Never saw it coming!

June 25th, 2014 47 comments

I’m in the US at the moment, working on papers and experiments involving unforeseen contingencies. I just woke up to the news that Clive Palmer has had a meeting with Al Gore that has led him to support the renewable energy target and an emissions trading scheme (the latter contingent on other countries taking the same route). And, relevant to me personally, he is to oppose the abolition of the Climate Change Authority.

I’ll wait for more news on this. In the meantime, at least I now have an ideal example of an unforeseen contingency.

Categories: Environment Tags:

This is a job for the Freedom Commissioner

June 24th, 2014 35 comments

The Minerals Council of Australia has just published a report it commissioned from Sinclair Davidson of the Institute of Public Affairs, responding to campaigns to encourage divestment from coal. What’s most interesting is the suggestion that Corporations Act and the anti-boycott provisions of the Trade Practices Act could be employed to silence critics of the coal industry. The relevant section, from the conclusion

Finally, the campaign may contravene the letter or the spirit of the Corporations Act. While activists argue that wealth portfolios without fossil fuel stocks perform just as well as those with fossil fuel stocks, the reality is that failing to hold a well-diversified portfolio has substantial economic costs in the form of higher risk and lower returns. So if investors make valuation errors based on the divestment campaign and relinquish high-performing stocks, a breach of the Corporations Act may have occurred.

There is a potential role for the Australian Securities and Investment Commission to examine whether the stigmatisation of the fossil fuel sector via the divestment campaign is a breach of the [Corporations Act].

The divestment campaign would amount to an unlawful secondary boycott if environmental activists were covered by those [anti-boycott] laws. They are seeking to restrict coal mining in Australia by targeting a critical supplier to the sector.

There are quite a few points of interest here. The most obvious is the threat to freedom of speech, something that ought to be of interest to Freedom Commissioner Tim Wilson, formerly of the IPA. In this context, it’s worth noting that campaigners against wind farms (notably including the IPA) would be potentially subject to the same kinds of penalties.

More generally, there’s the question of the anti-boycott provisions and the Trade Practices ACT in general. These provisions involve fairly substantial infringements on freedom, primarily for the benefit of business. The law originally focused mainly on protecting small businesses against a variety of anti-competitive practices of big firms. That sounds good, but there’s an equally good case to be made that the market should be left to sort itself out in such matters, or replaced by public provision when it can’t. The extension of Trade Practices Law to cover unions (under the Fraser government’s Section 45D) and public services (under National Competition Policy) makes the Trade Practices Act one of the central legal instruments for the imposition of market liberalism.

Note: Again, no personal attacks, please. There’s more than enough to criticise in the substance of this piece.

Categories: Environment Tags:

Lifters and leaners

June 19th, 2014 33 comments

I have a piece up at The Guardian looking at Hockey’s adaptation of the “47 per cent” line made famous by Mitt Romney. The focus is not so much on demolishing the claim (Greg Jericho did a more comprehensive job on this) but on the state of delusion that would allow Hockey to think that this kind of claim would be favorably received. After all, even Romney didn’t use the 47 per cent line in public: he was caught on video talking to rightwing donors.

Literally, Catallaxy on a bad day

June 19th, 2014 34 comments

A while back, I commented that the Oz was turning into a dysfunctional group blog, like Catallaxy on a bad day[1]. Now, it appears this piece of mild hyperbole has become literally true. The Oz has turned into a print version of Catallaxy, recycling their posts in support of tobacco industry propaganda. This really is Catallaxy at its predictable worst. The IPA, well represented there, started its career in science denialism with attacks on health scientists and, in particular, denial of the dangers of passive smoking. Like so many other tobacco industry fronts, it diversified into climate denial in the 1990s, using the same tricks and tropes.

I’m not sure if Catallaxy is the only blog source for the new Oz. The papers obsessive coverage of the AWU/Gillard case, which is looking rather quaint given the revelations of much more recent and clear-cut corruption on both sides of politics, seems to be a mixture of in-house stuff and lifts from the various extreme wingnut blogs devoted to the issue. In any case, it’s hard to tell the difference.

fn1. As previously agreed, no personal attacks on Catallaxy members, please.

Categories: #Ozfail Tags:

Disaster in Iraq foretold: Well, not quite

June 14th, 2014 142 comments

Along with the rest of the neocon crew, Andrew Bolt is blaming the collapse of the Iraqi state on Obama’s withdrawal of US troops in 2011. Exactly how Obama was supposed to repudiate an agreement signed by Bush, and maintain an occupation force against the wishes of the Iraqi government (he tried, but failed to negotiate an extension) is not explained. But, no matter.

At least Bolt and the rest warned us that Iraq was still too fragile to be left on its own, and that an indefinite occupation was needed. Well not exactly. Here he is in 2009, gloating over the fact that Obama was going slow on withdrawal and thereby disappointing his supporters. That could be read either way, I guess, but there’s no warning that Bush’s timetable needed changing.

More striking is this piece from 2007, claiming that “the war has been won“. Here’s what he has to say about future prospects

Violence is falling fast. Al Qaida has been crippled.

The Shiites, Kurds and Marsh Arabs no longer face genocide.

What’s more, the country has stayed unified. The majority now rules.

Despite that, minority Sunni leaders are co-operating in government with Shiite ones.

There is no civil war. The Kurds have not broken away. Iran has not turned Iraq into its puppet.

And the country’s institutions are getting stronger. The Iraqi army is now at full strength, at least in numbers.

The country has a vigorous media. A democratic constitution has been adopted and backed by a popular vote.

Election after election has Iraqis turning up in their millions.

Add it all up. Iraq not only remains a democracy, but shows no sign of collapse.

If I were an American reading that, I would have said it was time to bring the boys and girls home, as Bush agreed to do in October 2008.

Categories: #NewsCorpFail, World Events Tags:

Game of Thrones (Spoiler Alert)

June 13th, 2014 20 comments

Apparently, despite all the past experience, lots of people were shocked by the latest developments in Game of Thrones. Still, not everyone is willing to wade through 700-page volumes just to avoid being surprised by a wedding episode on their favorite show. So, as a public service, I’ve listed, over the fold, all the important and exciting developments in Volumes 4 and 5.

Read more…

Categories: Books and culture Tags:

The “job-killing” carbon tax

June 11th, 2014 155 comments

Tony Abbott hasn’t exactly covered himself in glory on his overseas trip. But he has found one ally: Canadian PM (at least until next years election) Stephen Harper, also a climate denialist. They made a joint statement denouncing carbon taxes as “job killing”. I didn’t notice any massive destruction of jobs when the carbon price/tax was introduced in 2012, but rather than do my own analysis, I thought I’d take a look at the government’s own Budget outlook, to see how many jobs they claim to have been destroyed by the carbon tax, and what great benefits we can expect from its removal. Here’s the relevant section of the summary (note that the outlook is premised on the Budget measures being passed)

The Australian economy is in the midst of a major transformation, moving from growth led by investment in resources projects to broader‑based drivers of activity in the non‑resources sectors. This is occurring at a time when the economy has generally been growing below its trend rate and the unemployment rate has been rising. During this transition, the economy is expected to continue to grow slightly below trend and the unemployment rate is expected to rise further to 6¼ per cent by mid‑2015.

In this environment, the Government is focused on implementing measures to support growth and jobs while putting in place lasting structural reforms to restore the nation’s finances to a sustainable footing. The timing and composition of the new policy decisions mean that the faster pace of consolidation in this Budget does not have a material impact on economic growth over the forecast period, relative to the 2013‑14 Mid‑Year Economic and Fiscal Outlook (MYEFO).

Since MYEFO, the near‑term outlook for the household sector has improved. Leading indicators of dwelling investment are consistent with rising activity, while household consumption and retail trade outcomes have improved recently, consistent with gains in household wealth. This is partly offset by weaker business investment intentions, particularly for non‑resources sectors.

The outlook for the resources sector is largely unchanged from MYEFO. Resources investment is still expected to detract significantly from growth through until at least 2015‑16, as reflected in the outlook for investment in engineering construction which is forecast to decline by 13 per cent in 2014‑15 and 20½ per cent in 2015‑16. Rising resources exports are only expected to partially offset the impact on growth. Overall, real GDP is forecast to continue growing below trend at 2½ per cent in 2014‑15, before accelerating to near‑trend growth of 3 per cent in 2015‑16.

The labour market has been subdued since late 2011, characterised by weak employment growth, a falling participation rate and a rising unemployment rate, although outcomes since the beginning of 2014 have been more positive. The unemployment rate is forecast to continue to edge higher, settling around 6¼ per cent, consistent with the outlook for real GDP growth. Consumer price inflation is expected to remain well contained, with moderate wage pressures and the removal of the carbon tax.

The reference to the CPI effects of the carbon price (around 0.4 per cent) is, as far as I can tell, the only mention in the whole of the Economic Outlook statement.

Travel

June 6th, 2014 58 comments

I’m travelling, which explains the total absence of recent activity. I hope to resume posting soon, but probably on a limited basis for some time. In the meantime, please keep it civil and constructive.

Categories: Metablogging Tags:

Piketty and nitpicky (updated with link to Piketty’s refutation of FT)

May 30th, 2014 168 comments

I have a couple of pieces up on the topic that’s likely to consume much of my attention for some time to come: Piketty’s Capital in the 21st century.

Here’s a long review article at Inside Story focusing on the conditions that have made Piketty a bestseller. And here, at The Drum is my take on claims by Chris Giles at the Financial Times that Piketty’s data is fatally flawed.

Update Piketty has responded to the Financial Times. To sum up, as I said in the Drum piece, the criticisms are (mostly incorrect) nitpicks except for the point about UK wealth inequality. Here Piketty’s demolition is convincing. The FT hasn’t used a consistent series. Rather, it’s taken a recent survey estimate (likely to underestimate wealth) and spliced it onto older estate data to produce the counterintuitive finding that the inequality of wealth hasn’t increased.

Categories: Economics - General Tags:

Campus reflection

May 22nd, 2014 54 comments

That’s the mild pun the Chronicle of Higher Education picked for my article (paywalled, but I’ve put my draft version over the fold) making the point that a higher education system is, in important respects, a mirror of the society that created it, and that it helps to recreate. I make the point that, like the US health system and labor market, the US higher education does a great job for the 1 per cent who go to the Ivy League Schools (and whose parents are mostly in or close to the top 1 per cent of the income distribution), does an adequate but expensive job for the next 20 per cent or so, and leaves everyone else in the lurch.

This is important in the context of the Abbott governments proposed removal of caps on fees for higher education, explicitly aimed by Education Minister Pyne at creating a system in which we might have institutions like Harvard and Yale. I plan to write more on this, but the central point will be that, far from creating more places at existing universities, fee deregulation will give them incentives to shrink, pushing students out to the alternatives now being funded under HECS: for-profit institutions and the TAFE system (which has its own funding crisis), corresponding to the bottom tiers of the US education system, where all the recent growth has taken place.

Read more…

Categories: Economic policy Tags:

If it looks like a debt, walks like a debt and quacks like a debt …

May 21st, 2014 11 comments

I’ve finally got around to checking out the big-ticket item (estimated value $28 billion) in the Queensland government’s privatisation program, involving the electricity distribution sector. It’s called a Non-Share Equity Interest, and the Treasury web page explains its appeal to the government.

Under this option the State retains 100 per cent ownership of the ordinary shares in the network businesses and assets. Private sector participation occurs through a hybrid security instrument, a Non–Share Equity Interest (NSEI).

The private sector contribution will equate to the net funding for the capital expenditure requirement and therefore represents new capital injections.

The NSEI security is debt in its legal form, but classified as equity for tax and accounting purposes and these characteristics give the security it’s (sic) “hybrid” form. (emphasis added)

The returns on the NSEI are sculpted to reflect the holders proportionate interest in dividends and tax equivalents paid by the network businesses separately.

In other words, the government is replacing debt raised by the Queensland Treasury Corporation from the private sector with an instrument that’s almost identical, but is classified as equity, and can therefore be presented as a reduction in debt

Read more…

Categories: Economic policy Tags:

Monday Message Board

May 19th, 2014 141 comments

It’s (long past) time for another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

Categories: Regular Features Tags:

Piketty Crossing the Delaware

May 19th, 2014 50 comments

Like lots of other readers of Thomas Piketty’s Capital, my big concern is not with the accuracy of the diagnosis and prognosis but with the feasibility of the prescription. Piketty’s proposal for a global wealth tax requires an end to the capacity of capital to escape taxation by exploiting the limitations of national taxations system, through tax havens, transfer pricing, artificial corporate structures and so on.

Given the limited record of success in past efforts to control global tax evasion and avoidance, Piketty is reasonably pessimistic about efforts in this direction. But the latest news from the OECD is remarkably positive. All members of the OECD (notably including evader-friendly jurisdictions like Austria, Luxembourg and Switzerland) have agreed to a system of automatic information exchange for tax purposes. Moreover, the “too big to jail” status of major banks engaged in facilitating tax evasion and money laundering, may finally be coming to an end.

On the face of it, the oft-repeated, but so far unjustified claim that “the days of tax havens are over“, may finally be coming true, at least for all but the wealthiest individuals. But the crackdown on individual tax evaders only points up the ease with which corporations (and individuals with the means to establish complex corporate structures) can avoid tax through a mixture of legal avoidance and unprovable evasion (for example, by illegal but unprovable internal transfers).

At the core of the problem is the ability to establish corporations in ways that make their true ownership impossible to trace. And, the jurisdiction most responsible for this is not a Caribbean island or European mini-state, but the “First State” of the US – Delaware, which has long been the preferred location for US incorporation by reason of its business friendly laws.

Read more…

Categories: Economics - General Tags:

Core promises (repost from 2008)

May 18th, 2014 55 comments

Now that Tony Abbott’s ‘fundamentally honest’ has joined John Howard’s ‘core promises’ in the lexicon of spin, I thought I’d repost this piece from 2008, urging Kevin Rudd to keep his (unwise and damaging) promise to adopt most of Howard’s proposed tax cuts.

Read more…

Categories: Oz Politics Tags:

Sandpit

May 17th, 2014 74 comments

A new sandpit for long side discussions, idees fixes and so on.

Categories: Regular Features Tags:

Weekend reflections

May 17th, 2014 28 comments

It’s time for another weekend reflections, which makes space for longer than usual comments on any topic. Side discussions to sandpits, please.

Categories: Regular Features Tags:

Australian right a dumping ground for failed US ideas

May 16th, 2014 63 comments

It’s been obvious for quite a few years that the Australian rightwing commentariat takes most of its ideas from the US Republican party. A more recent development is that they seem to be importing ideas that have already failed in their home country. I mentioned Voter ID recently. My Twitter feed has also been full of factoids along the lines “48 per cent of Australians pay no net tax”, being pushed by Miranda Devine and others. Obviously these are derived from the “47 per cent” line made famous by Mitt Romney in 2012 [1]. We all know how that went for Romney, and of course we also know what’s wrong with the factoid. I’ll talk a bit more about the specifics over the fold, but it’s worth asking what’s going on here.

The most obvious point is that the Australian right hasn’t had any new ideas in 30 years or more. Everything in the recent Commission of Audit report (a more coherent version of the ideology reflected in a distorted fashion in Hockey’s Budget) could have been (and often was) taken from the 1996 version, and everything in the 1996 report could have been found in documents like Wolfgang Kasper’s Australia at the Crossroads published in 1980, and similar documents. Everything useful in this set of ideas was implemented decades ago: what remain are the items that are either permanently untouchable in political terms (eg road pricing) or unworkable for one reason or another (eg handing income tax back to the states).

So, it’s scarcely surprising that they need to import from abroad. But the US Republicans aren’t in any better state. Their big causes a decade ago were the culture war (primarily equal marriage which was seen as wedging the Democrats), climate denialism and the Global War on Terror, which was transmuted into the invasion of Iraq. Most of our current rightwing commentariat (Bolt, Blair, Devine etc) cut their teeth on this stuff, and have never really outgrown it.

The Repubs are now in a state of complete intellectual collapse, unable to produce a coherent position on anything, from immigration to health care to budget policy. They survive only on the basis of tribal hatred of Obama. Since that doesn’t sell well in Oz, the local right is forced to live on discredited failures like Voter ID and “47 48 per cent of the population are takers”.

It’s the combination of tired economic rationalism and imported tribalism that makes the Abbott-Hockey such a mess, and the efforts of its remaining defenders so laughable.

Read more…

Categories: Boneheaded stupidity, Oz Politics Tags:

Mean and tricky

May 14th, 2014 40 comments
Categories: Oz Politics Tags:

Bahnisch is back!

May 14th, 2014 24 comments

I missed the memo, but Mark Bahnisch, formerly of Larvatus Prodeo is back, at the (much more sensibly named) New Social Democrat. Not posting often, but I still have a lot of reading to catch up on. This, on the Budget and the crisis of Australia’s political class, is superb.

Categories: Metablogging, Oz Politics Tags:

The Budget, the bottom billion and the 1 per cent

May 14th, 2014 25 comments

My first Budget commentary is up at the Guardian. Teaser

No progress on tax avoidance, no sign that Australia will responsibly lead the G20, no reform of expensive concessions to the wealthy: this Budget is a massive moral failure

Categories: Economic policy Tags:

Don’t Follow Leaders, Watch The Parking Meters

May 13th, 2014 78 comments

The dispute over the Greens apparent intention to oppose a more progressive tax system has heated up again, on Facebook and elsewhere, especially given indications that the proposed return to indexation of petrol excise will be passed, as it should be. In combination, if pursued, these policies can be presented, with some justice, as pandering to the self-interest of the stereotypical Greens voter: high income, inner city, with no need to use much petrol.

I haven’t seen anyone defend the pro-rich tax policy on the merits, but I’ve had vigorous pushback from people whose views I would generally respect, taking the following lines

* Labor is doing the same thing, why pick on the Greens
* The policy may be right, but it’s being advocated for the wrong reason (deficit fetishism)
* The policy may be right, but it’s being put forward by the wrong people (evil Abbott government)
* This is only a small step, we need something much bigger and more comprehensive

I’ll respond to these points over the fold, but for the moment I want to observe that these excuses, or minor variants, can be and have been made for every policy sellout in the history of politics. No one gives them the slightest credence when they are put forward by people who aren’t close allies.

The fact that so many intelligent people are willing to buy this sort of case when it’s put forward by the Greens is evidence of the proposition that none of us is immune to the kinds of biased thinking that have completely corrupted the intellectual base of the political right. Fortunately, I think, the left as a whole is more self-critical, so that this kind of reasoning gets a tougher run. But for me, this emphasises the importance of not being aligned with any political party to the extent that loyalty clouds my judgement on the issues. That doesn’t immunise me from various kinds of biases, but at least it helps with problems like this.

Read more…

Categories: Oz Politics Tags:

Voter suppression comes to Oz

May 13th, 2014 11 comments

I’ve been commenting for a while on the descent of the Australian right into tribalist politics, largely imported from the US Republicans. Even people you might expect to be unaffected like this, such as Joe Hockey, come out with tribal shibboleths such as his statement that wind turbines are offensive[1]. A striking instance of this is the campaign for voter ID, now being pushed by the Murdoch press. Those involved in this shameful exercise include Clive Palmer, Jarrod Bleijie and the Liberal party apparatus, none of which is surprising. More depressing is the fact that Malcolm Turnbull is part of the push. It really seems that there is no hope for a sane and decent conservatism[2] in Australia.

This Republican strategy for suppressing voters works well in the US where registration and voting are both voluntary and (for poor and black people) as difficult as the Repubs can make them (though of course, they have nothing on their own former incarnation as Southern Democrats, in the years before the Voting Rights Act. It’s hard to see this working to suppress votes in Australia, unless voting is made voluntary. Even if you are sent home for not having ID, the requirement to vote is still there. More generally, the whole ethos of Australian electoral systems has been to promote voting[3]

In any case, the timing of this latest foray into tribalism looks pretty bad. US courts are striking down voter ID laws following the obvious evidence that they suppress legitimate voters rather than stopping fraudulent ones. In many cases, the proponents of the law have been unable to produce a single instance of in-person voter impersonation (the only kind of fraud stopped by ID laws).

fn1. As, I think Fran B commented on my Twitter feed, George Brandis will doubtless note that “but they have a right to be offensive”! Brandis, another supposed “wet” has been busy outing himself as a conspiracy-theoretic climate denier
fn2. AFAICT, self-described libertarians are no better on this
fn3. Howard tried some dirty tricks to stop newly eligible 18 years olds from voting, but this is tinkering at the edges.

Categories: Oz Politics Tags:

On the Run: Fugitive Life in an American City

May 7th, 2014 20 comments

I got a review copy of this book by Alice Goffman a while back, and have been meaning to review it, but the multiple demands for Piketty reviews, responses, rejoinders to rightwing critics etc make it highly unlikely that I’ll get to it. So, I’ll just say that it gives some amazing insights into the way the War on Drugs is fought on the streets of US inner cities.

Categories: Books and culture Tags:

Wealth: earned or inherited

May 7th, 2014 91 comments

The efforts of the right to discredit Piketty’s Capital have so far ranged from unconvincing to risible (there’s a particularly amusing one from Max Hastings in the Daily Mail, to which I won’t bother linking). One point raised in this four-para summary by the Economist is that ” today’s super-rich mostly come by their wealth through work, rather than via inheritance.” Piketty does a good job of rebutting this, but for those who haven’t acquired the book or got around to reading it, I thought I’d repost my own response, from 2012.

Read more…

Categories: Economics - General Tags:

Zombie Apocalypse: Commission of Audit edition

May 5th, 2014 20 comments

I’ll be talking on this topic at a hastily-organized workshop at ANU tomorrow. Details here

Categories: Dead Ideas book, Economic policy Tags:

Licenses for cyclists?

May 3rd, 2014 95 comments

NSW Transport Minister Duncan Gay (seemingly one of the few NSW Ministers still in his job) has raised the idea of licenses for cyclists, in response to growing numbers of fatal and near-fatal accidents and (entirely justified) pressure for action against motorists who endanger fellow road users.

He can expect a negative response for a number of reasons. A license scheme is problematic, most obviously because children are (and should remain) free to ride bikes, but can scarcely be expected to pay license fees or sit for an exam. But the policy goal could be achieved without a license. All that is needed is to create a general right to cycle on roads, with no requirement to obtain a license, but with the courts having the power to suspend that right for cyclists who commit traffic offences. There’s no longer any practical requirement for a physical license. If an offender doesn’t have formal ID, a photograph or a phone would be enough to confirm identity in 99 per cent of cases (sad, perhaps, but true).

Then there’s the question of registration. Again, that’s a system that makes much more sense for cars than for bikes. But, if we had a proper system of road pricing, there wouldn’t be much difficulty in including bikes, though I suspect economic analysis would show their contribution to road costs to be very low.

Categories: Economic policy Tags:

Sandpit

May 3rd, 2014 93 comments

A new sandpit for long side discussions, idees fixes and so on.

Categories: Regular Features Tags:

Weekend reflections

May 3rd, 2014 16 comments

It’s time for another weekend reflections, which makes space for longer than usual comments on any topic. Side discussions to sandpits, please.

Categories: Regular Features Tags:

Reviewing the Commission of Audit’s opening night

May 2nd, 2014 42 comments

I played my little part in the political theatre that was the Commission of Audit, with about 15 seconds on ABC Lateline. I’m pleased to see that other reviewers agreed with me in dismissing this tired remake of the 1988 and 1996 hits as stale and derivative. Attempts to gin up a bit of excitement by introducing the minimum wage as a new villain wnet nowhere, and reviving the golden oldie (last performed by Malcolm Fraser in the 1970s) of returning income tax powers to the states fell flat. And of course, a supposed audit of the public finances with tax expenditures cut out of the show is like Hamlet without the Prince. About the only thing to be thankful for is that they toned down the Hockey-Abbott melodrama of a debt crisis and budget emergency, preferring instead some dark murmurs about ominous long term trends.

I give it one star.

Categories: Economic policy Tags:

A rose by any other name …

April 30th, 2014 106 comments

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.

Categories: Economic policy Tags: