Comments on: The social democratic (former) Howard government

By: Sinclair Davidson

Sinclair Davidson — Thu, 27 Mar 2008 21:09:08 +0000

I understand your interest in (a) and (b) - while not sharing any concerns about (a) and disagreeing on (b). I think ignoring %tax paid (=f(a,b)) people would be overlooking important information about how (a) and (b) relate to each other. Now I know you do understand that relationship but choose to have an open mind (or at least downplay that relation to others you find more interesting), but there are many, many out there who do not know it at all and who continue to be surprised when confronted with that stat. It very much undermines the populist understanding of tax reform - especially the anti-tax reform agenda.

By: Andrew Leigh

Andrew Leigh — Thu, 27 Mar 2008 03:24:16 +0000

Sinc, I think the left want a progressive tax scale. My point is that the rich will pay more if we have (a) more pre-tax inequality, or (b) more progressive tax scales. It therefore helps to keep the two distinct from one another.

While I’m fascinated by (a) and (b) individually, I’m afraid that I don’t find % tax paid (=f(a,b)) to be an interesting number.

By: Sinclair Davidson

Sinclair Davidson — Sun, 23 Mar 2008 22:35:48 +0000

More evidence for Howard’s conservative social democrat tendencies, now from the leftist Melbourne Institute.

By: Rafe

Rafe — Thu, 20 Mar 2008 13:29:53 +0000

Thanks Winton, but i don’t see any problem in picking up votes from an informed and economically literate electorate with a classical liberal agenda.

By: Andrew Norton

Andrew Norton — Thu, 20 Mar 2008 01:11:00 +0000

Andrew - Yes, but as I pointed out in the post their share of income went up by less than their share of tax, because while the tax system became slightly less progressive it was still progressive. If you work out their average tax rate, it went down from 32% in 2004-05 to 31.3% in 2005-06, not exactly a huge cut.

By: Rajat Sood

Rajat Sood — Thu, 20 Mar 2008 00:37:13 +0000

Over the longer term, the Coalition’s changes to the super tax arrangements will (if left unchanged) dwarf the impacts of its fiddling with the income tax rates and thresholds. The super changes allow (high income) taxpayers to pay only 15% tax on any super salary sacrifice contributions of up to $50,000 per annum and more significantly abolish tax on payouts.

By: Winton Bates

Winton Bates — Thu, 20 Mar 2008 00:34:43 +0000

Rafe and others:
I agree that egalitarians can never be satisfied. But I think we also have to accept that it would be virtually impossible for a political party to win more than 50% of the popular vote with a classical liberal policy agenda. So that means classical liberals have to form a coalition with some other group. Traditionally, they have found common cause with conservatives (because conservatives tend to respect property rights) but these days conservatives seem to think that high-income people have a duty to pay high taxes to pursue collectivist objectives e.g. saving the traditional single-income family from extinction. So, that suggests to me that classical liberals might actually have more in common with those social democrats who would prefer to see tax revenue being used to give greater opportunity to the poor. The social democrats I have in mind are more likely to be Rawlsians than egalitarians.

By: Sinclair Davidson

Sinclair Davidson — Thu, 20 Mar 2008 00:33:41 +0000

Andrew L - I’m not sure where your argument is leading. Do social democrats want a progressive tax scale or a progressive tax system?

By: Andrew Leigh

Andrew Leigh — Wed, 19 Mar 2008 23:54:31 +0000

Andrew, the share of tax paid by the top is a function of two things: the pre-tax share of the rich, and the tax rates. Since we know that the tax scales became less progressive, Sinc’s results tell us that the pre-tax share of the rich went up.

By coincidence, I have a paper coming out soon in the National Tax Journal that deals with a problem a bit like this: if you want to know how progressive the tax scales are, then you need to do a simulated exercise in which you plug the same cohort of people into successive years’ tax scales.

By: Sinclair Davidson

Sinclair Davidson — Wed, 19 Mar 2008 22:59:09 +0000

Doesn’t worry me much, but you know how pedantic some people can get