Saturday, May 10, 2014

Selfish pseudo-economics fights deficit levy

If you want to see a classic example of selfishness posing as high principle, look no further than the fuss big business's high income-earners are making over the deficit/debt levy/tax expected to be imposed in Tuesday's budget.

Jennifer Westacott, of the Business Council of Australia, said "raising Australia's already high dependence on personal income tax will place an increased burden on workers [note that word] and could weigh down an already sluggish economy. If we are serious about lifting our productivity and competitiveness, we should be lowering taxes, not increasing them."

Dale Alcock, of the home builder ABN Group, said the tax could dissuade people from working hard to earn more. The "government needs to get its own house in order first and get its government departments working efficiently. Once you've done that, then come back and talk to us."

Sound like a convenient argument to you? Now try this for logic: he would prefer an increase in the rate of the goods and services tax that, by its nature, raised revenue from wealthy, high-consuming individuals, as opposed to a class-based deficit tax.

So a tax increase paid by everyone would be preferable - why? Would it be fairer? Better for the economy? - to a tax limited to high income-earners.

Innes Willox, of the AiGroup business lobby, said the levy "will only serve to dampen our economy at a time when we need growth". A one-off debt levy on "people who are working, who are contributing to our economy, who are spending at a time when our economy is already fragile, we think is deeply problematic".

So what are you saying, Innes? Better to take money off people who don't work - say, the elderly, the unemployed, sole parents with little kids? People who don't work don't spend? People who spend don't contribute to the economy? I'm not following you.

According to the Financial Review, a senior Liberal figure, who did not want to be identified, said the tax increase was not just a broken promise but poor economics and an attack on the Liberal Party's base.

"We didn't vote for a f---ing Abbott government to increase taxes, did we?" he said. Ah, do I detect a note of self-interest creeping in among the high-minded concern for the health of the economy?

Trevor Evans, of the National Retail Association lobby, said the tax would reduce discretionary spending and damage economic confidence. "A debt levy, even a temporary one, on medium- and higher-income earners would damage consumer confidence at a critical time," he said.

Great argument, eh? Anything you don't like the sound of - especially since you and your mates will be paying it - is a bad thing because you just know it will wreck confidence. My old boss Vic Carroll used to speak with cynical amusement about the "easily frightened fawn of business confidence". Do anything business doesn't fancy and the economy will stop dead.

Speaking as one who's been on the top tax rate since 1982-83 - when it was 60 cents in the dollar, and stayed there for another three years - and escaped it for just one year, 2008-09, when Peter Costello's salary sacrifice superannuation rort was at its height, all this is self-serving rubbish.

Yes, as a failed accountant I do keep a record of income tax I pay, though it goes back only to 1969-70. And do you seriously believe being on the top tax rate has discouraged me from working hard or aspiring to be editor?

Do you think money's the only thing I get out of my job? Do you worry I might quit Oz to be economics editor of The New York Times or The Wall Street Journal? (Tip: not many vacancies in the Big Apple for people who think they're hot shots from Down Under.)

Do you think being on the top tax rate - and hence a pretty flash salary - has discouraged me from saving much in the past 30 years? Do you think my obscenely taxpayer-subsidised super payout won't be as big as a lottery win?

And though all my fellow victims on the top rate don't get the ego reward of having their opinions broadcast to the world, do you think senior executives, people in financial services, city lawyers, medical specialists and the like get no satisfaction from being a winner in the socio-economic status race, or from having kowtowing underlings to boss about?

As best I can determine from the leaks seeping under the door of the Prime Minister's press office, Joe Hockey plans to impose a 1 percentage point tax levy on the part of individual taxpayers' earnings that exceeds $150,000 - or maybe $180,000 - a year.

If so, someone on $200,000 is facing a punishing tax increase of $500 a year, or $9.60 a week. Really? That's what's going to destroy incentive, swell the brain-drain and foster rampant tax avoidance, not to mention stuff economic growth?

Estimates by Ben Phillips of the University of Canberra point to about 650,000 people earning more than $150,000 a year, making up the top 7 per cent of taxpayers.

If the threshold turns out to be the higher $180,000, this would affect 400,000 people, making up the top 4 per cent of taxpayers. (Note how quickly the number of people affected falls as you move further away from the median taxpayer's income of about $55,000 a year.)

What gets me in all the propaganda above is the evidence the disease of fiscal monoculism has reached epidemic proportions. This is the sickness that allows people to see only one side of the budget.

A budget deficit, for instance, can only ever be caused by excessive government spending, never inadequate tax revenue. And though an increase in taxes would kill consumer demand, equivalent cuts in government spending would have no adverse effects. Can't see it, myself.