Low-tax egalitarianism?

The latest issue of Policy has an article by former Costello adviser Dave Alexander defending what he calls Australia’s low-tax egalitarianism.

Compared to other OECD countries Australia’s tax-welfare system combines a relatively low tax take with relatively egalitarian outcomes because benefits are more targeted on lower-income earners. Australia also has unusually high rates of voluntary opt-out from full government entitlements, with many people taking partially subsidised private options in education and health.

For Alexander, this policy mix helps Australia avoid some of the pathologies and dysfunction associated with either high levels of inequality or over-sized government.

The Catallaxy crowd aren’t convinced. And indeed in publishing the piece I expected some flak from my classical liberal comrades. But I thought the Alexander article was a strong one. In my own political life I have always been torn between my philosophical commitment to smaller government and my pragmatic sense of what it takes to achieve even incremental change towards that goal. Politically, relatively low-tax egalitarianism may be the only viable model we have.

9 Responses to “Low-tax egalitarianism?

  • 1
    sinclair Davidson
    December 15th, 2010 19:02

    As you point out, not convincing – but the debate is well worth having.

    It also got picked up on Marginal Revolution

  • 2
    Karl Kessel
    December 16th, 2010 03:37

    That’s a really interesting piece. It will get picked up all over the place.

    The point that Australia’s income equality is better than the statistics suggest is very interesting.

    It will be interesting to see if more Americans pick it up. Australia shows a fairly small government can be combined with good health care and good social outcomes.

  • 3
    john malpas
    December 16th, 2010 07:30

    “good health care”?? When poor people eg pensioners may have to wait a great time for any care other than pills. As for dental care try getting it on a level with the well to do. Medicare is basically a second rate vetinary service.

  • 4
    M
    December 16th, 2010 12:20

    I would have thought that Australia’s key advantage with egalitarianism is that it is a relatively young country and has not had time to develope much of an “elite”. Compared that places in Europe where most of the land and housing is owned by a subset of the population.

    Our minimum wage is decent. Compare to US and places in Europe where the minimum wage is both lower and there are large numbers of illegal immigrants earning below minimum wage off the books.

    The US income inequality is apparently mostly driven by changes since the late 70s. Mostly it is down to huge pay increases in finance compared to any other industry. Mid-level bankers earning huge salaries.

    It is interesting to see the comparisons against other countries. However there was no comment on the apparent rise of middle class welfare from the Howard electoral pork barrels every couple of years. Is that phenomenon overstated? Was Australia more egalitarian before the GST?

  • 5
    Andrew Norton
    December 16th, 2010 12:54

    Though we’ve had more than 2 centuries of European settlement – plenty of time to build an elite. The FTB is surely a positive factor from an egalitarian perspective as it transfers large sums to people who are not destitute (which you have to be to get most cash benefits) but are in the lower income quartiles.

  • 6
    Tom N.
    December 16th, 2010 13:04

    Our minimum wage isn’t decent if you’re out of work because of it.

  • 7
    Club Troppo » Missing Link Friday – 17 December 2010
    December 17th, 2010 20:22

    [...] Small government egalitarianism is how former Costello adviser David Alexander describes the Australian model. As he argues in an article for Policy, it’s a system "that contrasts with both European models of welfarism and the American model of inequality acceptance." Policy editor Andrew Norton writes: [...]

  • 8
    Sharron Clemons
    December 22nd, 2010 04:15

    That’s a really interesting piece. It will get picked up all over the place. The point that Australia’s income equality is better than the statistics suggest is very interesting. It will be interesting to see if more Americans pick it up. Australia shows a fairly small government can be combined with good health care and good social outcomes.

  • 9
    mark
    January 7th, 2011 06:34

    This is an interesting article on creating awareness of cost of government services: