Public divided on tax and spend

The first of the Budget tax and spend polls have been released, but it is hard to get a clear reading on whether the long-term trend towards support for more taxing and spending is easing or reversing.

In a Newspoll published in The Australian, the public is almost equally divided between saying scheduled tax cuts should go ahead (44%) or cancelled to reduce the deficit (47%). The 44% saying go ahead is slightly below the 49% who nearly 12 months ago wanted last year’s tax cuts to go ahead, but the trade-off posed has changed completely: last year the stated risk was higher inflation and interest rates (it seems so long ago…), this year the risk is making the budget deficit even larger. In both cases, however, just under half wanted tax cuts despite a risk of negative consequences later on.

As reported at Pollytics blog, the Essential Report survey found that, when given a choice between reducing the deficit and increasing taxes on high income earners and decreasing spending, 49% went for higher taxes and 42% for less spending.

If we assume that higher taxes and cancelling tax cuts are much the same thing, it seems like pro-tax views are still favoured by more people than the lower-tax perspective. However, the role of deficits in structuring opinion makes it hard to see where the underlying trend is going; it is possible that the deficit may induce support for tax that would not be there in better fiscal circumstances, just at it was possible that the previous large surpluses induced support for more spending that would not have been there if higher taxes were needed to pay for it.

11 thoughts on “Public divided on tax and spend

  1. They have decided to tax the rich in England – it seem popular but there seems doubt equally so whether it will raise much money. The rich can always move somewhere else even if their cunning accountants cannot find tax evasion for them.
    Still it is good class warfare.

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  2. This is a balanced assessment, Andrew – unlike the ideological slant given by the Australian. It is not correct to say that

    (1) “47% of the voters …said the Prime Minister should reduce the size of the budget deficit by scrapping tax cuts to take effect on July 1”; as you say, the public is “almost equally divided”;

    (2) and why had the polling nearly all gone to the Greens and others – hardly strong supporters of deficits; as the report in Pollytics confirmed, the option of cutting spending so we don’t go further into debt is only 15%.

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  3. Fred – The Essential Report question asked respondents to choose between several options that were not mutually exclusive, making the interpretive task even more difficult. A ranking of the options might have been more useful.

    I would not read too much policy significance into the shift to Greens and others; a far proportion of their vote appears to be the generally disgruntled (as seen in high voter turnover between elections) which may have nothing to do with the Greens substantive policy positions.

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  4. What do you think of the fact that Coalition supporters were less supportive of maintaining the tax cuts than ALP supporters?

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  5. Caf – It does seem a little odd; like the Pollytics blog I don’t recall seeing Liberal voters less supportive of tax cuts than Labor supporters. The only theory I can think of consistent with past polling is that Liberals are stronger fiscal conservatives, and are more likely to think that we may as well start reducing the deficit now rather that let more debt mount up.

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  6. John Malpas – Some of the left appears to agree with you. I’m reading the editorial in the latest New Statesman and find this:
    .
    “The move in the budget to raise the top bracket was symbolic: even with measures to crack down on tax evasion, the most it can aim to raise appears to be several billion pounds.”
    .
    I wouldn’t have thought several billion pounds per year to be so paltry an amount to be sniffed at, but compared to the amounts we read about in the papers now, several billion is obviously small change.

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  7. “Tax the rich” is a less annoying idea if you are not defined as rich. However the proposed 2009 tax cuts are not pitched at people like Jamie Packer, Jerry Harvey or Russell Crowe. They are pitched at much more ordinary people of much more modest means. I think in such surveys it would be useful to also ask people their income.

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  8. The reason why Coalition voters were less supportive of maintaining the tax cuts than Labor voters is that Coalition voters are older and older voters were less supportive of the tax cuts than younger voters. Older voters have less use for tax cuts because they either: (1) don’t earn enough ($80K+) to benefit from the tax cuts, (2) are on the pension, or (3) earn plenty but salary sacrifice the majority into superannuation, paying 15% contributions tax as well as taking out a tax-free Transition to Retirement Pension to top-up their disposable income.
    So older voters would rather the tax cuts be canned in order to help limit the budget deficit so as to maintain and support their super tax concessions, the pension and subsidised healthcare.
    The Simpler Super tax changes have been a massive gift to Baby Boomers and I’m only bitter that my opportunity to benefit from them via salary sacrifice contributions is about to be curtailed by a Government that Ken Henry helped install with his leaked 2007 speech – a speech in which he praised the super changes as one of the best reforms he was involved in during his time at Treasury. Where’s Alanis when you need her?

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  9. Andrew, I just noticed that the Australian’s Exclusive Poll shows that 73% of respondents (to a sample of, so far, 4440) were “not concerned” about it. Another 8% were neutral and the rest were very or moderately conerned.

    That’s coming from a strong conservative stronghold.

    I don’t attach much significance to these numbers (the population may be designed badly) but it does reinforce my earlier point about the lack of support for lower spending to contain debt levels.

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  10. Fred – Unless I am going color blind, I think it was the other way around. But on the other hand it is not a very meaningful question – it is perfectly plausible to be very concerned about such large debts (the annual interest bill alone for which would consume more federal money than the higher education sector) while still believing that, in the circumstances, it is the best available option.

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