Tweet trouble

According to Chris Mitchell at the Oz (paywalled, I think), I’m the mastermind (or at least a mastermind) behind the original version of Emma Alberici’s now-rewritten analysis of company tax cuts. Here’s Mitchell

In Alberici’s case a lot of weight was given to left-wing academic John Quiggin and economist Saul Eslake, a prominent commentator whose position on the central question — do corporate tax cuts eventually trickle down as increased wages? — seems to have changed over the years.

It’s nice to be so influential, but there’s just one problem. In Alberici’s original article (here), I don’t get a mention.

But maybe Alberici is presenting my ideas second-hand. Sadly, the arguments I’ve put forward on the topic don’t get a run either. Here’s the summary of my piece in Crikey (also paywalled, I fear)

Optimistic tax models put the average Australian at being 0.1% better off under the proposed company tax cuts. And the good news is they’ll only have to wait 25 years for that tiny benefit to appear!

Alberici doesn’t mention this.

So how did I get top billing? The villain, as usual, is social media. Twitter user (tweep?) Matt K asked me whether there were any mistakes in the Alberici piece and I said no. Apart from a couple of replies to further questions, that was my entire contribution, as you can see from the thread of the conversation. But, as they say nowadays, it went viral, at least insofar as a comment on tax policy can go viral.

Before I knew it, I was being attacked from all directions. Helen Razer said I was a bogus “leftist”, while Aaron Patrick at the Fin hit me from the right because I mentioned Marx and Engels in the draft introduction to my book. To be fair, Razer wrote to explain her position. By contrast, Patrick’s whole technique is verballing and out-of-context gotchas’, so I don’t expect that to change.

I do get a passing mention in the revised column, but since my name is mis-spelt, I think it’s safe to assume that I’m not a primary source. Obviously, Mitchell didn’t get around to reading the original (maybe the research skillz of Newscorp aren’t up to locating it) and assumed that I was quoted there.

While I’m on the subject, Mitchell had an amazing piece a while back (not worth linking, since Paul Kelly and Mark Latham have already trodden this ground many times) about the end of freedom of speech in Australia. The burden of it is that decent, ordinary Australians like Mitchell and Andrew Bolt, limited as they are to major national newspapers and broadcast media, can’t say what they think about Muslims, lefties and so on any more without people on Twitter saying what they think about Mitchell and Bolt. As Tim Dunlop says in a similar context, any less self-reflection and they’d be vampires.

29 thoughts on “Tweet trouble

  1. It gets a run at AIMNETWORK in response to a comment just up there re the buffoon Mitchell and
    Prof. Quiggin…can’t believe the timing.

  2. I’m a tweet wittle bird in a diwded tage,
    Tweety’s my name, but I don’t know my age.
    I don’t have to wowwy and dat is dat,
    I’m tafe in here fwom dat ol’ puddytat, Chris Mitchell.

  3. Dan @ 2

    The article in question is here: https://dailyreview.com.au/emma-alberici/71583/

    The argument (also followed up in comments) is more or less that JQ in her view considers Paul Krugman and Thomas Piketty to be basically “socialist”, while HR considers them (or Krugman, at least) to be “culturally progressive neoliberal(s)”, and JQ is in her view a “moderate” “not given to socialist views, [his views] only appear so in the minds of free market maniacs”.

    So basically a lefter-than-thou remark from an avowed Marxist in the context of the panic about the Alberici article.

  4. According to the quote, paragraph 2 in JQ’s post, Chris Mitchell belongs to those who confuse changed circumstances (conditions) with changed minds (inconsistent policy recommendations).

    I have a few questions for Chris Mitchell and people who argue along the same line:

    Why do people in Sydney regularly change their minds between July and December on what to wear when going outdoors for at least 1 hour in Sydney? Why don’t Sydney people copy people in Darwin regarding adhering to their ‘position’ on what to wear outdoors? Surely, both Sydney and Darwin people have the same freedom of choice in Australia.

  5. Mitchell also queried Albericis expertise claiming that “she has a bachelor of arts with a major in Italian”

    Talking about cvs, Alberici’s wiki page says “Alberici graduated with a bachelor’s degree in journalism and economics from Deakin University and a bachelor’s degree in Italian from the University of Melbourne“”.

    Contrast that with Mitchell “In 1973 Mitchell began his career as a 17-year-old cadet on the former afternoon Brisbane tabloid, The Telegraph…. He turned down a dentistry scholarship to pursue a career in newspapers.[2]”

    Using Mitchell’s guide to suitability he is only qualified to be a junior.

  6. Even more of a joke is Mitchell’s hostile reference to Saul Eslake. Saul has, ferchrissake, a long career as a BANK economist (albeit he had, by the standards of bankspokeshumanoids, an unusual reputation for integrity rather than just talking his employers’ book). No-one who knows him would ever call him a lefty.

  7. @derrida derider
    Probably not surprising through. For over a decade he’s been the key high profile advocate for the policy of abolishing (or at least significant winding back of) negative gearing. No doubt that would have provided him with a fair degree of hostility from the right.

  8. I read the Mitchell article and as usual thought it laden with hubris rather than intellect and commented that Alberici’s article was the best I had ever read from her. I have at times been disdainful of her arguments especially that Labor spent Howard’s surplus. I also suggested that dollars in the paw of the hoi polloi would do wonders and lo and behold the great one commented I didn’t have a clue.

    Fair enough that might be so but I also argued that those who don’t have much tend to spend it all and some spare cash would do wonders for retailing. He replied it would blow out our CAD.

    My next comment was not printed.

  9. I watched a bit of The Drum a few hours ago. John Hewson, former leader of the Liberal Party, talked on corporate tax cuts, employment, wages and ‘trickle down’.

    Given Chris Mitchell’s taxonomy of academic economists into ‘left wing’ (and presumably ‘right wing’), Prof John Hewson is now a ‘left wing’ academic, like Prof John Quiggin,

    Given Chris Mitchell’s assessment of Saul Eslake, who like John Hewson is an economist, has work experience in Government and in the banking sector, John Hewson has also ‘changed his mind’.

    Chris Mitchell, in case you are reading this blog, my message to you is: Only blind followers of zombie ideas don’t ‘change their mind’ in the face of new theoretical and empirical information, including institutional changes. Tickle down of new information doesn’t seem to work well either.

    IMHO, Prof Quiggin followed a different route of analysis from the approach by John Hewson but reaching the same conclusion regarding the merit (not) of corporate tax cuts. They complement each other. Such results are generally considered to be more robust – have more credibility.

    Hewson (a macro-economist by training) talked about contemporary corporate finance (micro – how decisions are made). The overriding objective in corporate finance is ‘shareholder wealth maximisation’ – or ‘value maximisation for short’. So, Hewson pointed out that the tax reductions (‘savings’ from the perspective of a corporation) are most likely to be spent as dividends or share buybacks. The latter results in an increase in the share price all else being similar or unchanged (this may have implications for the personal wealth of the CEO and CFO and a few others who have put options written on shares or a bonus that is conditional on share prices. It is elementary in corporate finance that except when there is a hard credit constraint (rationing due to regulatory measures; GFC type crises) the investment decision is independent of the financing decision.

    If the institutional environment is the Bretton Woods monetary system with credit creation via the banking system being controlled via monetary authorities in many countries (local economies), relatively high wages underwrite demand for the output of business enterprises, the corporate tax rate is relatively high, say 60%, the local savings rate is low and, to control inflation, a credit squeeze occurred, then I would suggest, many economists would recommend lowering the corporate tax rate to provide finance for additional investments. This is nothing but Keynesian macro-economics, conceived during this institutional environment. As JQ mentioned in an earlier thread, current policies are directed toward solving the problems of the 1970s. Solving a problem which doesn’t exist creates a problem – I don’t know who said it first but it makes sense to me.

    Hewson also pointed out published statutory corporate tax rates across countries are not adequate indicators of ‘international tax competitiveness’ because of vastly different regulatory environments across countries. He pointed to effective tax rates.

  10. @Ernestine Gross

    You are talking logical, empirically-based sense to a person (Mitchell) who is a confirmed faith-based reasoner. Twon’t do any good in his case. But I guess the point of rebutting such people is to reach others who are still capable of changing their minds based on evidence.

    I agree with your emphasis on institutional environment. It reminds me of the STP concept (standard temperature and pressure) from physics. The prevailing conditions affect the outcomes of attempted measures. If I boiled a kettle on the top of Mt Everest it wouldn’t be hot enough to make tea. If we drop corporate tax rates, the effects are dependent on the ambient prevailing political economy conditions, including the institutional environment and all that it conditions in turn.

    There is also a psycho-social environment. People’s beliefs condition what they think is efficacious or possible. The net psycho-social environment (if I may use that term) conditions the Overton Window which then feeds back. Many things are now believed not possible and it is mainly the believing they are not possible which makes them not possible.

    The net psycho-social environment is now much conditioned by neoliberalism and libertarian capitalist ideas. The central tenet is the paramount importance of private income-producing property. This is clearly held to be the highest possible value from which all other values and the solutions to all problems must flow. If one does some historical reading it is clear that these ideas derive essentially from Whiggism. The Whigs were the landed aristocracy in ascendancy, in Britain anyway, in the 17th and 18th Centuries. They were quite liberal minded, libertarian in a sense and sometimes libertine. It is quite attractive to hold the philosophy that a man should be able to do what ever he wishes with his property (and people) when he has a lot of property (and people). For the property-less there was, and is, a lot less freedom. Impressment anyone?

    “Impressment, colloquially, “the press” or the “press gang”, refers to the act of taking men into a military or naval force by compulsion, with or without notice. Navies of several nations used forced recruitment by various means. The large size of the British Royal Navy in the Age of Sail meant impressment was most commonly associated with Britain. It was used by the Royal Navy in wartime, beginning in 1664 and during the 18th and early 19th centuries as a means of crewing warships, although legal sanction for the practice can be traced back to the time of Edward I of England.” – Wikipedia.

  11. @Ernestine Gross
    I’m in 2 minds about the proposed company tax cuts. With dividend imputation, they’ll have little effect to local investors, business owners, partners, shareholders etc. They’ll primarily affect overseas investors – making it more lucrative for them.
    So, I suppose the question then is: should we be taxing overseas investment effectively 30% on dividend return considering they’re out of the country and not utilising the local services that tax dollars normally pay for?
    Will there be another potential tax dodge for local investors claiming dividends as OS investors?

  12. To my rhetorical question, Impressment anyone? (a mere blokey, sexist viewpoint) I should have added “Domestic servitude anyone?” to include the effects on servants and more especially on women in those times and even today.

  13. @Troy Prideaux

    I am not sure what you mean by ‘investors’ – those who acquire physical assets or those who acquire financial securities or both. Are those who acquire financial securities corporations or individuals? Are those who acquire equity shares also selling debt securities (where interest on debt is a tax deductible item)?

    Not all corporations in Australia who have shares on issue pay ‘fully franked dividends’ or even partially franked dividends. Hence taking the statutory corporate tax rate of 30% as the ‘effective’ rate for dividend imputation applies at most to those corporations who issue fully franked dividends. Their effective tax rate may still be lower because of tax subsidies somewhere. (Where is Michael West when one needs him for empirical data required for quantification?)

    I don’t buy the argument that foreign investors don’t utilise the local services that tax dollars normally pay for. Firstly, without the local services provided by tax dollars (income, GST, stamp duties, council rates, other fees paid for by the local population) the foreign investors might not wish to invest at all (political risk) and in particular might not have the opportunity to buy shares or other financial securities issued in Australia without ever visiting Australia. Second, there is hardly a perfect correspondence between taxes paid over a life time and services used over a life time for each individual within any given society. I can’t see why ‘domestic’ vs ‘foreign’ should be a categories that require a special concern regarding correspondence between taxes paid and services used.

    “Will there be another potential tax dodge for local investors claiming dividends as OS investors?” None I can imagine. While foreign investors in financial securities issued in Australia could be expected to benefit from a corporate tax cut it does not follow that Australian investors in these securities would benefit by becoming ‘foreign’. There is only one clear cut effect on Australian investors, namely those who for reasons of their circumstances hold a portfolio of shares that pay fully franked dividends. They would be worse off, all else being about the same.

    I believe the crucial question is: How does the proposed program of corporate tax cuts (not 1 but a series, each cut being so small that it may be indistinguishable in its effect within the foam created by other events) improve at least one of the following objectives without making the others worse:

    1. Improve financial system stability (reducing private leverage)
    2. Reduce income and wealth inequality
    3. Reducing environmental degradation, including greenhouse gas emissions
    4. Reducing public (government) debt

    Without the benefit of Michael West’s data set and Treasury’s econometric models, but relying on a multitude of information, including the observation that large and small, domestic and foreign retailers are or are at the risk of closing shop, I reach the conclusion that the proposal has the quality of pure hope.

  14. Ernestine Gross :
    Not all corporations in Australia who have shares on issue pay ‘fully franked dividends’ or even partially franked dividends. Hence taking the statutory corporate tax rate of 30% as the ‘effective’ rate for dividend imputation applies at most to those corporations who issue fully franked dividends. Their effective tax rate may still be lower because of tax subsidies somewhere. (Where is Michael West when one needs him for empirical data required for quantification?)

    I’m confused. If you receive dividends (whether franked or not) you can still claim the company tax obligation against your income tax obligation. Bottom line, you’re only taxed once.

  15. Ernestine Gross :
    @Troy Prideaux
    “Will there be another potential tax dodge for local investors claiming dividends as OS investors?” None I can imagine. While foreign investors in financial securities issued in Australia could be expected to benefit from a corporate tax cut it does not follow that Australian investors in these securities would benefit by becoming ‘foreign’. There is only one clear cut effect on Australian investors, namely those who for reasons of their circumstances hold a portfolio of shares that pay fully franked dividends. They would be worse off, all else being about the same.

    Wouldn’t they only be worse off if their marginal income tax rate was less than the company tax credit?

    The potential tax dodge I was speculating about would be for those already claiming income as OS investors/stakeholders but living here.

  16. @Troy Prideaux

    I do understand what I wrote is consistent with the Australian dividend (‘distribution’) imputation system. The system is quite complex in detail. I suggest you go to the following web-site and then click on ‘in detail’.

    https: // http://www.ato.gov.au/ Business/Imputation/ (I introduced a few spaces into the address to avoid getting caught up in moderation.

  17. @Troy Prideaux
    The company tax paid on only fully or partially franked dividends can be fully or partially claimed against your income tax. The amount of company tax paid in those cases is imputed to you. If dividends are not franked there is no imputing to you of any company tax paid. wikipedia.org/wiki/Dividend_imputation

  18. @Troy Prideaux

    “So, I suppose the question then is: should we be taxing overseas investment effectively 30% on dividend return considering they’re out of the country and not utilising the local services that tax dollars normally pay for?”

    However, the resident company that paid the franked dividend here is here and “utilising the local services that tax dollars normally pay for.”

  19. Svante @22. neat reply. Traders in financial securities have no incentive to see it that way, do they?

  20. John I really enjoy your infrequent articles attack on other commenters deleted, please read comments policy – JQ

  21. @Ernestine Gross

    Not quite sure of the question. Overseas investors and traders are both owners of the resident company that utilises public services here to undertake the company’s business, but the trader’s business is short term frequent trading in business ownership not the productive and service consuming business of the company owned. Calculation of their taxable return without franking if a company is bought and held to an ex dividend date is surely a factor speculators, sorry, traders monitor closely, poor things. Of course they’d like a franking credit extra, but they are already only taxed once on the business they actually engage with.

  22. @Svante

    It seems to me you understood my question very well and I am reasonably confident in saying I understand your answer.

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