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Monday Message Board

April 4th, 2005

It’s time for the regular Monday message board, where you are invited to post your thoughts on any topic. I don’t have anything noteworthy to say about the late Pope, but perhaps you do. Civilised discussion and no coarse language, please.

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  1. April 4th, 2005 at 12:28 | #1

    I am developing some new costed Green Policies. One of them is a Carbon Dioxide Tax on power generation. It would be set at $20.00 per ton of emitted CO2. This would favour Natural Gas and renewables over Black Coal and then Brown Coal.

    These are modifications of the German model and would ramp up from $5.00 per ton over 4 years. All revenues would be used to subsidise renewable power with first priority given to solar panels on houses and businesses and solar hot water systems.

    What do you think would be implications to the Australian economy of such a tax. Would you be in favour of it?

  2. Andrew Reynolds
    April 4th, 2005 at 13:47 | #2

    Ender:
    Problem in the Oz application is that the Feds cannot tax the States, so it would mean that privatised utilities would have to pay it, but state government ones would not, creating a strong incentive to re-nationalise the power industry to get around the tax.
    Why stop at power generation? If you want to reduce CO2 emissions all should be taxed at the same rate. If you tax only power generation then you create incentives for people to generate their own power.
    Also, you should consider the amount of power and other resources used to make the solar panels. They are generally made of pretty unfriendly stuff. I think the most efficient ones at the moment are gallium arsenide, so you will to work out how to dispose of them as well.

  3. Dave Ricardo
    April 4th, 2005 at 14:05 | #3

    I hope the next Pope introduces the Index of Banned Blogs.

    Any suggestions on which ones might on the list?

  4. Vee
    April 4th, 2005 at 14:56 | #4

    Will Jack Strocchi ever blog again?

    Will PM Lawrence do a few posts addressing 1. Regional Governments 2. Federalism?

    What is Federalism in the Australian context? How is it defined?

    At first I thought it was centralisation of everything but now I’m not so sure.

  5. Ian Gould
    April 4th, 2005 at 15:52 | #5

    Andrew,

    I believe you’ll find that state-owned corporatised businesses do pay taxes – or “tax-equivalent payments” in some cases.

    Ender: There would be significant short term costs but these would depend in large part on what was done with the taxes.

    I’d suggest you look at allowing the emitters to purchase sequestration credits or to undertake other reduction measures and offset the costs against the tax liability.

    Dr. Warwick McKibbin, as you probably know, has written extensively on a carbon tax.

  6. pwe
    April 4th, 2005 at 16:34 | #6

    I have a comment about the so-called “tax debate”, in particular the cause for reducing personal income tax rates (I’m not sure if I’m for or against, as you’ll see). It seems to me that personal income tax is really a cost for business, not a cost for the salaried employee in whose name the tax is paid, and this has major consequnces for what might happen in the long term if tax rates are changed. I’ve never heard anyone articulate what I think are rather obvious consequences, so that’s why I’m soliciting a response from the participants in this blog.

    Here’s an example, with nice round numbers that don’t quite reflect reality, but are close enough to make the point. Suppose I earn, in a salaried job, $80000 a year as gross income, and out of that, my employer pays to the government $20000, as prescribed by the relevant tax rates. So the money I have in my pocket, my effective salary, is $60k. Now, supposing tax rates were halved, so now only $10k was paid by my employer, and I have $70k in my pocket. Well, that’s great, and it’s what would happen in the short term. But, the real “market rate” of my job, the “compensation” deemed necessary in the job market, has gone from $60k to $70k, and lots of other peoples “effective” (ie, after tax) incomes have also gone up. Ignoring some commensurate inflationary blip, it seems logical to expect that effective salary to stay static for a long time to come, as after-tax salaries readjust to the new rates. That is, increases in employee “reward” would be turned off for much longer than usual, and, after say 5-10 years, I can expect my (actual, as a number) after tax salary to be the same as where it would have been if there has been no tax rate cuts at all. Moreover, relative to everyone else’s salary (and therefore, roughly, to its purchasing power) my salary has hardly changed, and therefore it’s argueable that I’m any better off.

    However, over the long term, the real agent that has to pay the tax, the employer, is substantially better off. In the above example, the proportion of salary that has to be put aside to pay tax has gone from a quarter to an eighth, and in the long run, as salaries increase, will never go back to being anything like it was before the tax rate cut. That is, employers can spend more of their income on higher after-tax salaries, or, as I think market forces will tend to push them, over the long term they’ll spend about the same on after-tax salaries (the “reward” for the employees) and spend savings they’ll incur in tax payments on other uses (hopefully productive), or profit share payments to shareholders, or whatever. The point it, a major cost to doing business will decrease, but I do not think that in the long run, employees will benefit from the reduced tax rates. Of course, there’s a strong argument that a more profitable business will employ more people, or do more whatever good things that it does, and that may well be the case. And that’s traded off against reduced government services resulting from reduced government income, although that analyis gets very complicated by the flow-on changes in how money will spent and how it can be taxed (eg, while the income tax take will reduce, maybe other direct taxes on sales etc will increase – it’s a tough question).

    So, not withstanding the complicated effects over the whole economy of income tax rate cuts, doesn’t the above simplistic analysis tend to suggest that the vast bulk of people, who are salaried employees, stand to see little long-term benefit? My apologies of anyone familiar with the “dismal science” is havng a big yawn. Anyway, as per usual, one needs to keep a close eye on who it is doing the most shouting in any public policy debate…

    Thanks for any comments.

    -pwe

  7. John
    April 4th, 2005 at 18:27 | #7

    All Australians should come together and promote George Pell for next Pope. Think of the economic advantage. The brain export factor.
    Tourism advantage and closer ties with Italy.

    Lets get together and support him in the Head Job!

  8. April 4th, 2005 at 19:14 | #8

    Pell isnt really elligeable. Well, technically he is, but he is too young to be thought of as a candidate – he has no chance. Besides, it scares me enough that he and his whacked ideas will be involved in choosing the next Pope.

    Whats everyone here think about centralising and standardising the the education system? I posted about it on Saturday.

  9. wpc
    April 4th, 2005 at 20:36 | #9

    Nic White, are you actually a Catholic? Why do you care otherwise about what Pell’s views are in regards to Catholic church policy?

    I’m suprised at various media and other reports that say how many followers disliked the late Pope’s stance on issues like abortion, etc.

    They’re full of shit of course. Practicing catholics are morally conservative(otherwise they wouldn’t be practicing catholics) who are overwhelmingly in favour of his stance on those issues.

    And because I beat cs here, I’ll say it was a dreadful week for AUS in the Super 12. However the good news is:

    The Waratahs were close enough that it might not mean the beginning of the downward slide.

    And now that it is nearly impossible for Qld to make the finals, they should start winning consistently.

  10. April 4th, 2005 at 21:31 | #10

    Dn’t believe it wpc, i went out to watch it, and the Tahs were wallopped, or at least completely outclassed. one (brilliant) intercept try and Lote’s last minute consolation just make it look a lot less worse than it really was. Woe.

    the only consolation is that ther banana-benders were even worse the night before.

  11. Jason Soon
    April 4th, 2005 at 21:49 | #11

    “Will Jack Strocchi ever blog again?”

    Well, Jack was at my place not too long ago, helping himself to my Johnnie Walker till 2 in the morning (on a weekday) in his army fatigues raving on about how he was going to launch a whole new series of sci-tech related posts on Catallaxy. Not a peep from him since, but he’s recently acquired a girlfriend so maybe he’s found a life (or lost one).

  12. April 4th, 2005 at 22:06 | #12

    wpc: No, Im Protesatant. I care because there are lots of people who are Catholics and because the effect the Pope has on the world in general. Pell’s ideas, which I disagree with, will have a vote in deciding who the new Pope is.

  13. April 5th, 2005 at 00:11 | #13

    wpc, why would a non-muslim care about Osama Bin Laden’s views?

    I suppose I might tell people how I would run a country. But I remember one undergraduate conversation I once had:

    Me (joking): “When I rule the world, things will be different.”

    Friend: “They’d have to be.”

    Not that that stopped anybody else before, and there’s always the old saw about good men (like me, of course) doing nothing.

  14. MB
    April 5th, 2005 at 08:54 | #14

    With regards to the electio of the next Pope, I don’t think the debates between “liberals” and “conservatives” within the church (and any likely doctrinal changes this debate entails) will be of critical importance. The majority of Cardinals agree with John Paul II (and the Popes before him) on issues like contraception, abortion, etc. I am inclined to think the major issues will be church management, and the question of nationality. John Paul II centralised power in his position, leading to some resentment within the church. The nationality question will probably be significant too, especially in regards to whether the church will (a) revert to an Italian Pope, and (b) elect a Cardinal from the Third World.

  15. Paul Norton
    April 5th, 2005 at 10:24 | #15

    “Practicing catholics are morally conservative(otherwise they wouldn’t be practicing catholics)”

    This seems logical enough, and as a Protestant-cum-agnostic it has always seemed to me self-evident that if (a) you think your own Church is in intellectual or moral error on a matter you feel strongly about and (b) there are other denominations which you judge to be right on this issue, the logical and principled thing to do is change churches.

    Nonetheless, there is such a volume of media reportage and anecdotal evidence of Catholics whose views on gender/family/sexuality, and/or their personal practices in these respects, are at odds with Church teachings, and who wish the Church would be more accommodating to their existential choices, that I have to conclude that they exist in significant numbers.

    What is at work here is the kind of psychology which can reconcile continued loyalty to an institution with a belief that its teachings and directives are intellectually wrong, morally inhumane, contrary to one’s own best interests and/or at odds with the original purposes it was set up to promote. It is something I’ve never quite been able to understand – but hey, how many members would the Labor Party have left if this psychology didn’t exist?

  16. April 5th, 2005 at 10:41 | #16

    Andrew and Ender: Competitive neutrality (under the National COmpetition Policy) has led to the tax equivalence schemes and requirements to pay dividends being imposed on government owned business enterprises. Carbon would be included in this, as the idea is to simulate competitive conditions for these utilities.

  17. Andrew Reynolds
    April 5th, 2005 at 13:16 | #17

    I stand corrected on “taxing” the States and humbly withdraw that part. The other two points are still valid, though.

  18. April 5th, 2005 at 16:44 | #18

    Paul – like the second para. To be serious for a moment about your ALP joke in the last para – this is surely core behaviour for humans in institutions. Group think, midwitching, doublethink, “keeping the peace”, “clan loyalty” – all the same process, a tendency in any institution, in any office corridor, resisted all the time by people with integrity.

    I am horrified by it, but then I am working for myself, commenting in the middle of the afternoon, and I don’t even support a footy team.

  19. Ros
    April 5th, 2005 at 16:59 | #19

    I came here looking for succour and am somewhat disappointed. This right wing woman is appalled at the eulogising about this authoritarian medieval power grabbing man and what may follow in his footsteps. And the anti-homosexual and dissipater of women’s rights mob are out in force made confident by the declarations that he was a Great and wonderful man. When they make him a saint there will be no possibility of a reversal of the birth control mania, or homosexuality or any of the other papal infallibility icons he has created..
    One quote to explain why I couldn’t stand him
    In 1993, the pope called on women who had been raped during the conflict in Bosnia to “accept the enemy” into them, and to make him the “flesh of their own flesh. As an alternative to abortion for the raped pregnant Muslim women. Yuk
    And why does it matter to a non-catholic. Because of the Catholic Churches role in organisations such as the UN. That those misogynist sit in Rome deciding what will be the necessary outcomes of such as the United Nations Fourth Conference on Women in Beijing, and scheming to achieve them. Beating those radical feminists from the USA and Australia and Europe, and supported by such as Sudan for their hormonal contraception causes cancer. How dare these old men even be at such a conference and what women would be their tools. And why has a religion got a place at the UN table.
    And there are many Catholics out there fighting the good fight even though he was also very good at silencing or expelling opposition within the Church. And it is those Catholics fighting him and his Opus Dei mates such as Catholics for Free Choice that tell of the Holy See’s non compliance with their obligations. Of course they would need to sign up for the treaties first. Not bad at threatening bodies such as UNICEF either. And they seem to have a penchant for withdrawing “symbolic� contributions to the UN whatever they are.

  20. wpc
    April 5th, 2005 at 17:14 | #20

    Yes, my slant on it was wrong. No institution is an island and affects others besides catholics.

    I suppose my feeling was : Complaining about the Pope being morally conservative would be like complaining that the leader of a communist party was a communist.

    Also, George Pell’s conservatism might not look as conservative compared to some of the other cardinals.

  21. April 5th, 2005 at 21:01 | #21

    By the way, on the recent debate between Sinclair Davidson and John Quiggin. Davidson’s claim that only the top 40% of the population pay tax net of government benefits was in fact backed up by NATSEM, as I suspected from his footnotes in Taxation with Misrepresentation.

    See here:

    http://www.theaustralian.news.com.au/common/story_page/0,5744,12757865%255E2702,00.html

    I believe this merits a follow up post from Prof Quiggin, who said he’d sit on the issue until further information was available.

  22. Steve Edwards
    April 5th, 2005 at 21:02 | #22

    By the way, on the recent debate between Sinclair Davidson and John Quiggin. Davidson’s claim that only the top 40% of the population pay tax net of government benefits was in fact backed up by NATSEM, as I suspected from his footnotes in Taxation with Misrepresentation.

    See here:

    http://www.theaustralian.news.com.au/common/story_page/0,5744,12757865%255E2702,00.html

    I believe this merits a follow up post from Prof Quiggin, who said he’d sit on the issue until further information was available.

  23. derrida derider
    April 6th, 2005 at 15:31 | #23

    Yes, Steve, but NATSEM only put personal income tax in this calculation. They haven’t accounted for half the revenue.

  24. Sinclair Davidson
    April 6th, 2005 at 16:33 | #24

    ‘but NATSEM only put personal income tax in this calculation’
    - not sure about this…
    http://www.natsem.canberra.edu.au/publications/papers/cps/cp05/cp2005_005/cp2005_005.pdf

  25. Steve Edwards
    April 6th, 2005 at 23:04 | #25

    I am definitely sure about this – Derrida’s claim is false. NATSEM is not about “revenue”, it’s about “tax revenue”. Specifically, it counts income tax, GST and excises – which make up over 3/4 of total (federal) taxation revenue.

    Assuming NATSEM does not include company tax (the RBA however does count company tax in “total income tax” on their website), individual income tax was $87.2 billion in 2001-2002.

    On top of that, GST came to $27.4 billion that year. All taxes on goods and services (including excises and levies) came to $53.6 billion. Assuming “taxes on trade” aren’t included in NATSEM, then we have $48.4 billion.

    NATSEM therefore covers at least $135.6 billion in taxation receipts. This makes up more than 3/4 of $177.2 billion, not “half” as you claim.

    See here for data:

    http://www.abs.gov.au/ausstats/abs@.nsf/0/93f90436fe4750feca256dea00053a16?OpenDocument

  26. Stephen Ziguras
    April 7th, 2005 at 16:23 | #26

    But as NATSEM acknowledges they’ve left out two important revenue items ( ‘Caveats: Not State taxes and not tax expenditures).

    And these are both regressive, State taxes generally falling harder on low income earners, and tax expenditure overwhelmingly benefitting the wealthy.

  27. April 8th, 2005 at 02:17 | #27

    How do you make out that tax expenditure overwhelmingly benefits the wealthy, upper public servants aside? I was under the impression that outgoings were heavily aimed at health, education and welfare, or else were for things that spread their benefits across the board.

    To clarify, I don’t consider that subsidies to private education generally benefit the wealthy but rather generate human capital for the next generation, and so on. I don’t see many cases of regressive outgoings, and certainly no material ones. Or are you counting the inefficiencies of service provision as revenue streams to private contractors, or what?

  28. Stephen Ziguras
    April 8th, 2005 at 11:04 | #28

    PM

    Following taken from paper by Julie Smith (http://www.aph.gov.au/library/pubs/rp/2002-03/03RP08.htm) in $m for 2004-05

    Superannuation and termination payment concessions 13 765
    Social security exemption Family Tax Benefit 3 380
    Senior Australians’ tax offset 1 600
    Capital gains tax discount for individuals 1 480
    Private health insurance 1 130

    Most of these benefit higher income earners much more than middle and low income earners (with the exception of FTB where the benefits are mainly to the middle class). In the case of the largest item, superannuation, this is due to taxing superannuation contributions at the concessional rate of 15 per cent instead of the taxpayers marginal tax rate.

    You could argue that this is good economics as these superannuants will not be claiming the age pension in future. However the subsidy amount is still much greater than the pension they forgo (my calculations are around half a million dollars for someone on $80k over the working life cf age pension of around $12k pa) and in any case, the Senior Australians’ tax offset effectively subsidises superannuants even further.

  29. Sinclair Davidson
    April 8th, 2005 at 12:16 | #29

    My understanding is that ‘tax expenditures’ is the difference between what could have been taxed and what was taxed. By this standard, any difference between 100% of wealth/income and what ‘the rich’ actually paid is a ‘tax loss’ to the state. It is somewhat trivial to argue that tax expenditure favours the ‘rich’.

  30. April 8th, 2005 at 12:41 | #30

    SZ, it appears that you are classifying cuts in taxes as spending. I don’t deny that what you deny makes the taxes less progressive, it’s just that I don’t see anything in the funds outflows that tends to make that side of things regressive.

  31. Stephen Ziguras
    April 8th, 2005 at 17:17 | #31

    Tax expenditure is usually targetted to specific purposes and groups in the same way that outflows are targetted. It represents a decision – a policy – about what activities should be supported or encouraged and should therefore be subject to the same analysis as spending. It is not the same as ‘tax cuts’ since it is restricted for a specific goal. And tax expenditure is subject to far less scrutiny. You cant really look at one side of the ledger and not the other, especially since tax subsidies or expenditure (call it what you will) amounts to at least $30b pa. And if you believe in transparency of government decision making, more attention should be paid to this.

    As an illustration, the Howard government abolished a program which spent about $100m on dental services for low income earners saying it wasnt needed. At the same time, tax subsidies worth $400m pa go towards dental care for those with private health insurance – overwhelmingly high and middle income earners. What sort of equity is that?

  32. Sinclair Davidson
    April 8th, 2005 at 17:41 | #32

    Stephen, we know the definition – but its weak. I’m with Peter on this one. The decision to not collect a tax (how or why is simply a variation on a theme) is not spending on the ‘rich’. In fact income tax cuts would be an even greater benefit to the rich than the poor on this basis simply due to construction. Mind you, I happy to believe that pollies and public servants think our money is their money, consequently they might think and behave in a mmaner consistent with tax expentiture being spending. After all spending your own money on yourself is inconsistent with the modern welfare state.

  33. April 9th, 2005 at 00:19 | #33

    SZ, my disagreement with the categorisation is that you also brought out taxes. It’s not that we shouldn’t consider both areas, it’s just that if we already handled it under “taxes” it’s double counting to put it in again under “tax expenditure”. You’d be safe if you only dealt with one area or the other, but that way inconsistency lies.

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