There are two ways the government ‘spends’ money.

The first, the most obvious, is allocating money to programs. This generates what will grab the headlines on Tuesday, budget night. Figures like $42(+) billion for the NDIS.

But there’s another, equally important way the government subsidies activities. That’s by forgoing revenue, or not taxing things that would normally be taxable.

If you’ve got nothing to do over the weekend, the Australia Institute has provided an interesting 15-page briefing examining these tax breaks. Their economist Greg Jericho trawled through the budget to work out how much extra money the government would have to spend if, for example, the Fuel Tax Credit Scheme was scrapped.

Currently, this provides businesses with a credit for the tax they pay on fuel whenever they fill up. It costs the taxpayer $10.6 billion a year, approximately a quarter of the cost of the NDIS.

But (as Shakespeare might say) there’s the rub.

That’s because it’s not just big business, or wealthy homeowners that benefit from tax breaks. If it were, scrapping exemptions like negative gearing would be simple. This costs government something like $5.5 billion in foregone revenue every year.

Slashing that might appear obvious, but there are equally ‘obvious’ savings measures that reveal just how difficult tinkering with the tax system is. Treasurer Jim Chalmers discusses this problem in the Financial Review article in our Wrap section below, but what he says could be summarised more efficiently in three words: change is hard.

In 2022/23 accountancy trainer TaxBanter calculated tax exemptions for NDIS businesses were ‘costing’ the government some $8.08 billion a year. What was even more significant though, was the growth of that sum over the previous three years.

It had grown by more than 58% during this period. NDIS businesses were expanding and had gotten better at claiming deductions. And this explains, at least in part, exactly why the government is so reluctant to tackle tax deductions.

What might look like an obvious way to raise money by eliminating tax breaks will inevitably provoke much louder screams from anyone who’s losing a deduction. Once a tax exemption has been given, it becomes almost impossible to wrestle it away.

There will be a lot of complaints about the way the government’s taxing and spending over the coming week. That’s fine. But it doesn’t mean there are any easy and simple answers.

Particularly to a politician who wants to be re-elected.