Category: Tax & spend

Does the Intergenerational Report under-state future family costs?

~ Andrew Norton ~ 4 Comments

At the time of the second intergenerational report, I lamented the rapid increase in family payments. Fortunately the third intergenerational report shows that these have since stabilised.

Indeed, annual per person family payments (Family Tax Benefit, childcare, Baby Bonus/parental leave) are at $980 a year for 2009-10 only $10 higher than forecast for this financial year in 2007. FTB is slightly down (the means test on FTB B?) but childcare is up by 75%.

Rather optimistically, family payments are forecast to have slightly decreased by the end of this decade to $960 a year. I find this difficult to believe. For a start, there are already active plans to increase FTB handouts via overcompensation for the ETS. While the Coalition may be able to stall this for a while, their overall weak political position means that Senate obstruction has a use-by date. Continue reading “Does the Intergenerational Report under-state future family costs?” →

Income and tax illusions

~ Andrew Norton ~ 11 Comments

The Per Capita think-tank today released a survey of attitudes on tax and spend. The number one point they extracted from the survey results was that ‘Australians want a more progressive tax system’:

95% of respondents believe that low income earners and middle income earners are taxed too much, while only 16% believe that high income earners pay too much tax. However, only 3% of those surveyed feel low and middle-income earners pay too little tax, whereas 53 per cent believe that high income earners do not pay enough.

But as Per Capita itself notes, almost nobody believes that they personally pay too much tax. One reason for this is that many higher-income earners have an erroneous view of how well off they are relative to the community as a whole. In a 2004 paper I reported survey research asking people to place themselves in income deciles. Only 2% of people thought they were in the top two deciles. Continue reading “Income and tax illusions” →

The distributional politics of climate change policy

~ Andrew Norton ~ 33 Comments

One advantage of the Coalition breaking the parliamentary consensus on an ETS is that more attention is being paid to the actual content and effects of Labor’s scheme. In responding to the Coalition’s ‘new tax’ argument the government has released (to the media, I cannot find any detail online) details of how ‘millions’ of people will be better off under the ETS.

This confirms the Opposition’s point and tries to shift the politics to an old-fashioned redistributional battle. The reason millions of people will be better off is that most lower-income earners will be ‘over-compensated’ for the ETS’s price effects. This is because actual lower-income household carbon emissions will vary considerably, depending on location, housing design, and lifestyle. To ensure that households with carbon emissions at the high end of the normal range are fully compensated, households with low to average carbon emissions will receive additional payments that cover their costs and add more, which can be used to improve their overall standard of living (including consuming more energy!).

This redistribution – along with the handouts to polluters – will be financed by, as Tony Abbott says, a new tax on people with above-average earnings. Take for example a single person earning $80,000 a year. According to the government’s calculations they will be an average $677 a year worse off under an ETS, equivalent to about a 4% increase in income tax. Continue reading “The distributional politics of climate change policy” →

Government spending on higher education

~ Andrew Norton ~ 9 Comments

A commenter asks about how much Australia spends on higher education.

The main source for this is the DEEWR portfolio budget statement (outcome 3), with the DEEWR Annual Report also containing useful information. After taking out money coming from the Education Investment Fund, the budget for direct grant spending on higher education for 2009-10 is about $5.6 billion. Information on government subsidies per student by field of study can be found in the ‘further resources’ section of this site for university administrators.

More historical data (latest 2008) on funding for individual universities is available in the annual university finance reports. Unfortunately DEEWR has ceased timely publication of the previously annual higher education report so it is very difficult for the general public to find information on arrangements for a particular university.

However information on direct grants understates total higher education related spending. Continue reading “Government spending on higher education” →

Do ‘social returns’ justify higher education subsidies?

~ Andrew Norton ~ 23 Comments

In his Henry tax review paper, Andrew Leigh says:

The principle that education subsidies should be increased (or graduate taxes decreased) if there is a social return to education fails to hold only in very special circumstances.

These ‘special circumstances’ are that

1. Subsidies or taxes would be ineffective, i.e. would not increase educational attainment.
2. Everyone is already getting the maximum level of education.
3. Lumpy investments, e.g. where the optimal level might be 1 year of post-compulsory education but only 3-year degrees can be purchased.

But is circumstance 1 really so ‘special’? As noted in an earlier post Andrew’s empirical evidence suggests that circumstance 1 may common rather than special. Continue reading “Do ‘social returns’ justify higher education subsidies?” →

Should students be able to claim YA eligibility expenses?

~ Andrew Norton ~ 22 Comments

As reported this morning, the full court of the Federal Court has rejected the ATO’s appeal against the decision we discussed in April to allow as tax deductions expenses that help make students eligible for Youth Allowance.

The respondent in this case, Symone Anstis, had claimed expenses for among other things her textbooks, depreciation on her computer, and supplies for children on her teaching rounds.

As Youth Allowance eligibility broadens over time this is likely to be an increasingly expensive decision. I don’t expect many continuing YA-dependent students will have paid any income tax they haven’t already claimed back via the low-income tax offset system (which has become more generous since Anstis made her claim).

However there will be many who receive YA for half a financial year as they complete their course, but then earn enough as full-time workers in the second half of the financial year to to have a tax liability for the whole financial year.

What in practice this decision will do is give a small financial advantage to ex-YA recipients compared to other graduates who relied entirely on their own earnings in their final semester. Particularly given the legacy of widespread rorting of the YA ‘independence’ test, this group should not receive another handout. There is a still a YA reform bill stalled in the Parliament. It should be amended to abolish these deductions.

Politician admits wasting billions of dollars

~ Andrew Norton ~ 31 Comments

Ok , an ex-politician. But even among ex-politicians, how many admit to being partly responsible for wasting billions of taxpayers’ dollars, as former Hamer and Kennett government minister Rob Maclellan does in The Age his morning?

The sources of this waste are Alcoa aluminium smelters near Geelong and in Portland, a Victorian coastal town. By the time current contracts expire The Age estimates that these smelters will have received $4.5 billion in electricity subsidies.

As Maclellan now concedes, ever agreeing to this arrangement was a ‘collective moment of insanity’ around the cabinet table. There are many such moments, but at least Maclellan is, albeit far too late to do anything about it, admitting to this one.

Taxcheck

~ Andrew Norton ~ 10 Comments

Reader John Fletcher has set up a Taxcheck website that tells us how the government is spending our hard-earned tax dollars.

If you earn $50,000 a year, Taxcheck lists expenses ranging from a bargain 13 cents to pay for pharmaceuticals for Aboriginal people to $768 for granny’s pension.

The methodology is:

Estimates of income tax liabilities are calculated through a naive application of 2009/10 marginal income tax rates, with no accounting for the Medicare Levy, Low Income Tax Offset, Family Tax Benefits, or other potentially relevant factors. …The individual contribution to spending on each item in the above table is calculated as tax paid multiplied by that item’s share of total federal expenditure.

Though the numbers are approximate for most taxpayers, Taxcheck is a good idea. It brings the huge aggregate numbers in the budget papers down to figures more readily comprehensible to individual taxpayers.

Classical liberal nay-saying

~ Andrew Norton ~ 61 Comments

You’re becoming a nay-sayer. This is the second voucher type scheme that you’ve argued against and you are still pro-conscription on student unionism.

– Sinclair Davidson, 23 July 2009

A constantly negative person isn’t much fun to be around. But being a policy nay-sayer is, for a classical liberal activist, part of the job description. There are endless suggestions for more government spending and regulation, and so there must also be endless criticisms of those proposals.

Most classical liberals join in the nay-saying. But perhaps where I differ from the others is that, as I argued in my big government conservatism article a few years ago, I believe that pressures for big government come from within centre-right politics, as well as the usual suspects of left-wing ideas, interest group rent-seeking, and politicians’ vote-buying.
Continue reading “Classical liberal nay-saying” →

Confusing polling on tax

~ Andrew Norton ~ 1 Comment

The latest tax poll from Essential Research, published on Pollytics blog, shows again that question wording effects make opinions on tax and spend hard to read.

In this latest poll, a question which did mention bigger tax cuts for high than low income earners, but did not mention the deficit or any spending trade-offs, found that 60% of respondents approved of the 1 July tax cuts. 23% disapproved.

The disapproval rate is only half the 47% of Newspoll respondents in early May who thought the tax cuts should be cancelled to reduce the deficit.

I don’t think that opinion could have changed that much in two and a bit months. Rather, question wording can highlight the otherwise not top-of-mind link between the size of the defict and the tax cuts.