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A rose by any other name …

April 30th, 2014

Most of the discussion of the Abbott government’s recently announced revenue raising measure has focused on semantics: is there a meaningful difference between a levy and a tax, has the government broken its promises and so on. All of this is boringly predictable. The last government to treat its election promises as binding obligations was Whitlam’s. Perhaps Rudd would have kept his promises if it weren’t for the GFC (I don’t think he broke many before that), but with that exception we’ve got used to the various theatrical devices associated with ditching promises: Black Holes, debt crises, Commissions of Audit and so on. The reaction of Bill Shorten and the Labor Opposition is equally predictable. The job of the Opposition is to oppose, and in particular to excoriate the government for breaking any promise, no matter how ill advised.

On the other hand, I’m disappointed that the Greens have taken the same line. Their job, in my view, is to use their leverage to promote sustainable social democratic policies, and to oppose regressive market liberal and environmentally destructive policies, regardless of source. So, for example, they were sensible to wave through Hockey’s abolition of the debt ceiling, even though it involved breaking a silly promise. They can’t stop the government breaking lots of promises on the expenditure side, so they should try and achieve balance by supporting sensible proposals to raise additional revenue.

The case in favor of an increase in taxes for higher income earners[1] is obvious. The big cuts promised by Howard in the leadup to the 2007 election, and largely matched by Rudd were unaffordable at the time and became even more so when the GFC led to slower growth in real and nominal incomes and therefore to less of the bracket creep that normally pays for such cuts. Along with Costello’s massive handouts to “self-funded” (but publicly subsidised) retirees the previous year, these cuts are the main reason it has been so hard to achieve a return to surplus after the GFC stimulus was wound back under the Labor government.

So, it makes sense to increase the rate, and to keep it high until bracket creep finally works its magic and restores the revenue raising capacity of the income tax to something like its pre-2007 level. I haven’t done the numbers but it seems as if four more years ought to do it. So, a temporary increase that can be called a levy makes sense. And, if everything else is held constant, an increase in revenue translates one-for-one into a reduction in debt.

Summing up, if Abbott wants to increase income tax on high earners, I’ll support him. And, if he wants to call this policy a “debt reduction levy”, I don’t have a problem with that.

fn1. Doubtless, we’ll get objections that taxpayers on $80 000 a year aren’t really high income earners, although the median wage for full time workers is around $60 000. But the extra tax payable by someone on $80 000 is precisely zero: the levy is only payable on income in excess of that level. Even at $180k, the levy is only $2000/year or about $40/week – a small fraction of the discretionary spending of most people earning this kind of income.

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  1. Midrash
    May 3rd, 2014 at 15:21 | #1

    7@Ikonoclast
    If you choose to be in the tradition of Calvin , Torquemada, Iran’s Ayatollahs, extreme Right-to-Lifers and the witch-hunting Puritans who arrogate to themselves the right to inflict their moral certainties on others, body and soul (and you did suggest not tolerating the existence of billionaires) then you mustn’t be surprised if fewer of the rich follow the great traditions of philanthropy and more decide its a battle and that you are the enemy. Of course a modern Don Quixote doesn’t have to brave uttering “WE WARN THE CZAR” imprecations against the powerful he sort of knows could have him for breakfast because knows that they know he is just pi**ing in the wind on one of a million blogs they don’t read.

  2. yuri
    May 3rd, 2014 at 16:08 | #2

    @patrickb
    It is in fact very easy to find out about private schools balance sheets and what surpluses they have, if any, after paying all recurrent outgoings. You obviously are not interested enough to make the effort. My problem is with the sly way people who object to private schools (as if abolishing them and their occasionally good religious influences which an atheist has to acknowledge would not lead to a more stratified, materialist, money conscious society with money being used ever more nakedly to buy advantage for children) use the word wealthy as though they are just talking about the kind of PEOPLE who can properly, in perhaps most people’s opinion, be subjected to high progressive taxes on income and capital.

    You wouldn’t call a person or a school “wealthy” would you if all the magnificent buildings and artefacts the presided over had been bought with borrowed money and the prospective income to pay the interest was not going to prevent it all being sold up if that income wasn’t increased.

    It is obviously not a total or indefensible use of language to ascribe “wealth” to an entity deploying a lot of expensive assets but it helps the propagandists and not the relevant truth. That relevant truth is that parents of children at the leading private schools include a few who are rich by any standards, many who have good middle to upper middle incomes but still have to budget and make choices about what they will spend money on so they can afford private education for more tha one or two children, some having to send their children from their foreign postings so they can be educated in Australia (possibly subsidised by government or private employer) and some children of a single mother who goes to work s she can pay the fees – after any bursary from the school which other parents’ fees pays for.

    The honest way would be simply to subsidise parents for the cost of educating their children on the basis that there is a public interest in (a) having all children educated, and (b) in the pruduction of the next generation of Australians which is something we ought to help all parents do.

  3. yuri
    May 3rd, 2014 at 16:22 | #3

    @J-D
    You will see (from my immediately preceding comment) that my objection is to the deceitful use of “wealthy” as though one were dealing with the case of wealthy taxpayers (or tax avoiders) to obscure an objection, for whatever reason, to private education.

    Shouldn’t all children have their education supported? (I think that is the Gonski position before adding extra for special needs). Why do we talk about schools instead of parents as the benrficiaries of taxpayer support for children’s education just becsuse it is sdministratively convenient to hand the money to svools?

  4. yuri
    May 3rd, 2014 at 16:33 | #4

    @David Irving (no relation)
    When you say “who cares?” are you failing to understand how th rhetorical question was functioning in my comment or are you merely trying to be objectionable or express your loathing of private education (or something)?
    It is surely not too difficult to understand that I was attempting to highlight what an everyday non-tendentious use of “wealthy” would imply.

  5. J-D
    May 4th, 2014 at 21:00 | #5

    @yuri
    You ask ‘Shouldn’t all children have their education supported?’ as if you think the answer to that question is obviously yes. But if you think that all children should have their education supported, shouldn’t you be asking what is the best way of achieving that goal (or at any rate working towards it)? It’s not obvious on the face of it that the best policy choice, if that is your goal, is something approximating the current system of funding, or that it is any policy that includes public funding for the schools that Fran Barlow was talking about before (the most luxuriously appointed and lavishly equipped ones). Fran Barlow advocates an end to public funding for those schools; if you object to that suggestion on the grounds that it will interfere with or obstruct pursuit of the goal of supporting the education of all children, you have not supplied your reason for thinking that is in fact the case.

  6. J-D
    May 5th, 2014 at 18:16 | #6

    @yuri
    If you believe that there’s a public interest in having all children educated, what makes you think giving people money is the best way of promoting that interest?

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