Here in Australia, the taxation "debate" rolls on. I have put the word debate in inverted commas only because I am not convinced that it is a real debate. It's certainly a sometimes confusing debate because it mixes questions together. Or perhaps its just that those questions are inextricably mixed anyway.
One question is the desirable size of government, using government in the broadest sense to include the three layers of Government. To the proponents of the small is better school, the real issue is reducing government spending. This school then goes on to argue for reduced company taxation in particular, followed by reduced income tax as well. In doing so, they join two questions, the size of government with a specified tax solution, certain types of tax cuts. Winton Bates is a member of this school, see Was the great tax debate worth having?, as is the Business Council of Australia.
A related issue is the size of the Federal Government deficit. The small is better school also want the deficit removed, so expenditure cuts are needed to remove the deficit and to support lower tax rates, a sort of double whammy effect. By contrast, the Committee for Economic Development of Australia (CEDA) is now focusing on the need for increased taxation revenue to bring the budget back to surplus by 2018-2019. To this end, they propose a number of taxation changes largely at the margin, but also with pain attached.
A third question relates to the nature of Australia's Federation and especially the question of fiscal imbalance. The current system is out of kilter, I think everyone accepts that, but the solutions are not clear. This was an issue that that Prime Minister Abbott was trying to address, but it has got rather lost in the political static. Mr Turnbull is now apparently re-floating the idea of state income tax as a way of addressing the problem of fiscal imbalance - and making it easier for the Commonwealth by shifting responsibility back to the states. .
Then there is the question of the overall efficiency of the taxation system.Given what government wants to do, what taxes raise money in the most efficient way with minimised negative effects? This is a linked but quite separate question from the value and impact of individual taxation measures such as the treatment of superannuation intended to achieve specific public policy effects. To propose a variation in specific tax arrangements introduced for particular purposes in the name of general taxation reform brings together two very different sets of issues.
Matters are further complicated by the pattern of winners and losers associated with any particular change. The wider the spread of change, the more issues involved, the greater the spread of protest and degree of difficulty in bringing about any change.
Take my own case as an example. While I generally support the idea of smaller government, or at least government that is of minimum size relative to need, I just don't accept the idea that smaller government is an a priori good thing in all circumstances. I do accept the need to address the deficit because it gives us freedom later on, but want to know about the path. I do not regard this issue as a question of taxation reform as such. On the question of the Federation and fiscal imbalance, I regard this as a problem and have supported the return of income tax powers to the states. However, that is not a question of taxation reform, but of Federation reform. And when it comes to all the individual tax measures, I want to address them as specific questions so that I understand the issues.
In all this, we complicate by joining together unrelated if somewhat connected things. Perhaps it's time to do away with the concept of taxation reform unless we can strictly limit it to tax issues, instead focusing on the underlying issues that complicate the debate. At the moment, the whole discussion is like a palimpsest on which we can still read other words, tracking back though the layers to our ever greater confusion. .
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29 comments:
Palimpsest is a great metaphor, Jim. A parchment largely scraped clean of the original text. I don't think we can afford tax cuts if budget repair is our top priority, in fact larger taxation is probably up there, particularly if targeted at higher income brackets and companies.
I don't think we can afford cuts to health and education for the sake of our present and our future - the present because health cuts equate to a tax on those whose consumption is most income-sensitive (an austerity policy in disguise, and we've seen how well that works!) and our future because we are uncompetitive in fields where labour cost is a factor. High skilled jobs are our future and cutting education will drive employers elsewhere ina rather globalised economy.
And as for the States taking back income taxation powers which they gratefully shed in WWII and again at the introduction of the GST (in a different way): "He's gotta be dreaming!"
Yes, I had to look it up too, tanners. And that, itself, is indicative of a deeper problem.
Put plainly, this hand-wringing 'on the one hand but on the other' crap is just that - crap. No posited solutions, no way forward; just "my wasn't that a fine glance to mid-on" sort of stuff. Predictable: wrap thoughts so tightly in a glittering catch-phrase so that nobody notices there's actually nothing there, after they remove the wrappings.
So let's get to some basics:
1) What possible benefit to our Federation could ensue from the federal government divesting itself of taxation powers?
2) Are (continuing, national) deficits a bad thing?
3) Aren't (national) surpluses just an indicator that 'government' is removing more from the economy than it (as a placeholder for we, the people) recirculates by way of spending?
4) Why is 3 a 'good thing'?
5) What specific solutions are proposed for (this ill-defined problem of) budget deficits?
IOW - never mind the soothing sounds; what's actually under the bonnet?
kvd
I'd always thought a palimpsest was something slightly different until the maker of the film "The name of the rose" used it to describe his adaptation of Umberto Eco's work and my definition didn't match his sentence. Much nicer than saying "The Hollywood version" :)
And that's what we've got. The Hollywood version of fiscal/revenue reform, where the objective is not to deliver a statement (the documentary) or change the world (art nouveau) but to make a popcorn munching audience smile and frown in the right places and come out unchanged but somehow feeling better.
Just to answer your questions, kvd.
"1) What possible benefit to our Federation could ensue from the federal government divesting itself of taxation powers?"
Misdefinition. There is no suggestion of the Federal Government divesting itself of powers - it didn't have an income tax power originally, but of fixing fiscal imbalance.
"2) Are (continuing, national) deficits a bad thing?"
Yes, although its influenced by the size of the deficit. It builds debt, and can crowd out private sector activity when the economy is stronger. It also reduces Government's capacity to do things when times are bad,
"3) Aren't (national) surpluses just an indicator that 'government' is removing more from the economy than it (as a placeholder for we, the people) recirculates by way of spending?" `
No. First, it implies that private spend is the be-all and end all of economic activity. Secondly, and as suggested above, surpluses in good times give government's greater capacity to react in bad times. As we found with the GFC.
"4) Why is 3 a 'good thing'?
By 3, I assume that you mean surpluses. See may answer to 3.
"5) What specific solutions are proposed for (this ill-defined problem of) budget deficits?"
CEDA has one, Winton and the BCA another, The government purports a third, Labor a first. They all propose solutions but for differing problems.
Nore that with the possible exception of question 1, none of your questions are actually tax questions. And that was part of my point.
Now if you look at what 2t said, each response addressed a different issue than tax; the tax outcomes were a residual. And that was my point.
Except 2t's last comment. That raised different issues.
Well Jim, I've now read your responses to my numbered questions several times, and am no wiser. Perhaps it was a forlorn hope of mine to gain some basic understanding of a very complex set of issues, but I remain uninformed.
1) How could I have re-stated item 1 so as to not invoke your 'misdefinition' non-response? I had thought Turnbull's latest ploy was to provide individual states with the right to individually set levels of revenue collection which are presently set at the federal level. I can see the political gains to him from that; what I can't see is the benefits to Australia - hence my (obviously badly put) question.
2) You say deficits are 'bad' because they can 'crowd out private sector activity'. My understanding of our deficits is that they are largely caused by spending areas not easily addressed by the private sector - I'm thinking primarily of health, social security, and education here. I've never seen any evidence of "crowding in" by the private sector in those areas.
3) Sorry - I am reading my question, then reading your response, but am finding no correlation between the two?
4) I'm assuming your "see my answer to 3" is referring to your "surpluses in good times give government's greater capacity to react in bad times"? If so, one implication is that deficits can be a 'good thing' at certain points in the economic cycle.
5) Skipped because I can't see any 'solutions' proposed in any of those references apart from fairly vague references to concepts such as 'equitable' and 'transitioning economy' and the like. They seem more descriptive than prescriptive to this little brown duck.
Please understand that I was only seeking some enlightenment on some basic concepts, not attacking your post as such.
kvd
And I should add, with some sorrow, that our federal government since the last election has been a great disappointment. It may well end up as one of the least effective governments of my lifetime.
kvd
Hi kvd. Come back on this tonight.
The other thing which is niggling away in the back of my mind is what I'd call the false equivalence of 'innovation' with 'profit' - particularly with reference to IT and other cutting edge industries. It is a sad fact that the failure/success rate is maybe 99:1 - as I know from my own involvement and I'm sure Jim accepts thru his Aymever enterprise.
The constant refrain is that dropping company tax will lead to (sometimes is said to be critical to) the basic investment decision. This completely ignores business project failures - in which the tax deductibility of project costs is in effect 'subsidised' to the extent of the tax on such loss.
So, if you reduce tax, you are really potentially reducing the amount of government subsidy to failed projects.
kvd
David Pope - Canberra Times - must have been reading your "Palimpsest" post:
http://www.canberratimes.com.au/photogallery/federal-politics/cartoons/david-pope-20120214-1t3j0
As always, ahead of the pack Jim :)
kvd
Unfortunately I am too preoccupied with other things at the moment to think of what I could add substantially to the points that Jim has made. So I will just rave on a little.
This is the kind of institutional reform that we need in this country to ensure that the states and federal government have better incentives to make responsible decisions about government spending and taxation. It would be great if one of the states or territories took up the challenge to become a small government jurisdiction. And if the People's Republic of the ACT wants to impose a higher income tax rate on fat cats I would be the last person to complain about that.
Thanks for the link to the Pope cartoon, kvd. He is a very good cartoonist. Reading an exchange between LE and tanners on the later post reminded me that I should revisit the history of taxation in Australia. Mr Turnbull's proposal was treated as a thought bubble, but it may well prove to be of considerable significance.
Haven't forgotten that I said that I would come back with more detailed commentary.
Winton, competition between jurisdictions is indeed one way of reducing the tax burden.
I've been meaning to respond to kvd's comment about "one of the least effective governments of [his] lifetime. I reckon you have to go back to McMahon to find a challenger.
Now once you start comparing Mr Turnbull to Mr McMahon, 2t, Mr Turnbull has a problem!
I was actually referring to the elected government, so covering the whole of the Abbott period as well. They really have achieved very little, with the exception of the very poorly received dismantling of automotive subsidies, which I did support.
I'm sure Antony Green would add the reform of Senate voting rules, but that really is about it.
tanners, to give them their due, they did arrest the arrivals by sea - and whether you support the position or not, it was a fulfilled election commitment.
kvd
ps posted something equally non-inflammatory on the later thread; guess I'm binned :)
Unbinned! Just spotted iy!
kvd,
As they refused to give figures for a long time, and when the final figures came out they weren't zero, no, I don't consider spending a very large amount of money (we'll never know how much) in failing to STOP (not generally reduce) the boats as an effective policy success. As it happens, they didn't change the Rudd (i.e. Rudd redux) policy, it just hadn't had time to work. The towbacks into Indonesian waters and payoffs to people smugglers were new, if they happened, but were illegal which kind of discounts them in my view, as a govt policy does have to conform with the law. If they didn't happen, they weren't a policy change.
tanners, as usual, you are confabulating morality of process with practicality of outcome. That's so precious.
But I can see why you are confused, since in Aus terms it began with - I dunno - maybe Cook's 'invasion' of our fair land :)
kvd
kvd
I don't think you read what I wrote. They didn't, and haven't, "stopped the boats", therefore their policy failed. I haven't touched the morality of the situation.
It is true that I don't accept an illegal process as valid Government policy, but the point is moot due to the failure of the outcome.
tanners, while I actually agree with you it is also true that you are conducting last week's (year's?) argument. Simply put the number of people who care about the exactitude of the outcomes reinforcing your point might be numbered in the tens - aka who now, actually gives a proverbial?
And yes, I did read what you wrote, but I confess to skipping those bits which you've wrote before. Apologies for that.
Nah - b.gger it - tell you what, if you ever get an 'outcome' as close to achieving 100% of whatever you planned, in whatever role you attempt, I will be happy to acknowledge your work. But until then, just how many decimal points of pi will satisfy you?
kvd
All the decimal points specified by the policy will satisfy me.
Mr Abbott's policy, as differentiated from Mr Rudd's was that he would stop the boats, without qualification. Intercepting did not count, according to his own narrative. If all he did was continue Rudd's policy but have enough time to make an impact, then he achieved nothing, as he had no new policy and no new actions. Like McMahon claiming credit for a Gorton policy, essentially. Rudd was already having an impact. I'll look it up if you want me to, but under Rudd as opposed to Gillard there was already a drop-off in boat arrivals.
Being a former public servant and present consultant, I have to continually justify my own work against my terms of reference. They don't say "make things better", we negotiate what outcomes I have to have (not what activities I have to do) and I am assessed on impact, not on the number of minutes or manuals I have written. MY work, and now are going back to a previous discussion, is very much results based and if I can't prove the linkage to outcomes the assessment of my performance suffers. This is why I believe that Governments should be held to the same standards of policy formation and accountability. So if I make a ridiculous claim in a Trump-style headline grabbing performance (and make that claim over and over again) I should be held to it in exactly the terms I made it. If instead I promise to improve a certain situation by a given metric then anything over experimental error should count.
And if I choose to suppress details of the policy and the effectiveness 'because security', the weight of the presumption should be against me.
If MT were to abandon 'Stop the Boats' in favour of 'Never permit resettlement' he could still make an argument that in the long term, the government had succeeded in the new policy. Which unfortunately was also a Rudd policy, but let that slide.
Hi tanners - am at a loss to understand your pursuit of this point of 'stop the boats'.
I made the quite offhand comment (12:04 pm, April 05, 2016) that this at least was one policy that the Abbott government could claim as a fulfilled election commitment - yet you appear to argue that the boats haven't stopped?.
If so, that flies in the face of that well known Liberal supporter - Richard Marles:
In July 2015, shadow minister on immigration and border protection Richard Marles acknowledged that "Offshore processing and regional resettlement, together with the Coalition's policy of turn-backs, is what actually stopped the boats."
I don't dispute your comment that Abbott inherited policies that were "having an effect" - but he rAbbotted on about 'stop the boats', and according to Marles above - they have. And to repeat, I more than accept (and entirely agree with you about) the dubious nature of the process, but the bare outcome is that what was promised was delivered upon.
kvd
I accept that my comment suggests that the boats haven't been stopped.
When elected, the ALP policies had reduced boat *arrivals* from around 50 to around 5 per month. By the time Operation Sovereign borders was announced the figure was already zero.
So I accept the boats were stopped from landing in Australia, during the Abbott Government's period, although perhaps not by Abbott policies. However, that is quibbling.
The important part is that I said "Mr Abbott's policy, as differentiated from Mr Rudd's was that he would stop the boats, without qualification. Intercepting did not count, according to his own narrative."
Mr Abbott in campaigning always added the number of turnbacks and interceptions to the arrivals figure. His version of stopping the boats therefore required that no boats start out. (Implicitly this was the same for Labor, BTW.) Arrivals ARE zero. Turnbacks are not. According to Border Force, tens of thousands are still in Indonesia trying to find a boat to make the trip. So in my book he did not succeed.
Apropos of nothing at all, I had osso buco today. I'm glad I wasn't the cook. Recipe for doing it properly will follow. It does not include stringy gristly meat, watery mash and greyish peas. Unlike my lunch. :(
However, that is quibbling.
I have never undervalued the value of quibbling. Quibbling makes the world go round - and how else would lawyers earn their living :)
Osso buco! Memories of my childhood say 'roo tail so cooked was delish! I have always wondered if it's true we are the only people to eat our national symbols?
kvd
It's not true. All Solomon islandere except Malaitans eat shark (Malaitans have a taboo as sharks contain their ancestors' spirits). All Solom islanders eat crocodile (especially Malaitans who have a reputation for being able to catch them).
Timorese will willingly eat crocodile.
OTOH, not many English will eat either lion or unicorn.
That's interesting tanners - so I took the google trouble to look it up:
https://en.wikipedia.org/wiki/List_of_national_animals
- and I suppose the French might eat their Gallus gallus domesticus (Rooster) and Spanish their bulls? Also the Japanese their carp, plus there's a few crocs, goats, and deer which might be candidates for a cookup :)
kvd
Good to see that you both got back onto that favourite topic, food!
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