Word up.

Try saying that in public though.

Ok, you really got me thinking on this one. I would say that first came changes in behaviour because of the change in income. After this came the realisation that with less money, and with less spending, my life was no poorer really. Spending money on “things” no longer has any attraction. But I did make a point of stating that it was my own experience, and so I may be in the minority of the minority on this one.

So what you are saying is that the less money people have, the better.

No, I am not. I am saying people at the top end of the income distribution don’t need tax cuts which could usefully be cancelled for macro-economic purposes.

In context, I referred specifically to higher income earners, and I’ve specifically said that tax cuts for low to middle income earners should be delivered.

Please read more carefully.

So what you are saying is that the less money people have, the better.
The campaign which appeared late in Howards final term to educate people better on “money matters” was the good seed, but with roots that didn’t extend deep enough. To expect people to take the initiative to read the governments info on how best to handle their money… might as well expect people to take the initiative to use common sense in their money matters. People arent stupid. They’re just wanting. There is a tremendous amount of pressure placed on people by advertising to spend money on non essentials. People are driven by consumerism. Either this, or they just don’t have enough money to save. Basic life expenses ARE on the rise.
The question is, when is it going to cross over. Expenses are on the rise, wages are not. At least not in line with these expenses. That poverty line draws ever closer and closer to so many tax payers. People need help, but not necessarily with tax cuts in the form of weekly wage growth. Force people to save those tax cuts by opening special bank accounts, perhaps implement the tax cuts into those accounts Kevin Rudd has proposed to help new home buyers as a starter fund, or a dollar for dollar incentive. The side effects of having a great economy on the more modest earning sectors of society are really what swung old Johnny out of government. Particularly the rising unaffordability of the old Australian dream.

We are stuck with the political fact that a sectorally unpopular measure is more widely unpopular if it’s in breach of an electoral promise.

The baby bonus and the family tax benefit are just tax cuts delivered to people who produce sprogs, it’s a have-a-kid bribe.

I’d be surprised if any financially literate people have been convinced to have a kid based on the baby bonus. At best it might move the decision forward a little bit in time.

Part of Johhnnie’s back to the 50s programme. If you cut it out and simply let people keep the cash in the first place it would obviously be better fiscally. People would be just as well-off, more so if they don’t have a family and we’d save all the admin expenses that come of taxing people and then giving it back to ‘em.

Given that in a progressive taxation/welfare system you are meant to be taxing people on their ability to pay, taking into account their need for expenditure, I think you can reasonably argue that even a high income couple with a child should pay less tax than a high income couple without a child. Whilst having children is optional, it isn’t comparable to a pet or an overseas holiday, its another human being that should be taken into consideration when it comes to calculating taxation levels. For example I understand that in France, a child is considered to have half the tax free threshold of an adult which the parents are able to use when calculating their own income tax liabilities.

And isn’t that the same argument (or one of them) used against targetting tax cuts at the top end anyway? In practice, they have enough and don’t need the extra “incentive� to “work harder�, as the biz lobby groups are fond of saying?

I think its pretty hard to ever argue for the tax cuts at the top end because they need the money, or need the extra incentive to work harder. At that level I think most are working increasingly hard for other reasons (at least for the PAYE people). But if you let the taxation levels float too high people do end up either going to great lengths to minimise their tax or simply move overseas.

I know quite a few people have moved overseas to lower tax countries to save up for a few years with the plan of moving back later. Professional jobs especially these days are very portable. During the dotcom period quite a few IT people moved overseas for a few of years purely to vest their shares because of the huge difference in taxation - especially since in Australia stock options are seen more of an executive bonus rather than something for the general workforce.

Overall I think these discussions about taxation would be a lot easier if the brackets were indexed to inflation. Then we could have real arguments about whether to decrease or increase real taxes at different incomes. At the moment, too much of it is mixed in with the government agreeing not to tax the population more through bracket creep, but disguising it as a tax cut.

Yeah but the money gets chucked into the economy regardless. Who knows if it doesn’t go on an extra glass of chardie once a night?

Those people are already in the position that if they wanted an extra glass of chardie a night, they’d already be drinking it.

The way they will fix the inflation problem is by cutting wasteful spending, of which there is heaps: the baby bonus, Family Tax Benefit B, much defence spending etc etc.

The baby bonus and the family tax benefit are just tax cuts delivered to people who produce sprogs, it’s a have-a-kid bribe. Part of Johhnnie’s back to the 50s programme. If you cut it out and simply let people keep the cash in the first place it would obviously be better fiscally. People would be just as well-off, more so if they don’t have a family and we’d save all the admin expenses that come of taxing people and then giving it back to ‘em.
>
Politically it’d be harder. It’s ammunition for conservative banshees to screech about the anti-family socialists etc. I truly think that part of the proble with democracy isn’t so much finding quality leaders as a quality citizenship. We’re all such a bunch of lazy dumbarses it’s necessary for politicans to lie and cheat us to keep their jobs.
>
MAYOR QUIMBY: I’m sick of you people. You’re nothing but a pack of fical mushheads.
>
LEADER OF CROWD: He’s right. Give us hell Quimby!

The time to do it was just after the election. It’d still be possible to do some lesser fiddling at budget time, I suspect, without too much of a political cost.

I know its easy to say in after the fact, but in retrospect I don’t think there was any reason for them to follow the whole tax cut package in the first place. They still would have won the election.

So from my own experiences, I don’t beleive that it is the higher income earners who would be more inclined to save their tax cuts.

Is that change in your own behavior due to a change in income or due to increased maturity though? I’ve certainly seen the former behavior a lot in young people when they first start out and have few responsibilities beyond their own immediate welfare. As they get older and their incomes and responsibilities increase, they’re much more likely to save extra income rather than spend it.

And for those doing really well, though it might sound extraordinary to a low income earner, but an extra $50-$100 per week in the pocket simply isn’t going to affect a high income earner’s spending patterns. As much as newspapers like to print tables of the absolute increase in people’s income due to tax cuts, I think its the percentage increase in people’s income, especially at the higher end that changes behavior.

As to the political price, I’m sure it won’t be an issue as the horse has bolted. I’m just saying that it’s a pity, is all. The time to do it was just after the election. It’d still be possible to do some lesser fiddling at budget time, I suspect, without too much of a political cost.

On RobertBe’s point, the tax policy was announced just before the debate at the end of week 1. I believe there was a “vigorous” debate within the Labor hierarchy over what to do. The story about the policy launch was that the decision to call time on the spending auction was made just before it started - hence the delay to the start of the speech. The rumour is that what was cut out of it was systemic money for education (as opposed to bells and whistles like scholarships and computers).

I also note Jacques has weighed into the debate at Troppo:

http://clubtroppo.com.au/2008/01/11/riddle-me-this-economists/

I’ve seen some evidence that the theory that the better paid save tax cuts isn’t accurate, Chris (a different one). In any case, people have to live.

I’m not disputing that people have to live, just whether the amount of decreased inflationary impact of reducing the tax cuts in the manner you describe would be worth the political price the labor party would pay.

Wayne Swan and Lindsay Tanner are currently chasing around for hollow logs to cut and I’m sure Howard left many behind and nothing but good can come from cleaning the house of that sort of crap. Still, the objective truth, backed by the experts, is that shelving most of the tax cut would be the best economc policy right now.

“Those on higher incomes are likely to save their tax cuts as they have enough money already and those on lower incomes are under pressure already, so spend it.”

As a single parent having to cope on very little income, and where the biggest financial decision I make in a week usually involves an internal debate over whether to purchase the extra litre of milk or the extra loaf of bread, I was rather astounded at the concept that those on a higher income would be more inclined to save any extra money than those on a lower income. In my former life, pre-parenthood and pre-’the bread or the milk’ conundrum, my income was such that, according to this theory, I should have had savings coming from my ears. Well, actually, like a lot of people receiving a good income, I can only describe my former self as a wilful spender - and why not spend, because all that money was coming back into my hands again next week. Having now experienced less income, any non-essential purchasing decision is mulled over for days and weeks, and the final decision is usually a no. The fact is, if I have even $20 left over at the end of the week, that $20 stays where it is (ie as savings). The reality is that $20 represents far more to me now than it ever did when I had a higher income. So from my own experiences, I don’t beleive that it is the higher income earners who would be more inclined to save their tax cuts.

Won’t most of the inflationary pressure of the tax cuts come from those given to the low to lower middle brackets? Those on higher incomes are likely to save their tax cuts as they have enough money already and those on lower incomes are under pressure already, so spend it.

I’ve seen some evidence that the theory that the better paid save tax cuts isn’t accurate, Chris (a different one). In any case, people have to live.

If the Libs do it, Mark would be unquestionably be screaming blue murder. (And quite rightly too.) But it’s just hunky-dory for the other guys.

Double standards are found throughout politics, but it’s rare to see such an blatant expression of them.

Note also that I said that I agreed with Farmer that the cuts for low to lower middle brackets should be delivered.

Won’t most of the inflationary pressure of the tax cuts come from those given to the low to lower middle brackets? Those on higher incomes are likely to save their tax cuts as they have enough money already and those on lower incomes are under pressure already, so spend it.