Here’s my piece from today’s Fin, on the expenditure side of the budget
The Budget, Part 2
Following up on the Budget, I’ve been looking at the incidence of income tax over the Howard-Costello period. To start with, I’ve just looked at the tax scales, disregarding deductions, avoidance and evasion, and confining attention to single taxpayers. The results are perhaps not surprising, but certainly disturbing
Single taxpayers on average weekly ordinary time earnings faced an average income tax rate of 22.8 per cent in 1996, and that will be pretty much unchanged at 22.2 per cent when the second stage of the Budget tax cuts are phased in in 2006. Since the GST has come in in the meantime, raising more revenue than the indirect taxes it replaced, we can conclude the tax rate for this group has risen. Also, since the mean exceeds the median, this means most single wage- earners are paying more tax than they did in 1996.
The effect is stronger ot 0.6 times AWOTE, where the average income tax rate has risen from 15.4 per cent to 16.9 per cent. On the other hand, for those on 1.5 times AWOTE, the average rate has fallen from 29.4 per cent to 26.2 per cent, and for those on twice AWOTE, from 33.8 per cent to 30.1 per cent.
Since someone is bound to jump in and point out that this is still a progressive system, let’s remember that the income tax is just about the only progressive element of the system. Except for the bottom 20 per cent, the tax system as a whole was roughly proportional before the latest changes, and is likely to become increasingly regressive if policy continues along these lines.
Andrew Leigh has a different way of looking at the numbers, but reaches much the same conclusion.
The Budget
My AFR piece tomorrow will deal with the expenditure side of the Budget, but I also plan a piece on the tax side. My immediate reaction is the same as everyone else’s – these cuts are amazingly skewed towards upper-income earners, with no-one on less than $55 000 per year getting more than a $300 tax reduction. This is about 9 months worth of bracket creep for someone on $40 000/year, but it’s apparently supposed to last for the rest of this government’s term in office, given the allocation of future tax cuts to the top end.
I’ll try to have a more detailed analysis soon.
There’s more from Ken Parish, Andrew Norton and Flute
The realist case for electoral reform
Via Senator Andrew Bartlett, I see that The Independent is campaigning for electoral reform in the UK, following Labour’s re-election with only 36 per cent of the vote.
Leading opponents within the government are named as John Prescott and Ian McCartney and the story also mentions that Many union leaders also fear it will lead to coalition government with the Liberal Democrats, and prevent Labour from governing again with an absolute majority.
I imagine that the opponents regard themselves as hardheaded realists, but it would be more accurate to view them as reckless gamblers.
Great minds think alike, fools seldom differ
Peter Hartcher also thinks that Costello’s best option for becoming PM is to go to the backbench (thanks to Jack Strocchi for the link).
What I like about cultural studies
Nick Caldwell, who kindly helped me out yet again with the site design has asked me to write a post on what I like about cultural studies, following up similar posts on John Howard and postmodernism.
Which martial art are you?
Being focused on martial arts at the moment, I’ve run across quite a few references to boxing, an activity which continues to mystify me. My big question about is: whose idea was it to give boxers gloves? It seems like a recipe for protecting the fists (the bit that hurts most, in my experience) while maximising the potential for brain damage, thereby being simultaneously wimpy and deadly.
I also saw in the UQ News a story about the exclusion of women from boxing, which made the obligatory reference to Million Dollar Baby, a film I haven’t seen yet, though I plan to. It struck me that, of the sports I’ve had any involvement with [not that many, I admit] karate is easily the most gender-integrated. Women and men routinely train together, and, in my experience around 30 per cent of the participants in the average tournament would be women.
I’m not suggesting that non-Western martial arts are some sort of gender-neutral utopia, but the contrast with boxing is still pretty striking.
Monday message board
I’ve been away at the annual Seiyushin karate camp, and have returned to find my broadband connection not working, and my fallback dialup options plagued with difficulties. So you’ll have to provide the content yourselves, just for the moment.
You are invited to post your thoughts on any topic. I’m still planning a May Day post on labour issues, but I’d be interested in your thoughts. Civilised discussion and no coarse language, please.
Good news on geothermal energy
Geothermal energy is one of those alternative sources that always seems to be waiting in the wings. The basic idea is to exploit the heat (derived from radioactive decay) of granite rocks about 4k below the earth’s surface to superheat water which can then be used to drive a turbine at ground level. It’s a closed cycle so the water can be used over and over. Sounds good, but so have lots of other alternatives to carbon-based fuels that have so far failed to deliver on a large scale.
But now, it seems to be a lot closer The test run by Geodynamics produced 10MW of power and they are talking about a 250 MW plant, with orders already in place from Origin Energy. The Cooper Basin appears to have gigawatts of potential capacity, and large areas of the country are unexplored.
Of course, the big issue is cost. It’s hoped that power can be delivered at 4c/KwH, but it seems likely there will be some overruns. Nevertheless, if the cost of C02 emissions is taken into account, geothermal will very probably be a winner. Once again, it’s evident that, unless we ratify Kyoto now, we are in danger of missing the boat. Australia has a huge endowment of this resource, and a good start on the technology, but no doubt it can be found elsewhere and will be.
Weekend reflections
This regular feature is back again. The idea is that, over the weekend, you should post your thoughts in a more leisurely fashion than in ordinary comments or the Monday Message Board.
Please post your thoughts on any topic, at whatever length seems appropriate to you. Civilised discussion and no coarse language, please.
