It’s time again for weekend reflections, which makes space for longer than usual comments on any topic.
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It’s time again for weekend reflections, which makes space for longer than usual comments on any topic.
John Quiggin 
Just in case any readers missed my post in the other thread. You might be interested in the article we have today at ‘Left Focus’ – on Queensland privatisation. It was passed on by the QLD ETU.
see: http://leftfocus.blogspot.com/
Readers are also invited to join our Facebook groups: the ‘Left Focus’ mailing list/support group – and the ‘Movement for a Democratic Mixed Economy’ group:
see:
http://www.facebook.com/group.php?gid=58243419565#/group.php?gid=58243419565
http://www.facebook.com/group.php?gid=58243419565#/group.php?gid=152326549326
an important article by Johann Hari of Slate from a few days back, on the bizarre intellectual origins of the modern libertarian movement.
Those advocating the defeat of the emissions trading scheme (ETS) for ideological reasons now find themselves in common cause with the “filthy polluters”, the big coal companies.
The Sydney Morning Herald weekend edition of November 7-8 says on page 4 that these coal companies intend to spend millions to defeat the ETS.
How can this be? After all, the ideological purists tell us the ETS should be defeated because it does not go far enough and/or because the Government has caved in by giving too much compensation to the polluters.
Yet these polluters will spend millions in the hope of knocking back this compensation by defeating the ETS.
Perhaps we will see a stampede by the ideological purists to donate to the advertising campaign of the coal companies to achieve their shared aim.
While I do not really expect this to happen, I suggest it is more likely than these same purists reaching the logical conclusion that if coal companies are spending millions to defeat the ETS then these companies consider the ETS a threat to their long-term interests.
Let the twisting and the turning of the ideological pure begin as they explain this away!
One of the big items of news in the US at the moment is the recent gubernatorial elections, with the big result being the Republicans’ loss of New York’s 23rd District. The fact that they’ve held the seat for decades notwithstanding, the big story here is one of the two Republicans, Dede Scozzafava, dropping out and supporting the Democratic candidate.
It seems like this may be the beginnings of a potential (and much-needed) ideological reform within the Republican party. Scozzafava is controversial with the Republicans because of her support for abortion and gay marriage: but it seems to me that this should not be controversial for a libertarian, the closest political ideology with which we can affiliate the Republicans. After all, a government ban on gay marriage and abortion is a pretty unwelcome government intervention into personal liberty; but of course, that’s where the Christian Coalition comes in. However, the fact that a Republican would be willing to endorse a Democrat in a traditional Republican stronghold indicates to me that there’s a potential for an undoing of the coupling brought about by Reagan.
What’s the future of the Republicans? Well, chances are the result of the 23rd District will be swept under the rug and we’ll go back to the status quo. But what we might see (and what I really hope for the sake of the Republicans that we do see) is a break between the Christian and libertarian sects of the GOP, and an eventual reversion to classical liberalism and laissez-faire economic policy, without worrying excessively about “morality”.
Thoughts?
I’ve been thinking lately that “Wuthering Heights” is the worst english language novel ever written. Thanks to Gerard, I have been reminded that “Atlas Shrugged” in fact holds that spot.
By the by, I’m not a Bronte hater at all. I think Charlotte’s best novels are brilliant. But how “Wuthering Heights” ever garnered a literary reputation is beyond me. It’s a precocious but preposterous and wooden first novel. If Emily had lived longer she might have written some great novels. I find WH completely unreadable. Yet I have found, for example, that reading “War and Peace” (supposedly a difficult work) five or six times over the last 10 years has been a pure and easy joy.
With “Atlas Shrugged” I read the first page and a few other pages at random (in the bookshop) and was fully satisfied that it was a pile of completely unliterary and psychopathic drivel.
I asked this on the ALS blog but maybe people here are better able to answer the question.
British Prime Minister Gordon Brown has just advocated a “financial transaction tax”. I have always thought that the Tobin tax is daft. The idea is to dampen speculative capital flows but it is stupid because it punishes everyone for a minority.
The next problem is that the tax is to pool capital as an insurance fund to bailout banks in the next crisis. We should have a financial system where banks should be allowed to collapse without it causing systemic risk. Instead punishing everyone, we need to get to a position where banks are not so big that if one goes down the entire system follows.
@TerjeP (say tay-a)
The deregulation push probably comes from Senator Faulkner for whom I have a great respect. Faulkner is not about getting rid of rules but of making our systems so that there are ways of automatically following the rules.
The current moves in the tax office are of this nature. If you report your tax file number with all transactions where tax is involved (interest bearing accounts, wages and salaries, dividends from companies) then your tax return and payments are “automatic”.
Neo-liberals believe in some rules of behaviour to make transactions efficient such as you shall not misrepresent, you shall honour your promises, etc.
Most of the rules and regulations we have specify what will happen to people who break the rules. What Faulkner is on about is making it simpler for people to follow the rules. So deregulation comes about by a simplification of rules towards the positive not towards the negative. That is, saying what we can do and if we do it then we are following the rules.
This would seem to fit well with a neo-liberal agenda.
Can someone please tell me what is a neoliberal? It is one of those terms that is coined to create a strawman for every leftie weirdo to complain about. Free trade? Neoliberal. Lower taxes? Neoliberal. Less government interference? Neoliberal. A straw man of the lefts creation…
@JohnL
I support the defeat of the ETS because I know it cannot achieve the desired result of a rapid reduction in ghg levels. If it gets through it will stop us looking for non price based mechanisms to achieve the investments needed to reduce ghg emissions.
Manipulation of prices to achieve desired outcomes has proven time and again to be marginally effective. Just look at the use of drugs and alcohol and cigarettes. Most people do not stop smoking cigarettes because of a price increase. If price was an important factor they would never have started in the first place.
To think that increasing the price of one sort of energy through “artificial means” means that people will find now invest in ways to reduce ghg is wishful thinking. Most people (including the people who think pollution is bad) will find ways to manipulate the artificial prices – be it taxes or trading – so they can make more profits and/or pay less for energy.
There are other reasons for opposing the ETS than those you suggest.
I listened to Professor Q on youtube in a Whitlam Institute talk (and Q&A later with Keen and Debelle).
One thing which I thought was funny was when ProfQ said that the US/UK is leading Australia with higher taxes. The UK recently put up the tax for the highest earners by 10p on the Pound. They estimated that this would raise just a bit over £1bn, other economists and organisations have said that this is an overestimation.
The problem is that the increase in taxes have such a negative impact on a country where there is a great flow of people (such as the UK with the EU next door) and with a complex tax system that creates the incentives for people to leave the tax system altogether.
The next problem is the philosophical problem. Why is it that people who have worked the hardest and over the longest period whether it be in school, university and/or the business environment must be the first to be punished by a political decision from people in parliament who were too lax in the first place?
Update, Update, Update, one of Turnbull staffers, Mr Tudehope, has resigned amid a Liberal Party factional spat portraying Liberal MP Alex Hawke as an enraged Adolf Hitler in a video clip. Stay tuned as this story has legs.
@SeanG
Where do you get the idea that the richest people have worked the hardest and over the longest period?
Do you reckon a company executive who earns millions is lazy and only gets there by working 9-5?
Kevin Cox at 10: Well, you have begun the twisting and turning. You do not address the issue I raise that those advocating the defeat of the ETS now have a common aim with coal companies. Nor do you address the point that if coal companies are spending millions to defeat the ETS, then they must consider it a threat to their interests.
You say you oppose the ETS because if it gets through it will stop the search “for non price based mechanisms to achieve the investments needed to reduce ghg emissions”
I wonder who will make the investments to reduce greenhouse gas emissions if price mechanisms (such as an ETS or carbon tax) are excluded.
that’s not the point – where is the evidence that the richest have worked hardest and over the longest period? You seem to have that idea as a fundamental claim. Fine, but where is the evidence that can take that claim further than a statement of faith.
Take it as a statement of faith.
Is it fair that hard working and successful people should be taxed more?
Why is it that success should be punished via higher taxes?
No statements of faith – just a couple of questions for you to answer.
I’ve got other stuff on but as a simple point for now – you accept there is no justification for a belief that income is related to how hard and long you work. Then you ask “Is it fair that hard working and successful people should be taxed more?” That’s mixing two things together again – ‘hard working’ and ‘successful’ (by which I guess you mean rich). But you have already noted that they don’t together – by your admission of faith. So that question is poorly framed.
Onto the next one – “Why is it that success should be punished via higher taxes?”. Well it isn’t unless you really mean success and rich are the same – they aren’t to many people but are to some people. But, taking successful as meaning rich how are they punished – in what way do they suffer material loss – ie in what way is someone financially worse off for earning 100 million compared to if they only earnt 32k? They aren’t. There is never a point at which earning huge amounts of money and paying tax gives you less money than someone earning less. So there is no punishment. Only sophistry by the greedy.
Nanks,
I like the way you avoided the first question. By stating that success and hard-work are not related you have avoided the truth that on the balance of probabilities, they are related. By trying to use every trick in the book to avoid addressing the question you show that you cannot answer that question.
If I work hard and am successful, why should I be paying far more tax than others as a percentage of my income?
seang – I’ll never respond to a post by you again.
SeanG, nanks is correct. There is no tax system more equitable than progressive taxation for a flat tax is discriminating.
SeanG said “If I work hard and am successful, why should I be paying far more tax than others as a percentage of my income?”
Governments tax to raise revenue to govern. It wouldn’t be very smart to tax those who can’t pay now would it?
And another thing for free, those who are wealthy and successful are only so because there is a Government which taxes to provide services and infrastructure to support the very customers who are very often fleeced by said wealthy and successful.
One more lesson. If you are going to tax something it is better also to apply it to something you want to discourage or regulate, such as naked greed. Clearly many wealthy and successful people succumb to naked greed and rationalise away how they got there and their responsibilities to those mechanisms.
The same company executives whose idea of “work” is speculating on real-estate and investing other people’s money in bullsh!t financial instruments then getting the government to come and clean up their mess, while they still continue to receive bonuses on public money, and their customers, the “high net worth” individuals that hedge funds advertise for, most of whom were born into wealth and never had to work a day in their lives – they don’t even need to do the “work” of picking out stocks over morning coffee, they just invest their millions in the managed fund and receive ample returns, no risk necessary since they are the beneficiaries of ruling-class socialist bail-outs, then have the gall to whinge about those little taxes they haven’t managed to dodge through the Caymen Islands, this fraction of money that goes to the government mostly so it can protect their own wealth, like it would be better off spent on an extra yacht, a six-figure platinum watch, a seventh house… while millions starve and die for want of medicine, they should be lucky all their getting is a higher tax rate and not the guillotine quite frankly
Gerard, that is the problem when a board of directors subscribes to a philosophy that rewards executives regardless of performance. In respect to AIG, the giant insurance company paid executives that were not worth a crumpet $165 million in retention bonuses which nearly brought down the company and a $170 billion federal government rescue bailout.
@Salient Green
“Governments tax to raise revenue to govern. It wouldn’t be very smart to tax those who can’t pay now would it?”
The latter sentence is wrong in general, because there are cases where the former sentence isn’t true and/or other reasons apply. For instance, colonial governments often applied chartalist principles to establish a cash economy, e.g. in Madagascar and in British African colonies. With that, those who couldn’t pay were burdened in other ways pour encourager les autres.
P.M.Lawrence, all my life, the government has collected small amounts of tax from me because that’s all I could afford, and has collected much more from other people who could afford it. This seemed pretty smart to me and now you tell me it’s wrong?
I also noted during this time that various governments used those taxes to govern, that is, provide services and build things, and you tell me this isn’t true? I must’ve been dreamin’.
@Michael of Summer Hill
Moshie – I also now note that the federal govt has given money to the state govt to bail out James Hardie (who claim the GFC means they dont have enough in their fund for asbestos victim payouts). This after they shuffled their structure to make damn sure there was never going to be enough in that fund. That just goes to show that the entire tax structure is simply ignoring the immoral way that companies can use offshore structures and parent companies and transfers to avoid their responsibilities. This bailout just goes to show that the problem of collecting taxes lets the least deserving avoid taxes and the most deserving of tax reductions carry the burden.
No its not smart to tax those who cant afford to pay inorder to fund the avoidance of those who can afford to pay. Its immoral as well.
Sean – there isn just no end to the whinging fro lower taxes from the freedom fighters is there? Well, when you manage to collect some of the tax you have been letting the rich get away without paying…you might just get your tax reductions for the more deserving. Why should ordinary people carry companies (that are disgusting) like James Hardie and use tax havens and offshore structures to hide behind?.
Clean the blatant avoidance in corporate taxes up and the unethical mess of over concessions, tax reductions and tax perks given to the wealthy over the past three decades, Sean and Ill personally ask the ATO give you a tax cut so you can stop whinging for more and more and more tax cuts.
@Michael of Summer Hill
Moshie – they sacked the wrong person. Alex Hawke IS an enraged Adolph Hitler or an enraged bull ant..I havent decided which but he acts like both. He belongs to the Taliban wing of the liberal party.
@JohnL
Use your imagination.
There are other ways of encouraging investment than raising prices of competing products. You can reduce the cost of investment. You can change the investment evaluation techniques from discounted cash flow analysis to long term total value returned. You can combine both. Do the sums and you will find that investing in saving energy and producing energy without burning limited supplies of fuel will give a much greater total return on investment – and that is what is investment is all about. Investment is NOT about production. It is about the creation of wealth or productive capacity.
Not only do economists fixate on prices as the driver of investment but they fixate on output as the measure of wealth. The measure of wealth is our current productive capacity NOT how much we produced yesterday.
@SeanG
Those who consume more should pay more taxes because they are more of a drain on our community resources than those who consume less. There is a causal link between income and consumption.
Taxes are not something taken from you. Taxes are used to provide community services. The government is not something divorced from the population.
We are in this together. We are not isolated individuals in a zero sum game. If we work together we will all get wealthier. If you are not prepared to work together and share with others then go to some other planet. This nonsense that because I earn money I am entitled to spend it all without contributing to our common wealth is a barren idea.
@Highlander
Despite winning a governorship or two, I think the Repugs are on a path to long-run oblivion. In a two-party system, they will always win if the Dem alternative is bad enough, but the proportion of voters identifying as Republicans is at an all-time low.
One possible way back from the abyss would be for individual states to break with the RNC. They could even run their own Presidential candidates, with their electors potentially holding the balance of power in the Electoral College.
@Kevin Cox
That is one hell of an argument for higher sales tax.
We all have to work together. Unfortunately not everyone wants to work. Some work harder than others. What you want to see are those who work hard (and those who just work) to pay for those who are not working either by choice or not. Most people would prefer helping those who are prepared to help themselves but not to pay taxes to the people who are deliberately workshy.
We are forgetting the middle man in the form of the government who takes a slice of everyones tax revenue and gives it to themselves.
Why do you think if one political party promised higher taxes and more spending on government services, and another on lower taxes, that the lower taxes people win? People hate looking at their pay slip and see so much taken from them.
@Salient Green
You have an almost Marxian view of wealth – there are two groups with the very rich and everyone else.
In the real world, things are not as simple. You have small business owners, managers of companies and the self-employed who are all paying one of, or the highest, tax band. Many of them understand why they need to pay more tax. What they dislike is when cloistered individuals in universities state that they should pay more tax because the government (not known for being efficient under the best of times) cannot afford money to build infrastructure project (in ALP constituencies) or to afford to run the unreformed public services (with the unions refusing to reform).
The problem is that tax hurts. It hurts people who risk money or to strive and struggle to make it. Advocating (like ProfQ and many others on this board), that the rich should pay when you have a broad interpretation of rich, is the cause of many of the lefts foibles in the past. I know people who are genuinely rich. I also know people who are in the top bracket who earn good incomes. The difference in material wealth is astronomical. Yet leftists think that both are rich. In absolute terms, of course, but not in relative terms.
I dislike it when someone says to me that after all my effort and struggle that I must pay out more tax because there are hundreds of thousands or millions whose incomes are derived from the government. I dislike it, when the government says that taxes should be put up because of their profligacy.
@Alice
Have you ever met Alex Hawke?
SeanG, since you pay enough tax to whinge about you must be a PAYG (pay as you go) employee. You can’t possibly be a competent small or large business person or a tradesman or a contractor. Because if you aarev ny of these and you are half smart or have a half smart accountant you would be paying stuff all tax right now. Very few of those people pay any significant tax because they have an enormous number of tax lurks, tax deductions, negative gearing strategies, trusts etc.
I still recall a year that I (as a government clerk) payed more tax than PBL (Packer’s Company). I know that I did because PBL paid ZERO tax despite good earnings that year.
So if you want to get rid of welfare and socialism FOR THE RICH then I’m with you all the way!
SeanG #34, I believe the term is Marxist and most likely the ‘two groups’ was not his view and it isn’t mine. If you are going to descend into that sort of nonsense I will take the same route as nanks and never engage you again.
I am self employed in my own orchard business in the MD Basin. The highest income I have ever made was as a plastics toolmaker when I had to work 60hrs and travel 1000km a week to earn $60,000 pa. That was 15yrs ago.
I am a two time loser to economic rationalism and the free market. Toolmakers and Orchardists are in decline due to pressure from cheap overseas labour. Others won, all by the decisions made by Government. The Government gives and the government takes away. Those who make money under certain government policies should be bloody grateful because others like me have invested a lot of training and a lot of money only to have it taken away by government decisions and very few get compensation.
By all means challenge the government on wasteful practices but there should be no sympathy for those who can only see their salary in terms of what tax was taken out rather than how fortunate they are to receive a larger than average income. It’s all about attitude.
So, those that can pay more should pay more, AND, they should grizzle about it if the government is not using the money in the best practical way. However, I have a special sort of disgust for those who earn millions while avoiding tax and ripping off ordinary people.
@SeanG
Yeah – that little weasel got kicked out of the Macquarie students union for some filthy behaviour, nepotism, vote rigging of Asian students, likely pilfering. He is a crook and nothing less (mafioso type player) – Alex Hawke also used to be labor and he swaps sides whereever there is a buck to be made and he gets a promotion. If you are stupid enough to get sucked in by Alex Hawke Sean…all I can say is there is one born every minute.
@SeanG
Sean – welcome to the Taliban mafia wing of the young liberals (trained in boot camp) by Alex Hawke. Why he isnt in jail (along with Victor Ma) I wouldnt know except that maybe it was because Steven Schwarz was on the board at MQ along with another right winger Mayrice Newman – you know – the one who used to head up the ASX (private version) and then got a board oistion at the ABC thanks to JH, despite teh fact he would have liked to privatise the ABC to Rupert Murdoch if he had half a chance under JH – and he was pushing – in fact Im surprised Maurice didnt gather up a posse to privatise JH).
The government is asleep at the wheel letting these maladjusted extremists loose on public boardsl.
@SeanG
Sean – Ill second Ikono. Its a great point for the whingers who keep on and on (and on..about wanting tax cuts). I
If you think you are paying too much tax you are obviously not working hard enough to make yourself rich so you dont pay any.
Here is a link on that creepy Alex Hawke
http://www.parliament.nsw.gov.au/prod/PARLMENT/hansArt.nsf/V3Key/LA20061025036#cim_main-content
@Ikonoclast
I’ll give a little bit away – I am a chartered accounant (not practicing but by professional qualification). So I know two things: 1) I can very easy set up shop and offer tax, management and accounting advice and 2) I earn enough now to keep me happy so I have decided to not take the risk… yet (also because I have vesting shares which I will lose 😦 ).
If you look at SMEs, they all try to minimise tax but the most popular way is to use cash. However, you refuse to ask why they try to minimise their tax base.
@Salient Green
The wonder of the free market. Sometimes you win, sometimes you lose.
Not everyone who pays the top bracket is a millionaire. Yet again falling for the trap of characterising those who earn more than you do as being filthy rich and unconcerned about other people. You are like Alice; a black-and-white view of the world where there is the very rich and the huddled masses.
Do you think that a successful small businessman should be forced to pay more tax? Do you think that it is right that they get over $100k and should be forced to pay ever-more-tax because they took a risk and it worked? What kind of culture are we creating where those who are hard-working and are successful are the first to be vilified for daring to dream and to achieve?
@Alice
I am not a Liberal Party member Alice, I am not a member of the Taliban (both of the Liberal and Afghan varieties) and I am not a religious nutter who believes that the world is only 5000 years old (or something like that).
I asked a question. All the news reports say that he has split the right wing of the Liberals and that he is leading the moderate side of the right wing. So when you come out with a “he is the most evil person the world has ever known” I wonder if you have actually met the guy.
Do you work at Macquarie University?
@Salient Green
Two points – yes it is Marxist (nor Marxian – I was rushing to get this post done) and I said “almost”.
Sean, there are a few reasons why steeply progressive taxes on higher-income earners make sense to some.
For many it is all about envy. They simply cannot stand the possibility that someone else has more than they do. And so taking more of it away by any means is more than justified. It doesn’t matter if this reduces incentives and impedes economic growth. It is better to have less to go around than risk someone else getting a larger share of the gains.
Also, one of the things that left-liberals often dislike about a market economy is that it tends to reward people they consider to be unworthy or inferior. For example, a tradesman or a miner or a guy who runs a home maintenance franchise can make a lot of money while someone with a philosophy degree or an aspiring artist struggles to get work. The solution is therefore to confiscate more wealth from those who get their hands dirty and give more to those who aspire to be more refined cultural elites. That is, they would rather that material success only go to those they consider more deserving, rather than those the market tends to reward.
Seriously Sean, once you start to look at things a certain way, it all makes sense. If you’ve read How to Win Friends and Influence People, you will know that looking at things from other people’s perspectives is the key to success. However wrong you may think others are, to them their views make perfect sense.
MU,
I should not have asked the question! Look at the responses!
I particularly like Kevin’s response: “Those who consume more should pay more taxes because they are more of a drain on our community resources than those who consume less. There is a causal link between income and consumption.”
If we think of community resources like public hospitals and schools then the answer is no.
Maybe Kevin was thinking of material goods. But we all know wealthier individuals have a lower MPC than those who are poorer and the save more of their money. So by taxing them more and redistributing it to poorer people – aggregate consumption increases therefore causing a higher total drain on our “community resources”.
Sean, it’s notable how selective these arguments tend to be. When it comes to government fiscal stimulus, the argument is that giving money to low-income earners boosts demand faster and is therefore better. Yet that seems to be ignored whenever it doesn’t suit the argument.
Of course, if you increase taxes and redistribution, it means more people are able to consume more than they produce. It also means that the economically active have less incentive to produce as much. So how this can possibly help in reducing the demand on our scarce resources somewhat escapes me.
MU, it is unfortunate. They believe that we are consuming the earth’s precious resources but want us to consume more out of a bizarre notion of equality – as if that has ever been achieved or even tried without bloodshed, gulags and social destruction.
It is like Atlas Shrugged.
@SeanG
Yes in general consumption taxes is the preferred method. However, it does not matter how we tax as long as it simple, universal and difficult to avoid. People who do not pay taxes are free riders and we all hate free riders. A potential solution to the free rider problem is to ban people who are found to cheat from any benefits of from public spending. If you are found to have paid less than your share of taxation then you are excluded from future benefits by say twice the amount. That can be done by such things as increasing the cost of say driving on roads paid from the public purse.
In the same way as free riders on taxation we also hate free riders on work. Surely the criteria should be how much people contribute according to their ability. If, because of things beyond my control I am disadvantaged in some way or other but I work as hard as I am able then surely I should be compensated as much as the person without the disadvantage?
If I decide to stop contributing because I have been able to accumulate wealth and yet I am still able to contribute then surely I should not get as many community resources.
I suggest you read “Filthy Lucre by joseph heath” http://www.amazon.ca/Filthy-Lucre-Joseph-Heath/dp/1554683955 where the argument that taxes are “consumed” by governments is put to the sword. This notion you put that government consume taxes is nonsense.
You are wrong with respect to people wanting to pay less taxes. People DO NOT mind taxes if they believe that they pay their fair share and they get back a fair share in return. People mind paying taxes when it is obvious the system is unfair and some people are abusing the system.