Home > Economic policy > Open letter to Doug McTaggart

Open letter to Doug McTaggart

November 12th, 2009

Update 12/12: This was initially posted here and emailed to QIC on the morning of 10 November. As yet, no response. And, apart from a snark by Andrew Fraser, no public response to my piece in last week’s Fin pointing out that the government’s case for privatisation was entirely spurious

Dear Doug,

As you may be aware, I have been very critical of the “Myths vs Facts” booklet which is, as far as I know, the only document released by the Queensland government to present its case for sales of public assets. In today’s ABC News, you are quoted as supporting the sales and saying

It can curtail its spending on its infrastructure program and let service quality deteriorate, it can raise taxes to pay for the interest bill that’s building up, or it can rearrange its balance sheet – sell those assets which don’t have a particular need to be in Government hands and own assets that should be,

This statement appears to endorse the government’s claims that investment in non-income generating assets can be financed by the sale of income-generating assets, with no need for additional revenue to service the associated debt. In my view, these claims are obviously fallacious, and I would appreciate clarification on a number of questions. I think these questions admit an unequivocal “Yes” or “No” answer, with supporting argument if desired.

1. Do you believe that the “Facts and Myths” booklet presents a fair statement of the arguments for and against privatisation, offering Queenslanders sufficient information on which to make an informed judgement?

2. Do you endorse the statement that ‘Keeping these businesses would cost the Government $12 billion over the next five years. That’s $12 billion spent on new coal trains and new wharves that can«t be spent on roads, schools or hospitals.?

3. Do you regard the statement that “The total return from all five businesses in 2008-09 was approximately $320 million … When the sale process is completed, it is anticipated the Government will save $1.8 billion every year in interest payments” as providing a fair basis for assessing the fiscal costs and benefits of privatisation?

With my regards,
John Quiggin

Note: A previous version was addressed to Bernie Fraser, but Doug McTaggart’s comments appear more directly relevant.

Categories: Economic policy Tags:
  1. Jill Rush
    November 9th, 2009 at 22:29 | #1

    I am unable to help with tracking Bernie Fraser down although I do see him on the TV occasionally spruiking financial products.

    I haven’t read the booklet on privatisation either but I doubt that it mentions the ever rising prices at far greater than inflation rates, the lack of investment in infrastructure and new technologies, the profits repatriated overseas, the illusory savings, the Australian workforce reduction, no investment in training future workers and the overall reduction of services which all seem to be part of the privatisation deal.

    Why is it that despite the GFC that the State governments are so wedded to the outdated financial products and devices that are encapsulated in privatisations and Private/Public Partnerships?The sleight of hand accountancy which became the norm in the noughties is alive and kicking boosted by the love of government for only telling the positives about any plan that they make. The spin makes people wild, but they expect no more from any opposition (with good reason) and meantime those friends who are making a bucket load of cash spread it around to help those who helped them.

  2. November 9th, 2009 at 23:47 | #2

    PrQ,
    Perhaps a counter question or two may be in order.
    1. Given your near-constant (and at many times justified) criticism of many governments’ inability to understand the basics of economics, accounting and at times the law, why do you persist in believing that governments are the appropriate group to be running businesses?
    2. Do you believe that there is a government out there that could, given the limitations and stresses inherent in any democratic system, manage businesses and the economy in such a way as to comply fully (or even fairly closely) with any economic theory?

  3. Alice
    November 10th, 2009 at 04:56 | #3

    @Andrew Reynolds
    Better the devil you know than the banks you dont Andy.

  4. jquiggin
    November 10th, 2009 at 05:32 | #4

    @Andrew Reynolds
    If inabiliity to understand the basics of economics were a disqualification for economic activity, we would all starve.

    o spell it out, we have a choice between having the investment and pricing policies of large enterprises determined by governments or by financial markets. Neither is likely to do an ideal job. Which will do better, or less badly, is a matter to be determined on a case-by-case basis.

    (actually, I see Alice has made the same point more succinctly).

  5. Ernestine Gross
    November 10th, 2009 at 08:36 | #5

    I surely look forward to the reply.

  6. November 10th, 2009 at 12:48 | #6

    PrQ,
    I would agree that if a failure to understand were a disqualification then we would all starve – but that is not the question here. In the case of a government they have the ability to mandate the economic activity to be followed. No one else has that ability – not even a bank, Alice. Governments can force us to pay for their mistakes. Again, given their (aparent) inability to understand the impacts of their decisions, why do you believe them the appropriate persons to run businesses?

  7. Alice
    November 10th, 2009 at 14:14 | #7

    @Ernestine Gross
    Me too… but my guess is ..the reply will go into the same black hole as the sale proceeds..never to be seen again.

    Andy. I already answered that one (succintly too!). You dont need to repeat the question.

  8. Alice
    November 10th, 2009 at 14:15 | #8

    one of my two fingers slipped up again! Thats ..succinctly.

  9. derrida derider
    November 10th, 2009 at 14:32 | #9

    This bulldust about “the only way we can get the future income we need is to sell our income-generating assets” really does get me. I wouldn’t get so annoyed if I thought it was pure cynicism on governments’ part (dressing up the books for an election by moving stuff off-budget basically). But the Blighs of this world really do seem to believe they are genuinely fixing a budget problem.

    There really are only two good reasons for privatisation:

    (1) you think its a task the private sector can do just as well using fewer real resources than government; that is, you’re creating competition or doing something else that makes a real efficiency (sorry Jill, but “enabling workforce reduction” for the same output is a Good Thing – it’s how living standards rise).

    (2) you reckon foreign investors are vastly overrating the income these assets can generate(ie there’s a bubble like the 1990s tech bubble) and you want to relieve the suckers of their money while you can (you can always buy it back cheaply later). So much for the Efficient Market Hypothesis.

    None of these proposed privatisations have either of these motives.

  10. Uncle Milton
    November 10th, 2009 at 15:14 | #10

    @derrida derider

    The sale by the Victorian Government of its electricity assets in the mid 1990s was an example of (2). It was highway robbery. I don’t think it’s a refutation of the EMH if buyers pay too much on a one-off sale.

  11. Alice
    November 10th, 2009 at 16:33 | #11

    @derrida derider
    There is a third reason – corruption and too close relationships between governments and bigwigs. Yet the privatisation rampage just runs merrily along. In the end they will have nothing to sell. No income generating assets. The infrastructure will be in shambles and the resulting deficits will expose all the incomptent governments past and present. Then we get what we have been voting for. The market rhetoric and the unholy mess than goes with it and some disgusting little corporate dictators.

  12. Ernestine Gross
    November 10th, 2009 at 17:16 | #12

    I am still very interested in a reply to the open letter.

  13. Hal9000
    November 10th, 2009 at 20:05 | #13

    @Alice
    But given that the time horizon of governments is the next election, the unholy mess is beyond imagining for the stunted intellects of both the politicians and the corporate dictators. The extraordinary conflict of interest exhibited by McTaggart is worthy of some note, however. He’s (I think) the highest paid public sector executive in Queensland, presiding over a vast pool of taxpayers’ and public sector employees’ savings, on a private sector remuneration package. No doubt he’ll end up making the investment decisions in these sales, and equally no doubt, his personal remuneration will reflect any additional profits he can squeeze out of them through slashing jobs, ahem, cost cutting. I doubt whether even Peter Costello would be so brazen in his new role with the Future Fund.

  14. SJ
    November 10th, 2009 at 20:10 | #14

    Alice, to be fair, DD said that there were two good reasons. There’s any number of bad reasons. :)

  15. Alice
    November 10th, 2009 at 20:17 | #15

    @SJ
    LOL SJ – I wasnt being rational (again!)

  16. Alice
    November 10th, 2009 at 20:20 | #16

    @Hal9000
    Yeah – well Im very disappointed in McTaggart. I used to think he had a half decent textbook (not outstanding mind you – but passable).

  17. Alice
    November 10th, 2009 at 20:23 | #17

    @Hal9000
    But then again McTaggart wasnt ever in the same league as Waud, Hocking, Maxwell, Bonichi or even in the same leaugue as Dornbusch and Fisher.

  18. Alice
    November 10th, 2009 at 20:27 | #18

    @Hal9000
    Or Jackson, O’Connell..Jackson, McIver and Bajada…

    Maybe McTaggart just wrote an ordinary textbook.

  19. SJ
    November 10th, 2009 at 20:32 | #19

    DD Says:

    sorry Jill, but “enabling workforce reduction” for the same output is a Good Thing – it’s how living standards rise

    Not necessarily. Because of measurement errors, it can look like output is the same, and that GDP is either unchanged or increased, and thus that TFP for the country has increased, and so average living standards have increased. But what’s really happened is that GDP decreased (more precisely, rate of GDP growth was reduced), and it doesn’t become apparent until years later.

  20. Alice
    November 10th, 2009 at 20:39 | #20

    @SJ
    Exactly SJ – all those workforce reductions add to unemployment / unemployment which is a lagging indicator, subject to a multiplier effect and GDP falls. (Duh!). Short term gain, long term pain…

  21. Jill Rush
    November 10th, 2009 at 23:29 | #21

    DD There is no doubt that workforce reductions in many cases of privatisation haven’t helped service levels, profits or the nation. One of the great services that government instrumentalities have is the ability to create a more skilled workforce. Private companies are not inclined to do this because it cuts into the bottom line. The privatised electricity market has reduced employment. However is has increased the number of hours without electricity especially at times of peak load such as when it is very hot. The price goes up whilst service goes down and skilled workers go on the scrap heap.

  22. TerjeP (say tay-a)
    November 11th, 2009 at 06:10 | #22

    I think the question I asked under “Fixing Queensland’s Budget” was worthy of an answer but perhaps it was missed. I’ll repeat the point here.

    I agree with John Quiggin that governments should not sell public assets for a price below what they are clearly worth. An examination of future cash flows coupled with reasonable conservative judgements is the correct way to determine these things or at least get within the ballpark of a correct decision.

    My question for John Quiggin and his many enthusiastic followers is quite simple. Why do you seem to apply a different logic when it comes to buying or building public assets? For instance if the future cash flows associated with the proposed National Broadband Network don’t justify the capital cost then why swap public money (cash asset) for a more poorly performing physical asset?

    I’m a free market advocate. I think cutting taxes and other trade barriers is vastly more important that getting the government out of running businesses. However I do support the latter. If the price that private interest in the market place are willing to pay for a government owned business is below the worth of the business then the correct political solution in my book is to either corporatise or mutualise the business and then transfer ownership as a gift to all citizens (resident citizens in the case of a state government) in equal portion. At the last election this was the position that the LDP took with regards to getting the ABC out of government hands. Selling the asset for less than it is worth is equivalent to making a gift to the top end of town. And the government already gives far too many gifts of that nature.

  23. November 11th, 2009 at 07:27 | #23

    @TerjeP (say tay-a)
    Two points:
    1) “social dividends” not captured in future cash flows.
    2) a judgment call that the beancounters’ analysis is wrong – something businesses do on a regular basis as well.

  24. TerjeP (say tay-a)
    November 11th, 2009 at 07:50 | #24

    Robert – us free market advocates can also pull out “social dividends” arguments in favour of getting businesses out of government hands. Shall we do “social dividends” arguments at ten paces? More to the point shouldn’t we expect some quantification of social dividends arguments. In the case of the National Broadband Network I’ve yet to see them add up to a good case for building an asset at a price above it’s worth.

  25. derrida derider
    November 11th, 2009 at 09:32 | #25

    I’m on Terje’s side in his particular issue – “social dividends” are speculative and unmeasurable and are as likely to run in the privatiser’s direction as not. Like “culture” they’re often the resort of people who are unconscious Burkean conservatives, fearing change.

    Alice @20 falls for the classic lump of labour fallacy (as well as misunderstanding what a Keynesian multiplier is). Alice, labour markets just don’t work like that. Overall Australia destroys about 2 million of its jobs a year, but unemployment is not continually rising by 2 million a year. Indeed it’s not continuously rising at all.

  26. Alice
    November 11th, 2009 at 09:44 | #26

    @derrida derider
    Ever heard of uneremployment DD? That has been and is rising. You can take the unemployment measure on face value if you like but I will not. Its a crock. They have recently changed it so the entire generation leaving high school this year cant get unemployment benefits unless they are “learning” but hey presto – once they are deemed to be “learning” (learning ??? If the kid wants to work “learning” usually means some two bit private sector employment agents hastily shot together two bit dodgier course —- oh and for the which the provider gets a nice little government subsidy and the poor unemployed kid still has to pay for the dodgy two bit course – and it wont be enough to get a job).

    But the icing on that little sham, as regards the unemployment figure is (drum roll….) if the kid is “learning” he isnt counted as unemployed.

    Hey presto !! – a generation of school leavers is “vanished” from the unemployment measure.

    There is a sucker born every minute DD but its not me.

  27. Alice
    November 11th, 2009 at 09:45 | #27

    I meant “ever heard of underemployment DD”???

  28. jquiggin
    November 11th, 2009 at 09:51 | #28

    TerjeP (say tay-a) :

    My question for John Quiggin and his many enthusiastic followers is quite simple. Why do you seem to apply a different logic when it comes to buying or building public assets? For instance if the future cash flows associated with the proposed National Broadband Network don’t justify the capital cost then why swap public money (cash asset) for a more poorly performing physical asset?

    I apply the same logic in all cases. Obviously, the NBN is a risky investment, but it is justified only if the expected future returns equal or exceed the capital costs.

    There is a particular problem with rural services – it has been accepted that we have to subsidise these . But whether or not you agree with this subsidy is a separate issue – the subsidy will be paid through a CSO either to private or public telecoms, and this CSO should be counted in the returns to the NBN.

  29. November 11th, 2009 at 10:03 | #29

    Terje: I actually happen to agree with you, to some extent, on the NBN.

    Much as the Telstra tax gives me the screaming willies, I think the benefits of the NBN have been oversold considerably.

  30. Fran Barlow
    November 11th, 2009 at 10:13 | #30

    @Robert Merkel

    So do I, but then, how do the benefits of the NBN compare with the benefits of 25-40 billion worth of submarines?

    If the government must spend/guarantee 43 billion on something, an NBN is not the silliest, especially if the roll out were coordinated with undergrounding power, regrading roads, fixing/upgrading water infrastructure, redoing street lighting, adding to/upgrading public housing stock etc

  31. jquiggin
    November 11th, 2009 at 10:23 | #31

    I understand the 40 billion is the figure for a network that would entirely duplicate Telstra’s. That’s needed as a threat, but the sensible outcome, which I expect to be realised is that Telstra and the government will come to a commercial agreement in which the existing network becomes the basis of the NBN.

  32. Donald Oats
    November 11th, 2009 at 10:45 | #32

    Let’s grab the Telstra (partial) privatisation. Upon privatisation to 49%, Telstra was the behemoth of Australian telecommunications. At this point, free market activity couldn’t easily dislodge the monster, or rise to compete with it – it is just too big and has the infrastructure to the home, for most Australians at least. The Telstra strategy has been to milk the teats off of the old infrastructure milch cow, and to keep very high prices on the digital/optical assets which kept broadband use and innovation to a very low growth curve. Meanwhile our overseas trading partners were moving ahead of us in rapid strides. Australia paid a hidden cost of loss of innovation opportunities for the simple reason that the broadband freeways had ridiculously high tolls along the way.

    For Telstra this strategy made sense, as it could squeeze every last dollar out of its copper network, while getting premium prices for lowband on a potentially fast broadband infrastructure. They played this strategy well, but at cost to the Australian public in both a direct dollars spent (on communications services) and hidden costs of discouragement of innovation and application development (such as TeleMedicine where realtime high resolution video is required, and fast transfer of a patient’s scans, eg MRI, with secure encryption services), but these hidden costs are probably as good as impossible to estimate with much accuracy.

    Perhaps the government privatisation process should have involved a split of Telstra into Retail services and into Network Infrastructure services, or something. Given that both governments have taken private sector advice on strategy regarding the whole privatisation, I think if any mistakes were made – which hindsight indicates may be so – the errors belong to not only government and some public servants, but also to various private enterprise consultants too.

    If there had been no privatisation of Telstra at all, what possible scenarios might have played out? Let’s ignore the “inefficient public service, bloated bureaucracy” scenario, since it is fairly clearly that Telstra was an aggressive adopter of ITC and of continuous cost-cutting of labour, well before any privatisation actually happened. A different scenario, one that is quite plausible, is that Telstra research staff not only continued on inventing new technological improvements or services, but that they made the case for management to adopt a high-speed optical mode of operation, with the aim of providing multi-megabit/sec uplink and downlink speeds. Telstra, at the board level, could have shared their long term vision for Australian high-speed data and communication services, and encouraged the government of the day to do the same. Ultimately Australia may have had true competitive infrastructure, but more importantly, have a flourishing and innovative ITC sector which is willing and able to market its products and services internationally.

    Then I woke up, complete with keyboard rash, and looked at the utopia that is the current free market.

  33. Tom N.
    November 11th, 2009 at 11:53 | #33

    Let’s ignore the “inefficient public service, bloated bureaucracy” scenario, since it is fairly clear that Telstra was an aggressive adopter of ITC and of continuous cost-cutting of labour, well before any privatisation actually happened.

    Actually, let’s not ignore it, since it was in fact very close to the mark. The fact that Telstra started cutting staff before privatisation does not change this – a obese person who gives up one ice-cream in ten a day is still obese.

  34. rog
    November 11th, 2009 at 12:58 | #34

    @Andrew Reynolds

    Probably the best argument against privatisation is that the inefficient and unbusiness like government gets all the money which they then spend on pet projects.

    Interesting talk on the ABC by american Jack Fletcher, he went to Canberra and was coolly met by Frank Crean who let it be known that the government was not interested in dealing with yanks.

  35. nanks
    November 11th, 2009 at 13:24 | #35

    rog :
    @Andrew Reynolds
    Probably the best argument against privatisation is that the inefficient and unbusiness like government .

    I still haven’t picked up why government should be like a business

  36. Alice
    November 11th, 2009 at 15:40 | #36

    Nor me Nanks – when governments starting adopting that idea (that governments should be like a business) is precisely when they started falling apart. Once we let the profit motive in to once public services and set the profit motive to the default objective, as we have done in Australia, all notions of serving the public interest started to erode.

    Not immediately of course, but the profit motive in the public services plays out in a dangerously insidious creeping escalation (and often corruptly in my opinion – you cannot permit the use of the profit motive and expect people not to try to reward themselves along the way).

    Hence we get privatisations for illogical reasons, semi privatisations, the masquerading of public service on the surface with a managerial zeal for the collection of endless fees and charges (on top of our taxes).

    This is only one tiny example (but they are everywhere now) – my partner had to get a certificate of registration for a W.A. car this week. They charged him $5. The WA authority posted the wrong information on the certificate saying that the vehicle was encumbered. It wasnt. He rang and asked for the correct information to be sent. “That will be another $5″ they said. He said “but it was your mistake. Do you mean I have to pay again for you to correct your mistake?” They said, in short…”yes you do – we are sorry, we have to charge every time we send the paperwork.”

  37. TerjeP (say tay-a)
    November 11th, 2009 at 15:51 | #37

    Thanks John. Obviously we are going to disagree on the detail but you have gone some way towards answering my question. You seem to be saying that the rhetoric of the Rudd government with regards to the NBN is tactical as they try and negotiate a deal with Telstra. I suspect the rhetoric of the Queensland government is also tactical except they are trying to negotiate the general public into a sympathetic pose. Both seem to me to represent considerable bad faith.

    For what it is worth I think a Telstra split between retail and wholesale is a quite destructive process that will lead to buck passing and even worse customer service. Structural separation should have happened before Telstra was sold and it should have been by splitting Telstra geographically into two or more operators (with incumbant exchange infrastructure intermixed between the two in much the same layout as the black and white squares on a chess board). These separate entities should have remained vertically integrated. Of course this structural reform did not happen because the Howard government was less intrested in the “social dividend” that privatisation might deliver and more interested in maximising the sale price. No doubt to satisfy critics who knock privatisations on the basis of price obtained (JQ comes to mind).

    What we need is more vertically integrated providers of telecommunications services not less. Unfortunately the regulators have created a set of incentives via various access regimes that encourage the opposite.

    Pure retailers can only innovate in terms of marketing, billing and soothing words when things go wrong. These are necessary activities but not the space where innovation and investment is really needed. If the government wants to have a government owned NBN then they would destroy less value if they just nationalise Telstra.

  38. Sea-bass
    November 11th, 2009 at 15:57 | #38

    @Alice
    Please Alice, don’t try and pass off the inefficiency of the local government shopfront off as some failing of the free market. It was like the time Gerard tried to lecture me about the failure of the free market in healthcare by holding up the example of China’s state-run, heavily-regulated, for-profit hospitals (that’s possibly the worst combination possible).

    You also seem to believe that all profit comes from exploitation of some description. The only thing that profit means is that the public has a high demand for something, and at present that same something is being undersupplied. In a free market, eventually new sellers will enter to increase supply and profits will disappear. Unless of course you’re the government, whereupon you can maintain your monopoly indefinitely. In this case, I would hardly call it the profit motive – in fact, I probably would agree, that it is exploitation, by our own government no less.

    The reason government should be run like a business is so that every dollar they spend goes through some rigourous cost benefit analysis, instead of being thrown into some black hole (such as Medicare, the arts, or the humanities department at the local university).

    Without this, I don’t know how government would determine which services were most demanded. Perhaps nobody told you, but this was one of the problems with the USSR, they operated without a profit motive and ended up producing a whole lot of junk that nobody wanted.

  39. Ernestine Gross
    November 11th, 2009 at 18:02 | #39

    Sea-bass @38,

    The story you are telling about profits is known as product cycle hypothesis. There is indeed some empirical evidence to support this hypothesis. However, the behaviour of profits on a product line is not the same thing as the behaviour of profits for corporations. Is your ivory tower or whatever blinker mechanism you seem to be constrained by so dense that you are not aware that corporations play merger and take-over games? The evidence on this behaviour is not at all consistent with your assertion that the decisions are the outcome of a “rigourous [sic] cost benefit analysis”, even in purely financial terms.

    But more to the point, the idea that governments should be run like a business is an entirely empty proposition at best and outright silly at worst. This is not to say that government actions are not to be scrutinised and criticised. On the contrary, the topic of this thread is concerned with exactly this point.

    If you have any influence among ‘mainstream economists’, would you like to encourage the addressee of the open letter, which is the subject of this thread, to respond? I am particularly interested in questions 2 and 3 because these are technical questions.

  40. Alice
    November 11th, 2009 at 18:39 | #40

    @Sea-bass
    You say to me “You also seem to believe that all profit comes from exploitation of some description. ”

    Where in anything I said did you possibly deduce this Sea Bass?? Please quote source. Monumental leap of your own imagination?

  41. Alice
    November 11th, 2009 at 18:50 | #41

    “The reason government should be run like a business is so that every dollar they spend goes through some rigourous cost benefit analysis”

    ahhh the profit motive of the private sector…..

    The reason government should be run as a public service is to save people money by providing a service which adjusts for, corrects and prevents market failure.

    It should not involve a profit. It should be run on cost benefit analysis to BREAKEVEN after our taxes are deployed to the provision of the service, if at all, and……. not in every case Sea Bass (pure public goods). If the public service provided departmental provision of services or policing of the legislative responsibilities of the private sector, this then mitigates against the negative externalities of the unfettered free market, and we will save money regardless of whether the individual public sector cost unit makes an accounting loss.

    You ascribe ideals of private sector profit maximisation to the public sector which do not, and should not, be thus ascribed. In fact you inflict double taxation on us all to pay for the service with our taxes and again with government profit oriented fees and charges.

    In some ways Sea Bass, with such views, you are directly responsible for the expansion of government which you pitifully continue to wail against.

  42. TerjeP (say tay-a)
    November 11th, 2009 at 19:09 | #42

    But more to the point, the idea that governments should be run like a business is an entirely empty proposition at best and outright silly at worst. This is not to say that government actions are not to be scrutinised and criticised. On the contrary, the topic of this thread is concerned with exactly this point.

    Amen to that.

  43. TerjeP (say tay-a)
    November 11th, 2009 at 19:14 | #43

    Governments typically don’t profit from really low taxes. However higher taxes reduce private sector welfare (the welfare produced by the private sector). Governments most certainly should not be profit maximising. In laffer curve terms they should not operate at the peak of the curve (the revenue maximising point) but should operate at the point where total welfare (private sector welfare plus public sector welfare) is maximised. This will be well below the peak of the laffer curve.

  44. Alice
    November 11th, 2009 at 19:20 | #44

    Terje – dont you mean “laughter curves” as they have been laughed out of then profession?. Last time I heard Julie Bishop was virtually pronounced a badly “behind the times” airhead for bringing up the laffer curve.

  45. Alice
    November 11th, 2009 at 19:21 | #45

    By the media, Terje

  46. TerjeP (say tay-a)
    November 11th, 2009 at 19:58 | #46

    Yes members of the media are renowned for their intellect. That’s why they get quoted in the media so often.

    What exactly are you refuting anyway? Even JQ agrees that taxes are subject to diminishing returns at some point. Do you have a meaningful objection to what I said at #43?

  47. Alice
    November 11th, 2009 at 20:24 | #47

    Yes Terje – studies show the diminshing returns to higher taxation do not kick in until about 80% tax rate, which is considerably above what you are paying now…

    So I would suggest to stop using the Laffer curve as a crow bar for more tax cuts. Reagan looked at this theory favourably coming out of a period in WW2 where he was paying 90% income tax – of course he would. But thats not what you pay.

    People have had their “Laffer view” tax cuts Terje, since 1974, and all we got from it was rising inequality and underemployment, unemployment and not the promised growth. Its a case of not being too greedy and wanting yet more and more tax cuts. If I was you, Id know when to stop Terje and drop reliance on the Laffer curve (before income taxes get raised on you because the government budgets are out of control and in deficit – which will likely come anyway – its called the “weeper curve”).

    Any benefits the Laffer curve argument ever had have been delivered in the form of tax cuts – in fact, over delivered – but what would you expect of governments Terje? They always go too far.

  48. Alice
    November 11th, 2009 at 20:41 | #48

    @TerjeP (say tay-a)
    And at a certain point Terje, if you really believe in the benefits explained by the Laffer curve, you must also acknowledge that there could exist the inverse or negative version of a laffer curve, whereby diminishing returns to the budget will also occur through the lowering of income taxes beyond that optimal point.

    Or does your Laffer curve only work in one direction Terje – ever downward with income taxes?

    It is this assumption that is laughable.

  49. TerjeP (say tay-a)
    November 11th, 2009 at 21:27 | #49

    Alice – my comment at #43 did not entail a call for tax cuts. It simply explained why I didn’t think governments should be run like a profit maximising business.

    , if you really believe in the benefits explained by the Laffer curve, you must also acknowledge that there could exist the inverse or negative version of a laffer curve, whereby diminishing returns to the budget will also occur through the lowering of income taxes beyond that optimal point.

    The peak of the Laffer curve indicates the point at which government can maximise public sector welfare (ie maximum government spending). However I care about total welfare (public sector and private sector). The Laffer curve does not indicated where total welfare is maximised. By it’s very nature the peak of the Laffer curve is at a tax rate above that tax rate where total welfare is maximised. This should be quite self evident if you contemplate the reason why the laffer curve reaches a platue (what every point this might be at).

    Whilst all of this should be uncontroversial there is obviously a valid debate about the shape of the Laffer curve that corresponds with the real world. That’s where John Quiggin and I tend to part company. Personally I envisage the Laffer curve for the real world to look something like the postcard version of Uluru. It has steep edges and a long flat middle. The implication is that we should keep taxes rates quite low (to maximise total welfare rather than just public sector welfare which occurs at the peak of the curve) but an increase in tax rates above this point will indeed produce more revenue.

    http://www.crystalinks.com/uluru.jpg

  50. SJ
    November 11th, 2009 at 21:57 | #50

    Personally I envisage the Laffer curve for the real world to look something like the postcard version of Uluru. It has steep edges and a long flat middle. The implication is that we should keep taxes rates quite low (to maximise total welfare rather than just public sector welfare which occurs at the peak of the curve) but an increase in tax rates above this point will indeed produce more revenue.

    This is a prime example of why libertarians should be shunned. They reject the idea of an objective, empirically determinable reality.

    Hey, let’s hold a competition. Whose imaginary Laffer curve looks the best? Mine looks like Mont Blanc viewed from La Visaille between noon and 3 pm on the vernal equinox.

  51. November 11th, 2009 at 22:30 | #51

    SJ,
    Perhaps your argument is why socialists should be shunned – you clearly are not willing to read or understand what Terje said.
    He clearly identified it as his opinion – not stating it as “an objective, empirically determinable reality”.

  52. TerjeP (say tay-a)
    November 11th, 2009 at 22:31 | #52

    Like I said on “Monday Message Board” it is the lefties that seem to be obsessed with competition.

  53. SJ
    November 11th, 2009 at 22:37 | #53

    No, Andrew, I read it and understood it. It’s his opinion, clearly stated, of what he thinks reality either does or should look like, having no regard to what it actually looks like.

    So what’s your own personal Laffer curve? Kalamanjaro? K2 perhaps?

  54. Sea-bass
    November 11th, 2009 at 22:43 | #54

    @Alice
    Effective tax rates are about 80% (if not higher) for the upper income brackets i.e. those people that do the heavy lifting in terms of paying for the extravagant welfare state with which this country is afflicted. And the implications this holds for the deadweight loss are truly phenomenal.

    Finding the “peak” of the Laffer curve is besides the point anyway, since Terje is correct in stating that this is not the point where welfare is maximised. SJ, that Terje envisages the laffer curve as being shaped like some trapezoidal-parabola is no cause for shunning. Much as I wouldn’t care if you described the shape of it as resembling Mont Blanc, although with the French there’s no point talking about the Laffer curve since they don’t supply any labour, they just sit around eating crepes and smoking all day.

  55. TerjeP (say tay-a)
    November 11th, 2009 at 23:09 | #55

    SJ – do you lack opinions about reality?

  56. rog
    November 12th, 2009 at 05:07 | #56

    @Alice

    Alice bemoans the day that the public service was made to be profitable; I would have thought that being profitable was of public benefit and therefore a priority.

  57. Alice
    November 12th, 2009 at 07:15 | #57

    @Sea-bass
    Sea Bass – what do I care about effective tax rates for upper income brackets when they have used every accounting loophole, many neither legal or ethical, to reduce the amount on which they pay tax. Who is that clever accountant being extradited from a tax haven as we discuss this matter Sea Bass – and lets look at the long list of those who do such heavy lifting for the country – theres Steve Vizard, Paul Hogan, Rene Rivkin, Rodney Adler, Jodee Rich, the hih fellow, Sol Trujillo (he exited stage left with his loot), then there was old Packer whos real rate was around 3% oh and Eddy Groves.
    It seems the wealthy are peppered with people who know well how to avoid tax on a lot of their income before they get anywhere near the rate you mention Sea Bass. It also seems some of them need to do more heavy lifting (breaking rocks).

    Are you naive?

  58. Alice
    November 12th, 2009 at 07:22 | #58

    @TerjeP (say tay-a)
    SJ LOL – shape of the Laffer Curve – Mont Blancmange.

  59. Alice
    November 12th, 2009 at 07:24 | #59

    oops… that post above was meant for SJ Terje!

  60. Ernestine Gross
    November 12th, 2009 at 09:40 | #60

    Alice, IMHO Sea-bass provides entertaining digressions. We all know by now that Terje has this thing about the Laffer curve and takes a particular ‘view’. The ‘view methodology’ has been appropriately treated by SJ.

    The point is that so far not one ‘mainstream economist’ has volunteered to answer yes to JQ’s questons and we are still waiting for a reply from Doug McTaggart.

  61. Alice
    November 12th, 2009 at 10:38 | #61

    @Ernestine Gross
    Im with you Ernestine.

    (as a distraction…agree on Sea Bass’s digressions – he has moderated slightly and become a little urbane even!)

  62. Sea-bass
    November 12th, 2009 at 12:36 | #62

    @Alice
    “Are you naive?”

    Perhaps I was, arguing for greater freedom, less regulation and a better overall outcome. But it seems that freedom is a surprisingly hard sell. So now I think I’m about to give up. I’m thinking of doing my postgrad in law (I think they call it a Juris Doctor these days), and learning all the ins and outs of every regulation, and then lobby for more and more regulation and make a fortune small businesses out of their incomes.

    Regarding Paul Hogan, he’s already done more than enough for this country. Just think of all the business the Crocodile Dundee franchise created. Just because you didn’t like the film is no excuse for you to take it out on his finances. Hoges, I salute you. We need to petition to get the parasites at the ATO of his back, they’re just trying to squeeze that extra bit of mileage out of the poor guy.

  63. Sea-bass
    November 12th, 2009 at 12:38 | #63

    @Alice
    “Are you naive?”

    Perhaps I was, arguing for greater freedom, less regulation and a better overall outcome. But it seems that freedom is a surprisingly hard sell. So now I think I’m about to give up. I’m thinking of doing my postgrad in law (I think they call it a Juris Doctor these days), and learning all the ins and outs of every regulation, and then lobby for more and more regulation and make a fortune swindling small businesses out of their incomes.

    Regarding Paul Hogan, he’s already done more than enough for this country. Just think of all the business the Crocodile Dundee franchise created. Just because you didn’t like the film is no excuse for you to take it out on his finances. Hoges, I salute you. We need to petition to get the parasites at the ATO of his back, they’re just trying to squeeze that extra bit of mileage out of the poor guy.

  64. Sea-bass
    November 12th, 2009 at 12:50 | #64

    Hmmm… Unnecessary double posting – just read the second one, where I inserted the word “swindling” between “fortune” and “small businesses”

    @Ernestine Gross

    I don’t think the economic mainstream would want to have much to do with me. Nonetheless, I agree that there does seem to be something problematic with the idea of selling an asset that generates a constant stream of income and then throwing the money gained into some other public-spending black-hole that doesn’t generate any further revenue – in fact I find myself in general agreement with JQ on an issue, which comes as something of a shock.

    However, this only seems to be a problem if they’re promising greater government expenditure. If there were a general cut in spending on various government black holes this wouldn’t be a problem. By black holes, I mean things such as health, welfare or museums (honestly, as if Queenslanders ever go to museums anyway – a sculpture made of empty 4x cans would be more than ample).

  65. Donald Oats
    November 12th, 2009 at 17:45 | #65

    @Tom N.
    To Quote Tom. NOTE: The first paragraph is Tom N. quoting me from @Donald Oats, comment 32, Open letter to Doug McTaggart:

    Let’s ignore the “inefficient public service, bloated bureaucracy” scenario, since it is fairly clear that Telstra was an aggressive adopter of ITC and of continuous cost-cutting of labour, well before any privatisation actually happened.

    Actually, let’s not ignore it, since it was in fact very close to the mark. The fact that Telstra started cutting staff before privatisation does not change this – a obese person who gives up one ice-cream in ten a day is still obese.

    The scale of the reduction and the pace for Telstra’s transformation (back when it was called Telecom Australia) was in line with what was happening around it. Telecom first introduced the desktop computers on mass, and presumably moved a lot of paperwork onto the IT systems. Also around that time Telecom was taking advantage of increasingly rapid improvements in network infrastructure hardware. Telecom invested heavily in laying down of co-axial cable, and later, fibre-optic cable, overcapacitating in the process, with the express intention of creating a new broadband for Australia.”)

    Meanwhile, Telecom instituted a corporate-wide change program, in which they examined each function as it was carried out by staff, and new processes were designed to take some advantage of the corporate IT systems, and to trim down any “overgrowth” along the way. For example, maps, cable plans, and the like were moved from paper to computer, to the benefit of everyone. The flip-side is that as jobs were redesigned or streamlined to take advantage of the IT systems, it also implied that a significant fraction of people would end up redundant – and they were.

    For the rollout of new physical infrastructure, and for maintenance of the networks in the field, Telecom severely cut down on the number of line depots, having them only in the larger townships. They also ran down inventory at the depots due for closure or reduced duties. The end result of this was a reduction in QoS (Quality of Service, a measure of how reliable the network is) as the once staffed line depots lost their staff. The removal of inventory from the smaller townships meant that they now had to rely upon a “roving” maintenance crew. The poor maintence staffer lived under constant stress of making it to the next job in time, even if that meant long hours of driving from one town to another. In SA that means covering a lot of ground from job to job, and some late nights.

    Management ranks got thinned – and then thinned again during the 90s.

    The upshot is that while there was quite likely some labor bloat, and examples of time-sucking paper processes, Telecom Australia went through a weight loss program with a fair amount of discipline and pain. Telecom Australia was doing pretty much what other companies were doing at the time.

    I don’t accept the argument about Telecom being inefficient. While near the end of the change process Telecom had cut many thousands of jobs, and reduced inventory lying around, it needs to be remembered that Telecom and other big Australian companies were going through the change from pen-based white-collar work to fully computer based. Therefore, it is a fallacy to take the fact that they could cut jobs as a tacit admission of previous bloat. Job cuts due to automation and the like are an expected outcome (and presumably desirable outcome for the free market true believers).

    With regards to the original line depots, the were typically set up so that a rapid respond and repair could – in theory – fix or replace any equipment breakdowns (including the classic farmer or plumber etc putting a backhoe through some SDH cable.)

    It is a mistake to look at today’ staffing ratios and to use that to imply that the old, pre-privatised Telecom Australia was bloated. Oh, and did I mention the sacking of much of the scientific research group at TRL in Glenn Waverley, in the late 90s? The research used to be for the “public good”.

    Another, perhaps off-the-record, activity that Telecom field staff (mech-aid operators) engaged in, when undertaking phased cable rollout through rural properties, was to placate certain farmers by using the Telecom heavy machinery (D7s and D9s) to “assist” farmers in the maintenance of dams, brush clearance, etc. Note that in spite of legislation giving PMG/Telecom right of way through rural landholdings, farmers would often make it difficult for Telecom employees in the field. Many farmers were strident critics of Telecom workers use of the way-leave system (ie the right-of-way) to construct the next generation of communications infrastructure, ie cable networks.

    The semi-privatised Telstra of today is a far more pertinent example of excesses and waste. Remember the Three Amigos? And the widespread use of exit agreements (worth literally millions of dollars to the recipients, eg Amigo numero uno)? Rights and options as incentive rewards? And how about the biggest farmer of them all, Donald McGauchie, who after being the head of NFF – the National Farmers Federation, became chairman of Telstra? Ironic, given the farmers’ negativity towards Telecom/Telstra at the time. Who spent time arguing with the Liberal government and endlessly demanding for it to get (said in hushed tones) a controlling position on any national broadband network. Meanwhile those lucky few with broadband access were being gouged for exceeding a laughable 200MB limit on download – o/s a 10Mb/s download speed with 10GB of download data per month were common. A fair few shareholders don’t have a lot to be happy about, since Telstra became half pregnant.

    So, Tom N., I have done as you asked. I’ve looked at the argument of old Telecom being bloated, and I’ve defended my claim that is wasn’t, and furthermore, actually became wasteful once the second round of semi-privatisation was undertaken. I hope you weren’t an investor who subscribed to tranche 2: Telstra heavyweights dialled the clocks of Mum and Dad investors on that equity raising. Ow, it burns, it burns!

  66. paul walter
    November 12th, 2009 at 18:16 | #66

    Poor old Kenneth Davidson at the “Age”has spent decades proffering the same arguments as Quiggin re Victoria and with the same success.
    Its not about infrastructure. Its about consultancies, brown paper bags and sidestepping social and ecological protocols in the interest of whatever small clique or formation that is cougaring a given community resource.
    Interesting decisions Garrett’s re Traveston, in the wake of rudd and Henry’s “35 million pop growth at any cost” propositions of last week, tho.
    Will the right inside Labor try to overturn Garretts decison?
    Is there a section within Labor that wants rational planning back on the books?

  67. paul walter
    November 12th, 2009 at 18:20 | #67

    Sea Bass, re your response to Alice.
    Why is developers freedom so much more important than the freedom of the rest of us, and how can a person be”free”, when a slave to greed and arrogance.
    Can a person be “free”, if this comes from the malicious expropriation of others?

  68. Alice
    November 12th, 2009 at 18:27 | #68

    @Sea-bass
    You were and are still naive Sea Bass ( but I note not crossing the great divide to vitriol). Hoges, bless his soul, through his advisers, descended from the throne of the harbour bridge to be a mere tax cheat. Otherwise he might still be popular…then there was the small matter of absconding with Linda and getting his face rearranged – but lets not dwell on mere trivia shall we?

  69. Donald Oats
    November 13th, 2009 at 08:43 | #69

    I think that the tax-reductionists at the top end of the market might occur with a slightly greater frequency than at the mid to low end of the taxable income distribution. However, it is worth remembering that because of the fame that goes with being phenomenally rich, the tax-reductionists (or are they tax-libertarians? Let’s be tax-free!) tend to stand out like the dog’s proverbials. How many of the exceptionally rich class who pay tax in the spirit of the tax law – rather than in the serpentine, twisted, pro-tax-reductionist-only legal interpretation of tax law – also do nice things like big apolitical charitable works and the like, for society’s betterment? Certainly such people aren’t likely to make it onto the public radar, unless they have a PR dept that gives media releases about the good works. Even then, the media is more likely to focus on the seedy-side and to make up a seedy-side to fill a void, if there is one.

    Of course, I’m making a generous assumption here: perhaps there are so few such noble characters that you could count them on the fingers of a snake’s hand; however, I’m willing to chance it that there are a few such individuals at least – afterall, in the USA Bill Gates has demonstrated significant charity, however, I’m not privy to his tax audits, so cannot confirm that he meets the criteria in full.

    It seems likely that the MSM highlight the few egregious tax cases among famous rich people that are part of the public record. Therefore they don’t necessarily form a representative sample of the rich tax payers.

    If the Tax office is able to successfully prosecute the richest of the tax-reductionists, then the amount of missing tax is so large that it could support a reduction of the required income taxes from low to middle income people.

    If the big guys pay the tax that they should – both in the spirit of the tax law and in its application – then the littler guys wouldn’t need to pay as much tax to the government.

  70. Alice
    November 13th, 2009 at 18:06 | #70

    @Donald Oats
    Says “If the big guys pay the tax that they should – both in the spirit of the tax law and in its application – then the littler guys wouldn’t need to pay as much tax to the government.”

    Thats why I wonder why some of them keep calling for tax cuts Don. After the big guys first minimise or evade tax, then then get a very good income tax rate by historical standards. Its easy lifting they do, not heavy lifting…and the same goes for a lot of companies that manage to avoid tax in most jurisdictions.

  71. Alice
    November 13th, 2009 at 18:10 | #71

    @Ernestine Gross
    Ernestine…we are still waiting.

  72. Alice
    November 13th, 2009 at 18:12 | #72

    @Sea-bass
    Sea Bass – Hoges could hardly be described as “that poor guy.”

  73. November 13th, 2009 at 18:20 | #73

    paul,
    I would agree that a person cannot be free if this comes from the malicious expropriation of others. In this case the malicious expropriation is conducted by the government and we are not free as a result.

  74. nanks
    November 13th, 2009 at 18:22 | #74

    Alice :
    @Donald Oats

    Thats why I wonder why some of them keep calling for tax cuts Don. After the big guys first minimise or evade tax, then then get a very good income tax rate by historical standards.s.

    It’s not for themselves Alice as they don’t pay much tax. It’s for the battlers and the middle classes that they make this call. The call is driven by their enormous sense of social obligation.

  75. Alice
    November 13th, 2009 at 18:25 | #75

    @nanks
    Nanks – is there an irony alert missing?

  76. nanks
    November 13th, 2009 at 18:28 | #76

    @Alice
    an irony emoticon would be handy most anytime

  77. Alice
    November 13th, 2009 at 18:36 | #77

    @Donald Oats
    Don – we constantly hear about the “bloated inefficient public sector” – but Telstra and the three amigos is a classic example of the bloated inefficient private sector. Now lets see. Who is really fatter than who here? Im so over the one sided arguments like “if its public sector it must be bloated and inefficient” and if its private sector “it must be lean and efficient.”

    The last time I noticed inefficient human beings actually work in both and the nature of the organisational structure ie public or private do not determine the degree of “bloated inefficiency”.
    There are some huge examples around of private sector inefficiency with managements ripping too much out of the business to pay themselves an indecent salary and bonus and the company having insufficient reserves to fall back on in hard times etc. (Short term fly by night execs! Usually yankee imports)

    We could almost call that particular type of private sector inefficiency a “leaky bloat” couldnt we?.

    A rising tide lifts all boats..isnt that what some economist said?

    Well, not if they are leaky bloats!!

  78. Donald Oats
    November 13th, 2009 at 19:09 | #78

    @Alice

    Actually I think it was something to do with having a leak – “the trickle down effect”, I seem to recall.

  79. Alice
    November 13th, 2009 at 19:50 | #79

    @Donald Oats
    I think it was an insider leak Don.

  80. Ernestine Gross
    November 13th, 2009 at 19:54 | #80

    Yes, Alice @21, p2, we are still waiting for a reply to the open letter to Doug McTaggart.

  81. paul walter
    November 13th, 2009 at 19:55 | #81

    Andrew Reynolds, JQ, an economist, suggested, “the government’s case for privatisation is spurious” .
    If state governments are trying to hawk off the public’s silver to insider “developers” and the like, incidentally implementing neolib ideology of small (innefectual) government, you’d have a point, except, as I’ve said before, when governments are in effect”captured” by big business, as the neolib model proposes.
    Then these cease to be a government in the meaningful democratic sense, merely a tool for the real “government”; that motley collusion of politicians, capitalists, lobbyists,consultants, media spinners, public servants and brown shirts passing themselves off as”union”, as happened in Tasmania involving Gunns.
    If you are repeating the silly American right-libertarian shibboleth about government being the thief because it taxes rednecks and corporate cowboys as well as everyone else, to provide the services a civisation requires to function efficently, nahh!

  82. Freelander
    November 13th, 2009 at 20:29 | #82

    @paul walter

    But long ago neoliberals were “captured” by big business. If neoliberals refused donations from corporations or wealthy “big bussiness” people and provided some critique of big business (for example, spoke out against proposals to give free emission trading permits to big business) then they might be taken more seriously. But probably not. Problem is that they are very selective in the ways they apply their ideology. Their ideology is more typically used to crush workers and benefit the wealthy, when their are plenty of opportunities to apply the arguments the other way around. Why, for example, are they typically in favour of deregulation of labour markets (for ordinary workers) but are relatively silent on the various guild workers – doctors, lawyers, pharmacists and so on (who are more capable of lining their pockets).

  83. paul walter
    November 14th, 2009 at 01:54 | #83

    Ahhhh…knew I’d forgotten some one.
    Lawyers ( like bean counters, but turbulent passions of latter ).
    Of course.

  84. paul walter
    November 14th, 2009 at 01:56 | #84

    …should read “lack of turbulent, etc”!

  85. TerjeP (say tay-a)
    November 14th, 2009 at 05:20 | #85

    “If the big guys pay the tax that they should – both in the spirit of the tax law and in its application – then the littler guys wouldn’t need to pay as much tax to the government.”

    If increases in revenue automatically led to tax cuts for low income people then the argument might stack up. However the government has had quite massive growth in revenue (the GFC was a mere hickup in terms of revenue growth) and those on low incomes are still paying more taxes than they used to.

    If you favour tax cuts for people on low income (which I do) then argue for tax cuts for people on low income. I also happen to think people on high income should get a tax cut so I tend to cast a wider net but that needn’t disrupt unity on the first type of tax cut.

    I previously outlined how we could halve income taxes for everybody by 2020 without and decline in real populartion adjusted government revenue.

    http://blog.libertarian.org.au/2009/08/18/halve-income-tax-rates-by-2020/

  86. Alice
    November 14th, 2009 at 06:16 | #86

    @TerjeP (say tay-a)
    As you call for more tax cuts for all Terje – if you read today’s SMH you will note that the private equity firm in receipt of the funds from the Myer Float just moved all the money offshore despite the ATO attempting to freeze one of its bank accounts for a tax debt owed of $678 million dollars. The ATO lost its court case to freeze the account and despite that it was too late. There was only $45 left in the account in question – its already gone. That tax obligation has just been successfully avoided by TPG private equity and the ATO now has no way of getting it, with the private equity firm claiming “it had satisfied all its tax obligations”.

    Sure Terje… and you want to give these sort of people an even bigger tax cut?

    If we effectively taxed the big guys more, and were able to stop this blatant avoidance through dodgy transfers off shore, the people who really deserved the tax cuts could get one. Shame on the court.

    You have only one real objective here Terje and we both know what that is…to ensure the government does not have sufficient income to exist.

  87. SeanG
    November 14th, 2009 at 09:02 | #87

    Transfer pricing always happens when one country has comparatively higher tax rates. That has always been a problem and the issue about just cracking down on tax rates is that the root cause, the primary driver, for avoiding tax is that the country of origin of the transaction had such a high tax rate at the start.

  88. Donald Oats
    November 14th, 2009 at 09:09 | #88

    @TerjeP (say tay-a)

    To quote you Terje: “If increases in revenue automatically led to tax cuts for low income people then the argument might stack up. However the government has had quite massive growth in revenue (the GFC was a mere hickup in terms of revenue growth) and those on low incomes are still paying more taxes than they used to.”

    The key flaw in your argument is that I am not assuming that increases in revenue automatically leads to tax cuts for low income people. The government must decide that that is how it will use the extra revenue – there is no magic here. Remember, I was merely discussing a possibility that would arise if the tax-reductionists stopped and did what most of the taxable population do, which is pay tax in accordance with the law.
    Perhaps I could have been clearer in my last sentence (#19) – I’ll concede that it is possibly ambiguous, although it was clear enough to me :-)

  89. TerjeP (say tay-a)
    November 14th, 2009 at 10:04 | #89

    I was merely discussing a possibility that would arise if the tax-reductionists stopped and did what most of the taxable population do, which is pay tax in accordance with the law.

    I pay my taxes in full. The insinuation that I don’t is wrong.

    Sure Terje… and you want to give these sort of people an even bigger tax cut?

    Your example of tax avoidance (assuming it is avoidance) isn’t particularily relevant to a discussion about what the tax rate ought to be.

    You have only one real objective here Terje and we both know what that is…to ensure the government does not have sufficient income to exist.

    It is a big leap of logic to assume that because I want lower tax rates I don’t want the government to exist. It is also incorrect. And it should be obvious that it is incorrect because I make a point of showing how revenue growth can pay for tax cuts without any decline in government spending.

  90. Alice
    November 14th, 2009 at 10:53 | #90

    @TerjeP (say tay-a)
    Says

    “Your example of tax avoidance (assuming it is avoidance) isn’t particularily relevant to a discussion about what the tax rate ought to be.”

    After I gave the example of how a private equity firm involved in the float of Myer (a long standing Australian dept store – before the private equity firms were let in to run amok – profits from offloading the company by way of a public float – and then transfers the money oseas without paying their tax on that profit???

    This is not an isolated case Terje and you say it has no relevance to what the top marginal tax rates should be?? Of course it does. If these high fliers consider wanting to live here (itsaniceplace….) and they insist on dodging corporate tax, then I am damn sure they would be rewarding themselves personally as well from their immoral corporate tax avoidance.

    Simple Terje – its relevant because if the ATO cant get the rightful tax before they fly off into the nightsky with it, then ensure that high fliers are taxed higher rates on their income tax.

    Do you honestly suppose the executives would not reward themselves handsomely from this theft while they are whinging for lower income tax rates.

    If the ATO cant get it on the wing it needs to get it on the round about Terje because thats all this is and this is only one example.

    I would suggest to you that corporate tax evasion is a normal everyday occurrence, and tax saved enables higher bonuses and executive rewards bringing it back into the scope of personal tax.

    Not irrelevant at all Terje. You might pay your tax, but if you are arguing for a tax cut for yourself and other deciles more deserving – I have no problem with that at all. I have a problem with the antics of the corporates and the rich and their blatant in your face tax evasion.

    I have a huge problem with the income tax rates they now pay, seeing as they have been granted large decreases over the past thirty years. Too large and they very much need to rise so that others like yourself who pay their taxes, and who need it much more, actually get some relief.

    As I mentioned to you earlier Terje – your sole objective is to reduce tax so that the government does not have sufficient income to exist, because there are holes in your pro tax reduction arguments are across the board, do not recognise current evasion levels (and at which income level they originate from – ie the wealthy tax dodging entrepreneurs). You use the laffer curve but only in a “one way sense” ie large tax reductions have already been granted dince the laffer curve became popular in the 1970s but for you there is no optimal level of cuts, because you keep calling for more….(and more).

    Thats illogical.

  91. TerjeP (say tay-a)
    November 14th, 2009 at 11:15 | #91

    Alice – your argument is akin to saying that some people cheat on welfare therefore all welfare payments should be as low as possible.

  92. Alice
    November 14th, 2009 at 11:17 | #92

    @TerjeP (say tay-a)
    Terje – one other point on the matter of corporate tax evasion and income tax rates too low on the rish to deter avoidance initiatives results in exactly the subject of this thread ie you need to link the reasons for fire saling public assets “to balance budgets” and keep a phony AAA rating under a phony budget surplus at all times philosophy and nothing more (not to fix schools and roads and hospitals because you can bet that wont happen) – after these sales are finalised they will dig for more and announce more privatisations.

    The NSW Govt and the QLD Govt has already proved that they would privatise the premier if they had half a chance of a getting a decent price, which they dont.

    Public services like transport have already reached a point of disarray in our major cities, but particularly Sydney. Just think, 60 years ago we had half the population and public services were greater (public trains, buses, and trams, road building services, infrastructure – also providing employment).

    Now – every day across this city (Sydney) millions are sitting in gridlock traffic jams, one per car, spewing expensive petrol fumes into the air. Blind Freddy can see its an unholy mess but where are the funds to correct it?

    You libertarians will get us into a bigger, uglier mess (and its ugly enough now), continuing to call for tax cuts and privatisations. There are even Labor ministers now openly opposing the privatisation of Sydney Ferries. Roozendahl is just plain stubborn wrong headed and bloody minded and in the wrong party – like Costa. Seeing as politicians are notoriously slow to pick up on what the voters actually want – this should indicate to you that people want better public transport options, not more PPS toll roadbites or tax cuts.

  93. Alice
    November 14th, 2009 at 11:20 | #93

    @TerjeP (say tay-a)
    entirely fatuous comment Terje.

  94. November 14th, 2009 at 12:28 | #94

    Alice,
    No – Terje is right. How is an illustration of how one group evaded their obligations (if indeed they did – I have not read all the evidence here) in any way at all relevant to a discussion of what those obligations should be?

  95. Alice
    November 14th, 2009 at 12:57 | #95

    @TerjeP (say tay-a)
    The reason is Terje – thats usually what libertarian small govt view argues…(“that some people cheat on welfare therefore welfare should be as low as possible…or none at all”) – not me, but by the same logic why arent you arguing that because some (in this case the corporate tax evaiders and wealthy tax minimisation schemes) cheat on taxes, taxes shouldnt be increased???

    By the same logic thats what you ought to be arguing.

    There is also more to this story (about TPG evading tax and clearing out the account the ATO sought to have frozen, in payment of the $678 million tax bill). It turns out the private Myer family also had its funds in the very same TPG account which the Myer family claims is a fund they use, (invested in the TPG account under question) to also provide tax minimisation advice to other wealthy individuals and families and their so called private “charities.”

    Its an everyday occurrence in this country and you call for lowering taxes on the rich??.

    By any angle your argument is illogical. You would seek to lower welfare on welfare cheats but you dont see the paradox in the argument (by libertarians) not seek to raise taxes on wealthy tax cheats. Its hypocritical…and ends up at my same point. That your main reason (and the reasons of other libertarians is to seek both tax cuts and welfare reductions and government spending reductions is because of an entirely ideological opposition to government with the objective of seeing it starved of funding and failing altogether).

  96. Alice
    November 14th, 2009 at 12:59 | #96

    @Andrew Reynolds
    Read todays SMH business section first Andy!

  97. Donald Oats
    November 14th, 2009 at 13:44 | #97

    @TerjeP (say tay-a)

    I certainly wasn’t insinuating that you specifically weren’t paying tax in full.

    I’m referring to a group, known to exist and indeed, the ATO has some statistics on it, who try every trick in the book to evade their tax responsibilities. Now, I’ve been at the high end of the tax rate in the past, and my experience was that the government of the day was very happy to give me an extra couple of grand taxcut in the lead up to elections. I’d much rather that they had kept the money and passed it on to services for people in difficulties related to illness, impoverishment and homelessness, child abandonment, etc. The previous government’s argument that people should be free to spend the money as they wish obviously went down well with a number of recipients.

    Unfortunately, not much of the taxcuts found its way to dealing with homelessness, impoverishment, chronic illness and disability, etc. A shitload found its way into consumer paradise, as was the economic intention.

    It seems to be the classic tradeoff between choice at the individual level, and choice at the society level (which happens largely through our voting decisions). I think governments of all persuasions have a role to play in making the choice to deal with society’s sticky problems, instead of hoping that enough people individually choose to fund the necessary services.

    The individual may think “Oh, I’ll have to get around to donating some money again to continue the disability services for a bit longer.” – they may mean well, but lets just say other personal priorities seem to push the donation back in the mental queue of things to spend the loot on. At the level of democracy, governments can be voted in or out on the basis of their contributions to social problems. It isn’t perfect, in fact it often sucks; however, the alternatives seem a bit – ahem – optimistic concerning individual behaviour.

  98. TerjeP (say tay-a)
    November 14th, 2009 at 14:45 | #98

    By the same logic thats what you ought to be arguing.

    By any angle your argument is illogical.

    Alice – you’re not demonstrating much ability to follow a logical argument let alone create one. However keep trying.

  99. Alice
    November 14th, 2009 at 15:33 | #99

    @TerjeP (say tay-a)
    Terje – just answer me these (three) questions then. Would you prefer to see lower welfare spending? and lower government spending? and lower taxes?

    Ill bet its the trifecta.

  100. Alice
    November 14th, 2009 at 15:42 | #100

    @TerjeP (say tay-a)
    Anyway, we are still yet to get a response from Dough McTaggart. A response I feel is warranted unless he cannot fully justify his decisions…except to balance a budget in shortfall in order to keep a rating not worth its name – for what??? –

    When you sell assets you may balance the budget, reduce a deficit, or put it into a short term surplus by cost shifting to the private sector (as if there hasnt been quite enough of that already – view private sector debt levels)….but could someone please tell me why we need these AAA ratings when the clear intention of current governments is for governments neither to borrow or invest in (or maintain) public infrastructure?

    Why is the AAA rating so important unless Govts know that down the track, when they have nothing left to sell future governments are going to need it, to borrow (but what does the incumbent govt care – they wont be around and have benefitted from the sell off).

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