. Speculation on the stock market is also a socially useful thing (providing capital by those willing to take a risk) whereas I’m not sure gambling has much social value at all.

Slightly off-topic – but why aren’t winnings from lotteries and gambling generally treated as taxable income? If someone wins a couple of million dollars why shouldn’t they pay about half of that to the government in tax? Buying a lottery ticket or betting on red at the roulette table is not that much different from buying a random stock on the ASX.

A few reasons:
a) because then logically lottery ticket purchases would be an expense incurred while earning income and would then be tax-deductible.
b) The government already takes a cut of the winnings at each ticket sale.
c) If the government took half the winnings, they’d have to double the winnings to maintain sales. That’s not feasible.

See goose, golden egg, etc..

But I think royalties could be a good way to go about it morally – this is stuff that is part of Australia that is being dug up and shipped offshore for private profit. Since we all have an interest in keeping Australia physically here for the future, paying handsomely for the privilege of removing bits of it should be seen as fair.

How would an Australian Govt steer extra revenues into infrastructure with the best possible future prospects of assisting the average Dianne? Should it?

That’s not the argument being made, Ambigulous. During a recession, claims on government spending rise because economic activity diminishes and thus welfare spending increases. Tax revenue also falls. What’s being discussed, as I read the article, is a way in which these claims can be met in a fashion which stimulates economic activity. Raising taxes to fund spending in a recession and borrowing are problematic, for the reasons already given.

One of the fundamentals of fiscal policy is maintaining a surplus during periods of economic growth in order to avoid this. But the surplus we currently have is not being maintained for this purpose, but allocated in the future to infrastructure spending. That may have stimulatory effects during a downturn, but it also may not be sufficient to do what government has to do during a recession.

Or was the extra oil revenue mainly invested in European and US companies? Or was it used to buy up real estate elsewhere?

How would an Australian Govt steer extra revenues into infrastructure with the best possible future prospects of assisting the average Dianne? Should it?