A rose by any other name …

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.

106 thoughts on “A rose by any other name …

  1. Fran
    I’m getting confused by all the alternatives. Why can’t the Greens just do the simple thing and say they’ll support it if Abbott stops trying to abolish the climate change legislation?

  2. Dismantling the states is not a simple matter and would require changing the Constitution in its entirety as the Constitution provides for joint ownership of the Crown and a balance of power between local and national interests. I can’t imagine events so catastrophic to lead to the dismantling of the states and even if it were to be accomplished I can’t see how it would result in a better deal for citizens.

  3. Thinking about it more, I see the problem. If you think about all the wrong things that Abbott has done or is threatening to do, it becomes more complicated.

    Could the Greens just say: we support making taxation more progressive in principle, but there is a range of other measures that Mr Abbott should address first.

    And then have a list? He’s never going to agree with them all, but it would make the position clearer – especially if there was an emphasis on climate change and broken promises.

  4. @Val

    Fran
    I’m getting confused by all the alternatives. Why can’t the Greens just do the simple thing and say they’ll support it if Abbott stops trying to abolish the climate change legislation?

    {sigh}

    Because Val …

    The regime’s leader has taken a ‘blood oath’ to do just that. We might as well ask him to resign as a condition of supporting what is essentially a thought bubble that his own party room probably hates more than the PPL. IF we could ask that then why couldn’t we ask for all the other things I specified on the previous page?

    Really, this would merely be a figleaf to cover our reluctance to render him aid and comfort. It’s doing what I propose we do now with one intervening step. If the regime wants this for real let them explain the case for it in detail so that its supporters can process what they have voted for in practice rather than culturally or rhetorically. Let the regime propose a deal so they come as supplicants.

    They are the party that has done gross wrong, and repeatedly. They need to own their reckless folly, accepting blame and as Abbott might have it, “seek forgiveness”. Then we can discuss a wholistic response to actual problems rather than a piecemeal response to fantasy ones.

    As I keep saying, without good process, good outcomes are mere chance, are insecure and cannot be duplicated.

  5. @rog

    For exactly the reasons you outline, a process of federal mission creep is probably the only way this can be undone.

  6. @Fran Barlow

    Don’t be silly. The regime isn’t contemplating the introduction of Greens policy.

    That’s my whole point – this debt levy/tax is very much consistent with Greens policy. I quoted direct from Greens policy – “strengthening the progressivity of the income tax and transfer system”.

    So you’re saying that the Greens should oppose this because Government’s should first be

    engaging the excluded in public discourse in ways that allow them to understand what lies behind what the elite propose.

    So how much did the Gillard government “engage the excluded in public discourse in ways that allowed them to understand what lies behind what the elite propose”?

  7. @Christine Black

    [So how much did the Gillard government “engage the excluded in public discourse in ways that allowed them to understand what lies behind what the elite propose”?]

    The short answer is not at all. That’s our role since we alone amongst the parliamentary parties favour inclusion in practice. The Gillard regime however claimed to favour carbon pricing and ran for office on that promise. The election returned a parliament where this was the consensus. Entering the MPCCC made sense in this context. It helped advance policy rather than retard it. This regime however is bent on vandalising public policy and may well see the levy as a way of advancing that cause, or underpinning it. That is their problem, not ours.

  8. I agree with you JQ, the only two positions that made sense were to agree with the levy/tax outright, or propose more tax brackets with higher percentages at higher incomes, inviting Abbott to negotiate. If you concede that there needs to be a tax hike for high earners, then why not do it properly?

  9. @Fran Barlow

    you’re still not indicating why the Greens should oppose something which is basically their policy – to increase the amount that high income earners pay in tax.

  10. @yuri
    “Have you really missed my point so completely ”
    Probably, because it’s not very clear. I’m unclear as to what your definition of wealthy is, it appears to have something to do with examining the schools balance sheets so I guess by your definition we’re unable to determine whether they are wealthy or not as we don;t have access to this data. So we have to turn to cruder, but more widely accepted, measures such as observing that these schools have a large number of expensive assets, property for instance, on which they put very well appointed facilities that are peopled by highly paid teaching staff who teach the children of very wealthy people from the surrounding wealthy suburbs. These observations might be contrasted with say Balga Senior High School. I encourage you to take up the challenge rather than speculating over what the state of a wealthy school’s balance sheets might be.

  11. @Christine Black

    I have indicated why … at considerable length. If you choose to ignore that, one more post reiterating it seems unlikely to advance discussion.

    Some clues:

    What is our (the Greens) mission? Policy? Process ? Both?

  12. @patrickb

    I work at one of the “better” universities, and when students from the wealthy schools come here, they get to use inferior equipment and facilities than they did at school.

    Maybe by some strange definition these schools aren’t wealthy, but in the sense of having vastly better facilities than government schools and universities, they are.

  13. As regards Labor and the Greens, I don’t expect Labor to support this because I expect less of them. In particular,

    1. Substantively, they are too rightwing/gutless to support the policy itself
    2. As the Opposition, they are indeed supposed to as Fran puts it, “expose [the government] for the scoundrels they are”. Anyone who isn’t convinced by Labor’s efforts in this direction is unlikely to pay much attention to the Greens

    So, coming to the Greens position either they are duplicating the process role of the Opposition, or they are playing for popularity by opposing a measure that is causing the government grief. Poor stuff either way.

  14. …and what seems worse to me is that the opposition parties are engaging in ideological slogan games that are antithetical to their stated philosophy.

    Everyone wants to live in a country with high taxation – they are much nicer places. No one wants to pay tax. This is classic cooperator/defector game theory in action. Politicians facilitate this essentially schizophrenic position by lying to us and encouraging self-deception: it’s not a tax, it’s a levy; taxes are evil; Labor dunnit; the weather dunnit, the global financial system dunnit, etc.

    If the Greens are serious about a country with higher levels of public projects and a more even wealth distribution their correct approach would be to modify the legislation to rebadge the levy as a tax increase, make it either permanent – or persistent until say three consecutive years of surplus- and then vote for it.

    There are a lot of good arguments for taxation but no one has the guts to make them.

    Personally, I’d rather that tax levels were set by an arms-length body committed to economic management rather than satisfying incoherent voter aspirations, similar to the way that the Reserve Bank controls interest rates, but that is another matter.

  15. @Fran Barlow

    Seems it is as I said – the Greens (at least according to you) should vote against measures that implement their policy if those measures are being put forward by the Abbott government, regardless of what it is.

    I had assumed that if a party supports a particular policy, they will vote in the Parliament in support of implementing it. If the Greens have some other process based meta-layer that gets priority over their policies, I might have to look for a different party.

  16. @yuri

    How long could they stay open on nothing but their investment income?

    Who cares?

  17. John, is there not a basic problem with what you are proposing, which is that Greens voters are quite clear that they view the main political enemy as the LNP, and their most plausible long-term ally as being the ALP? 83 per cent of Greens voters at the 2013 Federal election preferenced Labor ahead of the Coalition parties, which has gone up from 70 per cent at previous elections i.e. the “Turnbull Liberal” stand of the Greens has largely disappeared, and they are now clearly a party of the left. In fact, the Greens 2PP preference for Labor is higher than that of the Socialist Alliance (80 per cent). To now reinvent themselves as a quasi-centrist party along the lines of the old Australian Democrats would appear to be a betrayal of the demonstrated preferences of the vast majority of their voters.

  18. The Greens haven’t blocked the Debt Levy yet. They made a good decision in stating they were against it.
    Given that the levy is a broken promise, only temporary, not hitting the top income earners hard enough, and that other taxes are going to be repealed which should not be, billions are going to be wasted on fighter planes and there are many other areas from which revenue should be coming (mining subsidies, investment subsidies, superannuation tax subsidies for high income earners), then the debt levy is an absolute shemozzle as was the CPRS.
    All those reasons are grounds enough to lose an opportunity in the same vein as the CPRS but it’s not lost yet. Just waving the debt levy through gives no opportunity to make deals, hold the government to account or gain political mileage.

  19. Our bourgeois democracy protects us against dictatorships. That much is good but it does not actually give us the postive of good governance. We have oligarchs ruling (most of the time) through the two bribed and suborned parties of the economic far right, Liberal and Labor. Until we change the fundamentals we are not going to change anything. First step is to destroy Liberal and Labor through the ballot box. Never vote Liberal or Labor. Never give them 2nd or 3rd preferences if it can be avoided.

  20. @Christine Black

    Seems it is as I said – the Greens (at least according to you) should vote against measures that implement their policy if those measures are being put forward by the Abbott government, regardless of what it is.

    Simply restating your claim doesn’t add to its credibility. You keep forgetting about the integrity of the process. When the ALP regime turned the business of implementing garnaut into an exercise in political gameplaying, it was no surprise that what emerged was un unsupportable mess — indeed, that was its point. That the regime paid lipservice to carbon pricing was not relevant.

    When the new regime was elected, a qualitatively better process — one that had integrity — attended the CEF. The outcome still fell well short of what we wanted, but it was manifestly a step forward and we supported it.

    I am a teacher. Sometimes a thought bubble on some new and better way to deliver some syllabus or class management outcome occurs to me. Before it can go from being a thought bubble to a good idea, I must follow a structured process.

    1. Defining the problem

    What problems or constraints am I trying to remedy/mitigate?

    2. Specifying the timeline and identifying resources

    When do I need to be able to implement the solution? What resources (physical, temporal and human) exist to fashion a solution? Who else (if anyone) is confronting this problem and what approaches have they used? What successes have they had? How would these compare with what I have considered?

    3. Identifying constraints

    What constraints (if any) are there on implementing the solution? Who else could guide me on this? Is the solution maintainable, andf capable of being modified if circumstances change?

    4. Benchmarking and evaluating

    How will I determine if the solution has been successful? When will this be audited and tested? By whom?

    5. Reporting

    How will I report the solution to colleagues and other stakeholders?

    Only after I have adequate answers to these questions can a thought bubble become a workable solution to some problem or challenge.

    The regime has done nothing like this and plainly, has no plans to do so. Ergo, there is no case for this. This would be so even if the regime were not a pack of scoundrels and pretenders.

    I had assumed that if a party supports a particular policy, they will vote in the Parliament in support of implementing it. If the Greens have some other process based meta-layer that gets priority over their policies, I might have to look for a different party.

    That is a matter for you, but on your showing in this topic that may be best. If some schyster only has to wink in your direction for you to start wondering whether you should do as he says, then one of the other parties is likely to serve you better than us.

    It’s our objective to empower humanity rather than offering political cover for scoundrels, however hard they wink at us.

  21. The Greens support progressive income tax. However, the first step is for a higher tax on personal incomes of over $1M. Hence, the $80K as proposed, is far too low a threshold.

    From the press release the Greens would prefer to support higher tax on big business – my suggestion is a real super rent tax on mining and the banks. The other suggestion is the removal of subsidies for the mining industry. And, a real killer budget item is for fighter jets – it can be removed before any person pays more!

    So, until those are addressed I believe the Greens will not support the levy/tax in its current form.

  22. Higher taxes on the very wealthy only will only stimulate avoidance schemes. France talked about it, now they are having to look at tax cuts.

    Raising the tax free threshold is one way lighten the load for low to middle income earners combined with a progressive tax scale à la Henry.

  23. I did a quick scan of the Greens news website and couldn’t find anything about the tax/levy/whatever.

    But anyway, I would think there’s no conflict in arguing against the levy in the media, in parliament, etc on the basis that it is sub-optimal to the alternatives (e.g. retaining the carbon tax, mining tax, etc) whilst also “voting for it” in parliament (if it requires such) assuming is it not regressive, and assuming our income taxes are currently too low (on some objective basis, as JQ has suggested they are).

    Rob (Greens member who doesn’t always agree with every Greens policy)

  24. … continuing from the above…

    The alternative, that a party should (attempt to) block *any* bill from another party because one of their other bills/policies/whatevs is disagreeable is a bit silly. That’s the situation in the US at the moment, where the Repubs vote down anything from the Dems, because “obamacare”. Not really a healthy democracy acting in the best interested of the country, I would say.

  25. @Fran Barlow

    When the new regime was elected, a qualitatively better process — one that had integrity — attended the CEF.

    Which is precisely what I said – that you suggest the Greens should put process ahead of content, only supporting legislation which implements our policy if we like the process which produced it. It’s hard enough getting legislation passed which improves the progressiveness of our tax system as it is, without adding some meta-qualification to it. But if the Greens are going to only support legislation if it’s produced by a desirable process, they should at least put that qualified against their policies so people who are thinking of them know they plan to put process purity ahead of policy progress.

    If some schyster only has to wink in your direction for you to start wondering whether you should do as he says, then one of the other parties is likely to serve you better than us. It’s our objective to empower humanity rather than offering political cover for scoundrels, however hard they wink at us.

    Name calling doesn’t really substitute for cogent argument. This isn’t a ‘wink’ – it’s a clear cut proposal to tax the rich. To say that we can’t support something implementing our policy because it’s put forward by a ‘shyster’ is to say that the Greens should not support any legislation put forward by Tony Abbott. You keep saying this isn’t your position, then you outline an argument which makes quite clear that it is.

    As @Rob says

    that a party should (attempt to) block *any* bill from another party because one of their other bills/policies/whatevs is disagreeable is a bit silly.

  26. @Rob

    We’re not proposing to block *any* bill. On the other hand, I doubt we will be in the business of letting the regime eat their cake yet have it too.

  27. Fran Barlow :
    @Rob
    We’re not proposing to block *any* bill. On the other hand, I doubt we will be in the business of letting the regime eat their cake yet have it too.

    Indeed I am using the US to illustrate a “logical conclusion” scenario. I don’t think that would happen here, but it makes me wonder, where does one draw the line?

  28. Ths conversation seems to be about the user pays system and how some users can afford to pay more. The recent audit, compiled by representatives from the Business Council, seems to have excluded business as a user who should pay. One could argue that the Business Council is not merely an objective observer and is actively lobbying on behalf of its members. Followers of NSW ICAC have been exposed to the corrupting influence of business on government and the threat business presents to the democratic process. It may well be too late.

  29. @yuri
    You are evidently aware that some schools are far more luxuriously appointed and lavishly equipped than others. I am confident that you are also aware that when Fran Barlow advocates an end to public funding for ‘wealthy’ schools, the schools she is referring to are the most luxuriously appointed and lavishly equipped ones. If you have some substantive objection to this proposal, you are free to make it. It is deceitful to obscure the issue by focussing instead on how Fran Barlow’s use of the word wealthy violates your personally upheld canon of usage.

  30. @J-D

    Indeed. I’ve no problem in principle state funding non state schools in areas that are poorly serviced by state schools. That’s not at stake here though.

  31. I was flabbergasted, if I heard correctly, that The Greens support Abbott’s bizarre PPL after the insignificant trimming of the upper limit to payments – aren’t The Greens opposed to policies that provide more help to those that need it less, and less help to those who need it more?

    Re Prof Q’s fn1 – I’d feel fabulously wealthy on $80,000 a year; I’d be able to support my daughter’s education properly, buy a reasonable car and even contemplate a brief holiday; $50,000 a year seems like a more reasonable threshold, though it’s out of reach to me.

  32. A day late, but with the CoA in mind

    Arise ye heads of exploitation
    Arise ye paragons of greed
    For avarice thunders extirpation
    Of those who live in need.

    No more the workers’ chains shall bind us
    No more are we in thrall
    Privilege shall rise on new foundations
    What can be bought
    shall now be all …

    Noting May Day and recalling the Haymarket Martyrs and the many who have fallen in the cause of the struggle for the empowerment of working humanity.

    Solidarity ….

  33. The Greens support progressive income tax. However, the first step is for a higher tax on personal incomes of over $1M. Hence, the $80K as proposed, is far too low a threshold.

    It looks like my disagreement with the Greens is substantive, not process-based. This is an incredibly lame excuse for a progressive policy, identical (ignoring the difference between $A and $US) to the position of the US Republicans. A tax on the component of income in excess of $1m will affect hardly anybody and raise hardly anything.

  34. @John Quiggin

    OK, let us look at income and wealth distribution.

    “Measures that focus on the very top income earners show a strong gain in their share of national income, as is the case in most OECD countries.” – Aust Govt Treasury.

    “… the wealthiest 20% of households in Australia account for 61% of total household net worth, with an average net worth of $2.2 million per household.” – ABS

    I would suggest that a focus on the wealthiest 20% (income and wealth taxes) would go a fair way to fixing the budget. The next 20% could possibly pay a modest income tax increase as well. The lower 60% should either benefit or the revenue could fix the budget if the deficit is considered excessive.

    The real substantive issue of course is why does our system generate inequality which then necessitates transfers? A better functioning and more equitable economy would not necessitate much if any need for transfers. The system of ownership and wealth distribution is flawed in the first place.

  35. @Fran Barlow
    Did you see my other comment (after the one you responded to)? Think I ended up much closer to your position after some thought.

    Though I agree with ProfQ #36 to an extent – setting the bar at incomes over 1 million seems far too high.

  36. @John Quiggin

    I stand by what I’ve said in the past. I’m for taxing people on and under my income progressively more. I’d prefer an infinitely incremental scale so that each new dollar is a new tax bracket.

    It seems that anyone not in the bottom 60% of income earners ought to be paying more and getting less state assistance. Conversely, there should be a lot more direct state assistance to those in the bottom 40% and somewhat more for those in the middle 20%.

    Yesterday’s revelations from the CoA underline that what this regime is about is not progressive tax reform but rather, a shifting of transfer payments away from the bottom 40% and by default, in favour of the top 20%.

    To be talking about supporting a tax measure from this regime is simply to focus on the growth of a sickly sapling in a forest that is in the process of being clear-felled.

  37. @Ikonoclast

    If you want the wealthiest 20 per cent to pay substantially more, you need to increase marginal tax rates starting somewhere below the 80th percentile (if you start there, then people at the 80th pay nothing extra at all). That’s going to get you pretty close to $80k for a single earner.

    @fran fact that it’s proposed by “this regime” is irrelevant. Obviously, anything that happens in national policy over the next three years is going to be done by “this regime”. If you’re going to oppose everything (even policies you would support in substance) on that basis, then you should say so and remain silent thereafter. Certainly, there’s no point in banging on about how bad the government is – you don’t need to convince me or the vast majority of people who read these comments.

  38. @John Quiggin

    Fair enough, I agree with your assessment then. But I would like to see the super rich hit a bit more too. There is no good reason that individual billionaires should be tolerated at all.

  39. Too many rich hippies who bankroll the Greens would be hit by a debt levy that kicked in at $80K.

  40. If you’re going to oppose everything (even policies you would support in substance) on that basis, then you should say so and remain silent thereafter.

    Plainly not. This regime sought and obtained our approval to abolish the debt cap. There might be other things to which we would not object. If for example, the regime decided to abandon the joint strike fighter deal or the Collins Class submarine replacement, I can’t imagine that we’d oppose that. If they decided Manus was too expensive and decided to process onshore and in the major cities, again, we’d support that, as unlikely as that is.

    But as things stand, this debt levy is a bridge too far.

    It’s also manifestly stupid — $2.4 bn p.a. when there are any number of more simple ways to raise much larger sums of revenue from people on higher incomes — the super concessions merely being perhaps the most obvious.

  41. @Terry

    One day I’m going to meet a rich hippy who supports us. I feel sure it will happen one day. As it stands the people I meet most often are low to middle income baby boomers, (some of whom may well once have been hippies but even I’m too young to have been one) younger tertiary educated people, often in education or the public service, retired people and quite young peopole (17-25).

    As yet nobody has suggested we go for a latte or chardy and I’m yet to meet anyone from The Greens wearing sandals.

  42. Do you know Graeme Wood, the founder of Wotif? Or MONA impressario and successful gambler David Walsh?

  43. Fran Barlow :
    One day I’m going to meet a rich hippy who supports us.

    There are quite a number of them around. BZE was bankrolled by a few for a while (may be still), and if you drop the “rich” threshold to include the top 5% of taxable income Bob Brown may even qualify. But drop it too far and a parliamentary salary would push you into “rich”, and we can’t have that. It’s bad enough that half of them start in the top marginal rate (before negative gearing drops them to something more reasonable).

  44. @Terry

    Do you know Graeme Wood, the founder of Wotif? Or MONA impressario and successful gambler David Walsh?

    I’ve heard of both of them but

    a) 2 is a small number, and hardly “too many”
    b) Neither of them has any say in Greens. As far as I know, neither is even a member.
    c) By supporting us they support our policy, which is for more sharply progressive taxation. I’ve never heard either complain about this policy.
    d) It’s actually quite hard to work out when Wood was born but he looks much too young to have ever been a hippy. Walsh was born in 1961, which was around the time the hippy period was also in embryo and at the time of Woodstock he’d have been 9. Apparently he was raised a Roman Catholic, which makes him an improbable hippy. Now he’s reportedly a “rabid atheist” which is still not very hippy. At a guess, I’d say most hippies are deists of some kind or followers of some variant of Buddhism.

    As both seem to be into left-liberal philanthropy, I doubt taxa rates would be an issue for them.

    So your claim that the large wealthy hippy demographic would object seems to fail on more than one basis. If there were one, they haven’t blocked our progressive taxation policy, and the two you cite seem very quiet on the matter and probably haven’t been hippies.

    And no, I’ve not met either, though one day, I suppose I might.

  45. Totally agree with John Quiggin. As soon as I saw Abbott’s proposal for the levy I was relieved that at least there was some possibilty for those earning $80,000 plus to ‘share the burden’ of this Government’s bloodbath. When I then heard immediately that the ALP and Greens would oppose it, I laboriously emailed all ALP and Green senators saying that the levy was not a problem, while all the other horrors were.
    Only heard back from Christine Milne, patronisingly telling me that income tax on those earning $80,000 and over was unfair to ordinary Australian families and companies should be paying more tax not individuals.
    Tax is paid by individuals not families (apparently if you’re not in a family you aren’t of interest) and company tax is based on dubious principles and not necessarily redistributive.
    Love you John Quiggin!

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