Anyone puzzled by Treasurer Scott Morrison’s bizarre comments about tax and spending ought to remember that the man is a fundamentalist Christian who spends his life believing in the unbelievable.
As the blog remarked recently about Galileo – when he showed sunspots through his telescope to believers in an Aristotelian universe they couldn’t see them – and despite the scientific revolution and the Enlightenment not much has changed since then in some minds.
But a little dose of taxation reality can be found in a paper by former Victorian MP, Graham Ihlein, published by the University of Melbourne School of Government at http://democracyrenewal.edu.au/income-and-property-tax-should-be-increased-not-gst
Graham says: “Australia’s governments face major and growing budget problems.” So far so conventional but what is different is that he then goes on to look at the structural problems in both spending and revenue. In terms of tax he says: “Revenue-raising taxes are under pressure due to low growth, lower export prices, tax dodging and unsustainable tax deduction. Revenue-raising taxes across Australia total about $440 billion or about 27.5% of our GDP, well below the 33.7% OECD average.”
So what is to be done? Graham suggests raising – yes raising – income tax through slightly higher and more progressive personal income tax rates and reducing concessions for superannuation, capital gains, negative gearing, trusts, dividend imputation and similar concessions such as the fuel excise tax credits farmers and miners get. He wouldn’t cut company tax (only the Federal Government and the BCA think that’s a good idea) but instead crack down on tax evasion. Graham also advocates expanded land and resources taxes. He also wouldn’t increase the GST because it would increase inequality. “Evidence shows that the overall level of taxes does not change jobs or national income. But taxes that reduce excessive inequality can impact, especially where inequality has increased, as in Australia, or the public believes inequality is excessive or unfair,” he says. He cites OECD research on how rising inequality reduced economic growth by around 5% in 1990-2010.
The total tax system would be more progressive under his proposals: those on low income would continue to contribute a total of 24% of their income; average income earners 28% (up 3%); and high incomes would contribute 35% (up 7%).
Turning to the spending side he cites the Australian Council of Social Services report on tax and spending priorities which says that without addressing the structural problem “Governments will be trapped in a vicious cycle of austerity and recrimination. On the expenditure side Graham argues that much low priority spending and waste could be cut although as we all know waste is the eye of the beholder. The blog believes funding school chaplains, for instance, is waste and can think of any number of corporate welfare tax expenditure and concession scams which largely benefit overseas companies and financial manipulators. The recent Dick Smith private equity purchase and flip is a good example – a case study on how to dud both shareholders and taxpayers.
Polling consistently shows Australians want more spending – on things like health, schools and infrastructure rather than tax cuts. The people who want tax cuts are, of course, the same people who want to carefully protect inequitable forms of corporate welfare. The National Party Deputy Leader, Barnaby Joyce, rejoiced when Malcolm Turnbull refused to sign on to Paris climate change conference calls for ends to fossil fuel subsidies. Yet the same Barnaby pointed out that National-held seats had lower income levels than other seats in Australia suggesting that they are among the main sufferers from the growing inequality in Australia. The ABC Fact Check scheme looked at Joyce’s claim and found it was true. The blog wondered why the Fact Check team didn’t go a step further and establish whether possible correlations between income and educational levels demonstrated that National Party held seats were populated by Australia’s least well educated voters.
The Australian tax debate –largely driven by the usual rent seekers – is now a massive masquerade in which the BCA and others talk about ‘reform’ but actually promote their vested interest. Once the BCA, when Geoff Allen was CEO, played a major constructive role (alongside the ACTU and Bill Kelty) in the Hawke-Keating reforms. Today they simply mouth simplistic and misleading mantras.
Which, of course, is a very useful description of what religious people like Scott Morrison practise. The ‘sunspots’ in Australia are very visible but sadly too many people can’t see them because of ideological blindness and irrational beliefs. Perhaps Scott Morrison could pray for a remedy but then the blog suspects Morrison’s problem is too much prayer and too little analysis.
And, for all the talk about the need to communicate the ‘case for reform’ it should be remembered that even the best communicators can’t do that without some analysis, some evidence and a robust product rather than a mantra.