I recently suggested to Mark that we nominate our best posts of the last month or so and swap them. Mark liked the idea. I also sent him a draft of my next column for the Courier Mail. Mark asked to post it on LP so, being an easy candidate for flattery, I agreed with unseemly haste.
One thing led to another and so here I am - with my own login and all as a guest or irregular blogger. Who knows? We’ll see. For anyone who’s interested, I wrote out my own (centrist) ideas about politics in an early post of mine on Troppo.
Anyway this column from Wednesday’s Courier Mail expresses my dismay at the latest turn of events by which every galah in the pet shop is now talking about the need to lower top marginal tax rates — that is tax cuts for those earning more than 125,000 squid (as Ali G would say).
As I argue in the column this is of some seriousness for the ALP because so many of those arms of government for which the labour movement had high hopes either make life worse for most working people (eg. tariffs) or are ambiguous in their effects helping ‘insiders’ and hurting ‘outsiders’ and even creating some outsiders (as I argue is the case with most IR regulation — including the basic wage).
I think most people who thought about it much would probably always have imagined that tax and transfers are the most powerful policy means of addressing economic inequality. But with other means looking both politically and economically shaky, it’s no time to be giving up the citadel.
As I argue, strongly redistributive tax and transfer systems were at the heart of how we managed to engineer the ‘Australian miracle’ of 15 years of strong steady economic growth (still counting) whilst tax and transfer policy undoes most of the growing inequality that the market began to generate starting in the early 1980s — or perhaps the mid to late 1970s.
Now it seems that Peter Costello is one of the few people who is prepared to counsel caution in jumping on the lower rates bandwagon. So we’re at a pretty pass. Of course when the Coalition gets around to cutting the top marginal rate (its hard to see how they can resist it now) the ALP will look seriously silly objecting to it. Anyway, as I do every week, I’ve posted my column up at Troppo.
Note by Mark: For a previous discussion on the tax debate at LP, see Naomi’s recent post. And also, please make Nicholas welcome as a new LP blogger.
A very warm welcome to the LP pages, Nicholas. I’m sure you know that it gets a bit crazy here after midnight!
However, addressing your post, while I disagree with you on IR, and I read your unfair dismissal article at OO today, I thoroughly agree with you on tax. Labor needs to play itself into the game by highlighting the economic benefits of redistributive policy and progressive taxation, instead of the “sandwich and a milkshake” angle.
It’s also been somewhat bizarre to see Labor spokespeople throwing around terms like “the politics of envy” - tempting as it might be to apply such phrases to the Howard government, I’d have thought that selling a good and well thought out tax policy on the grounds that incentives need to be given to the vast majority of taxpayers under 50k ought to be key.
No doubt some of what Labor are saying is to play themselves into the “economic responsibility” game.
My question for you would be can they sell good progressive tax policy and keep the Fin Review/Lateline crowd happy simultaneously? If in doubt, I’d go for the former.
in case some people don’t know cutting the top MTR does not cost a lot of money so it can be done relatively easy.
It costs a lot more the further you go down.
Yes, Homerkles, apparently there are a lot more poor people than rich. Go figure.
Ross Gittins is in good form on the tax issue in today’s Sydney Morning Herald.
http://www.smh.com.au/news/opinion/all-this-crying-poor-is-a-bit-rich/2005/08/30/1125302563872.html
Fyodor,
There is no need for that.
I was merely trying to assist people in this debate.
It doesn’t cost a lot to get rid of the top tax rate.
It takes a lot more for the 43% .
It takes one hellva lot of money to reduce the highest MTRs ie those for people on welfare who thren get work.
Yeah, I know. Sorry - being facetious. However, the priority in the tax debate should not be on cutting tax rates as cheaply as possible, but fixing the biggest problems. Gittins is right in focusing on the high marginal tax rates for people trying to escape poverty traps. I’d much rather the government focussed on providing a tax regime that didn’t penalise people for working.
You have to do both.
you can’t change the tax if you aint in government so then you have to look at where the most taxpayers are and what to do.
both the ugly duckling and roy want to do something with the 43%.
in ten years time when the labour force is contracting because of age that is when the parties will examine welfare to work properly because they have to
It’s slightly off-topic but I’m taking advantage of this thread to announce that my SPSS database of the 2004 Federal election has generated a bivariate correlation analysis showing a strong positive correlation between the percentage of home buyers and the swing to the Coalition in individual electorates. So it looks like interest rates really was the big issue.
Also, there appears to be a strong correlation between the percentage of agricultural, forestry and fishery workers in each electorate and the swing to the Coalition - but intriguingly, there is a substantially lower than average swing to the Coalition in the mainland forestry seats identified by the forest industry groups as likely to swing hard against Labor over the Tasmanian forests policy. (By lower than average I mean lower than the national average for all seats, lower than the relevant state averages, and much lower than the rural and regional average.)
Paul, correlation doesn’t prove causation.
focus groups showed few believing the interest rate guff but a change happening after the Tasmanian forests decision which is interesting given your analysis.
funny thing is economic rationalists would have supported the decision.
Homer, correlation on its own doesn’t prove causation, and only the voters know what was in their minds when they voted in the way they did. But when one considers the existence of such a correlation in combination with the heavy emphasis given by the Liberal campaign to the interest rates issue, one can plausibly posit the probability of a causal connection.
You also wrote “focus groups showed few believing the interest rate guff but a change happening after the Tasmanian forests decision”. It would be more accurate to say that focus groups showed few *admitting* they believed the interest rate guff in front of a room full of people, and perhaps a number affecting a high-minded concern for the poor Tasmanian forestry workers, taking their cue from a line being brashly asserted in the media.
Pity about the poor Tasmanian forestry workers now being retrenched as a result of commercial calculations by the woodchip buyers, without that $800 million adjustment package. Pity too about the Tasmanian farmers being shafted by McDonalds, without the compensating macroeconomic stimulus which the $800 million would have provided.
Paul, the voters thought the ALP were spending more money than the Libs.
This shows they were completely flummoxed by the campaign.
I think there is a fair case to say they made decisions based on bad information.
Traditionaly a lot of voters made their mind up in the last week and it seems to me voters were totally confused.
Remember polling for the parties. morgan and Newspoll got it wrong on preferences.
you could say the same thing about workers in comapnies supported by tarrifs.
The only way workers will ever feel secure in the forestry industry is to get the companies to move up the value-added chain.
This is essentially what the ALP policy was.
If Tasmanian farmers can’t provide potatoes at the same price and quality as NZ then as a consumer I am not bothered one bit.