NZers and Aussies: Switching it up

[Impmk2]

33 minutes ago, The Anti-Targ said:

I don't believe that's the case here, but if it is there then that seems like a good thing.

Hmm I assumed NZ might have the same kind of system but on looking into it seems somewhat unique to here. Stems from an independant tribunal which was apparently set up in the 1950s to deal with settling workplace law / disputes, and also has the power to set minimum wages across industries (currently guise is the fair work comission).

[The Marquis de Leech]

Taxation is a political decision, and ought to be treated as such. Ditto monetary policy - I have a heartfelt loathing for the Reserve Bank Act 1989 on democratic grounds.

Anyway, local council elections in New Zealand are bad news for the Left. My own home town has gone back to the old Tartan Mafia for the first time in three decades.

[The Marquis de Leech]

3 hours ago, Impmk2 said:

Hmm I assumed NZ might have the same kind of system but on looking into it seems somewhat unique to here. Stems from an independant tribunal which was apparently set up in the 1950s to deal with settling workplace law / disputes, and also has the power to set minimum wages across industries (currently guise is the fair work comission).

New Zealand had the Arbitration Court from 1894 to the 1970s. Basically, the union would put its wage demand, the employer would put their proposal, and the Court would rule on what everyone got, industry-wide. On paper, the system was designed to prevent strikes. In practice, it started running into issues as early as 1908.

[The Anti-Targ]

At least very few COVIDspiracy nuts got elected, and some incumbents who were COVIDspiracy types lost their seats. Still, a few real conspiracy whackos won elections (the UN's secret programe to enslave all of humanity ). 36% voter turnout. So with that few people voting it's not really indicative of how parliamentary elections are likely to go. At next years national election we should get at least double that number of people voting.

[Jeor]

A bit late to the party, but I agree that taxation has to be a government thing. Bracket creep is what it is, and should be moved only when the government of the day decides to. As it is, bracket creep can be a good thing as it builds in some resilience to government revenue.

Re: the Stage 3 tax cuts specifically, I think it's a bit much to compare it to the Truss-UK situation and I think it's a bit alarmist to deal with it in those terms. Yes, I lean Liberal voter, but hear me out on the three points of changing:

1. Stage 3 doesn't mess with the top rate (which stays at 45%) and simply moves the kick-in rate from 180K to 200K. Now that top rate of 45% has been set at 180K since the 2008-09 tax year, literally 14 years ago. If you were dealing with bracket creep you'd actually move it far higher than 200K, so moving that top bracket out is really a nothing burger.

2. The lowest bar of Stage 3 is cutting the rate from 45-120 from 32.5% to 30%. This should be relatively uncontroversial at least in terms of equity, as it affects a large proportion of people. Of course, you can debate whether taxes should be cut at all, but I certainly don't think this tax cut could be billed as inequitable or a giveaway to the rich.

So there you have two big parts of the tax cut which I would characterise as certainly not a giveaway to the rich. That leaves the last part,

3. The 120-180K going from 37% to 30%. This is the only part that could be rightfully billed as a giveaway to higher earners, but even then I don't think it's as bad as it looks. The cut probably is a bit too steep and looks it on paper, and it will affect the budget the most given the amount of people in that bracket and the steepness of the cut. But again, looking at the historical record, it was way back in 2011-12 that this 37% rate applied to 80-180K. The people below 120K have already been dealt with. But for 11 years that rate has stuck and a whole lot of people will have crept themselves into that 120K+ range. 

So - yes, we can obviously have a debate about whether taxes should be cut in the first place. But I don't think they can be billed as massive giveaways to the rich. Two of the three components of Stage 3 tax cuts aren't, in my view, that inequitable in favour of the rich, and even the third one isn't as bad as it looks.

Politically, I also have a problem with Labor breaking their election promise. It was obvious the budget was going to be in bad shape (yes because of Coalition spending), it was obvious inflation in services and NDIS would be an issue, and at the same time Albanese repeatedly said, again and again, that Stage 3 would stay.

It's pretty poor form to say something that prominent and then talk about breaking it less than 6 months later and certainly opens Albanese up to the charge that he deliberately lied and said whatever he needed to say to get into power, and then will do what he actually wants later on. Especially after all his talk of integrity. The Morrison government was certainly bad on that front, but Albanese won't come out looking good if he reneges on this.

[Paxter]

The reduction in taxes for the $120k+ crowd is completely indefensible when we have so many people struggling in this country.

And I couldn’t care less about broken promises. Let’s get the important policy questions right.

On comparisons with the Truss situation, those are to provide electoral cover. The credit rating agencies aren’t about to downgrade Australia over the ScoMo tax cuts. We have far too much coal to dig up for Moody’s to be worried about us.

Edited October 9, 2022 by Paxter

[Paxter]

On 10/7/2022 at 9:52 PM, Impmk2 said:

Aren't pensions here indexed?? Isn't a small part of government spending. I mean I'm probably not helping my point in that we struggle to get on top of the deficit, though that seems to be more a case of using projected surpluses to give tax breaks.

True pensions are indexed to CPI in Aus, but Brazil also automatically indexes things like the minimum wage and many other govt payments (such as highly successful cash transfers to the poor). While laudable from a social justice perspective, these legislative increases mean that it’s very hard for Brazil to maintain fiscal restraint. 

Edited October 9, 2022 by Paxter

[The Anti-Targ]

Indexing to CPI is a bit blunt. For a lot of countries and states within countries govt agencies or NGOs calculate a living wage. That is possibly a more useful benchmark for figuring out reasonable rates for benefits. But I would also say how does a govt justify a minimum wage that is less than the living wage? By definition the living wage is meant to represent the minimum income necessary to meet the essential needs. If the minimum wage doesn't deliver that then people are not receiving a decent income for an honest day's work. I don't understand ideologies that says doing an honest day's work should still put some people in poverty.

Edited October 10, 2022 by The Anti-Targ

[Paxter]

23 minutes ago, The Anti-Targ said:

Indexing to CPI is a bit blunt. For a lot of countries and states within countries govt agencies or NGOs calculate a living wage. That is possibly a more useful benchmark for figuring out reasonable rates for benefits. But I would also say how does a govt justify a minimum wage that is less than the living wage? By definition the living wage is meant to represent the minimum income necessary to meet the essential needs. If the minimum wage doesn't deliver that then people are not receiving a decent income for an honest day's work. I don't understand ideologies that says doing an honest day's work should still put some people in poverty.

The eternal struggle between adequate social investment and prudent economic management! If you have a strong tax base, both goals are within reach. The ScoMo tax cuts don’t help on either score.

[The Anti-Targ]

24 minutes ago, Paxter said:

The eternal struggle between adequate social investment and prudent economic management! If you have a strong tax base, both goals are within reach. The ScoMo tax cuts don’t help on either score.

That's a false dichotomy. Adequate social investment IS prudent economic management. Imprudent economic management is spending govt money on wasteful boondoggles and white elephants, subsiding unsustainable industries and implementing policies that further concentrate wealth at the top of the pile.

[Paxter]

9 hours ago, The Anti-Targ said:

That's a false dichotomy. Adequate social investment IS prudent economic management. Imprudent economic management is spending govt money on wasteful boondoggles and white elephants, subsiding unsustainable industries and implementing policies that further concentrate wealth at the top of the pile.

If that were true, emerging economies could rack up huge deficits in health, education, social security and infrastructure while never receiving a credit downgrade.

[The Anti-Targ]

The operative word being adequate, but developing countries should spend more on all those things you mention, because they will all conduce to improving the economy and so much more. The problem with developing economies is the spending they do on the stuff I mentioned as imprudent, and straight up corruption.

Also, deficits in and of themselves are not the problem.

[Paxter]

16 minutes ago, The Anti-Targ said:

The operative word being adequate, but developing countries should spend more on all those things you mention, because they will all conduce to improving the economy and so much more. The problem with developing economies is the spending they do on the stuff I mentioned as imprudent, and straight up corruption.

Also, deficits in and of themselves are not the problem.

For sure, institutions like the IMF encourage countries to reduce corruption and maintain high-quality spending. But they are also strong proponents of a balanced budget and they usually make smaller deficits a condition of financial assistance.

[The Anti-Targ]

7 hours ago, Paxter said:

For sure, institutions like the IMF encourage countries to reduce corruption and maintain high-quality spending. But they are also strong proponents of a balanced budget and they usually make smaller deficits a condition of financial assistance.

Which is mostly the fault of the IMF being captured by neo-liberal economic thinking. Balanced budgets are completely stupid when what developing countries need is large investment in health, housing, education and infrastructure. Investment well beyond what can be funded by being constrained in spending to non-oppressive tax revenues. What the IMF should be doing is helping such countries to come up with a plan to achieve developed country status in those four areas in a reasonable time frame.

[Jeor]

On 10/10/2022 at 7:01 AM, Paxter said:

The reduction in taxes for the $120k+ crowd is completely indefensible when we have so many people struggling in this country.

I don't think it's completely indefensible. There are plenty of families with a single income earner in the 120-180K crowd living in the capital cities with those associated housing costs, who are also having some struggles. Yes, if you're on a smaller income of course you're going to be worse off than those people and could do with more help rather than the 120-180K crowd, and you could also make the case that this 120-180K lot has benefited from Stage 1 and 2 at the lower brackets as well. So the reduction in taxes is unwise and too generous, but I don't think it's completely indefensible to do something at those levels. 

An article in the SMH (behind a paywall) says "Even with stage 3 cuts taken into account, Australia is still on course to have the highest average income tax take in decades" and that "our heavy reliance on income taxes is due, in part, to our relatively low reliance on taxing other things, such as land and consumption activity". So there is also an economically structural argument to be made for cutting income taxes, though it should be paired with finding other sources of revenue (e.g. inheritance taxes, capital gains) if this were the case.

On 10/10/2022 at 7:01 AM, Paxter said:

And I couldn’t care less about broken promises. Let’s get the important policy questions right.

We're always sanguine about broken election promises when they're policies we personally didn't agree with anyway. But put the shoe on the other foot - if the Coalition decided to bring a pro-environment platform simply to win over independents and won the election, and then suddenly pivoted post-election to becoming the friend of coal, oil and gas again, I'm guessing you'd feel differently about election promises. Or if this Labor government decided they weren't doing a federal ICAC after all. I agree that good policy should be at the forefront of the decision-making process, but election promises are still important and shouldn't be dismissed straight away.

1 hour ago, The Anti-Targ said:

Balanced budgets are completely stupid when what developing countries need is large investment in health, housing, education and infrastructure. Investment well beyond what can be funded by being constrained in spending to non-oppressive tax revenues. What the IMF should be doing is helping such countries to come up with a plan to achieve developed country status in those four areas in a reasonable time frame.

I agree balanced budgets are silly for developing countries that need more expansionary policies and development, and the IMF probably goes too far on this. However, the developing countries still need to be able to service their debts. Which is a lower bar than a balanced budget, but still a bar that some dysfunctional countries don't clear.

Edited October 10, 2022 by Jeor

[Paxter]

@Jeor: Why is it better to give the $120k plus crowd a tax cut than spend that money on the aged care or health system? Or tax credits for struggling families? $243bn is a nice pot of money…can’t we find better uses for it? We have talked a lot in this thread about ways to raise taxes either for budget responsibility or to fund services to an ageing population. This move completely goes against that mantra. It’s more a Reagan style trickle down thing :(.

Hopefully voters see right through the broken promise to the wise policy decision. I didn’t vote for Albo so that we could keep this! 

On fiscal restraint of emerging economies, I can see both sides. We have to avoid Argentina style situations but at the moment the pendulum probably has swung too far towards austerity. Pakistan, for example, should probably be spending more, not less, in the wake of its devastating floods.

Edited October 10, 2022 by Paxter

[Jeor]

1 hour ago, Paxter said:

@Jeor: Why is it better to give the $120k plus crowd a tax cut than spend that money on the aged care or health system? Or tax credits for struggling families? $243bn is a nice pot of money…can’t we find better uses for it? We have talked a lot in this thread about ways to raise taxes either for budget responsibility or to fund services to an ageing population. This move completely goes against that mantra. It’s more a Reagan style trickle down thing :(.

Hopefully voters see right through the broken promise to the wise policy decision. I didn’t vote for Albo so that we could keep this! 

As much as the tax cuts are Reagan-like, the broken promise is as much a comparison to American Republicanism. Say whatever you like in order to win power, talk about how full of integrity you are and how the other side lies all the time, and then promptly go ahead and lie yourself and do the opposite of what you've said. That's a pretty stark, bald-faced reading of it, but there is some truth there. Either way, it seems the issue is moot at this point because Labor aren't going to repeal them - at least for now when Albo hopes the (admittedly forgetful) electorate will have forgotten.

Yes, we've talked a lot about raising taxes and funding services. I'm not a blanket proponent of Stage 3 (watering them down would be okay), for me it's always been a structural reform thing - we need to move away from income tax and move towards more reliable sources of government revenue with an ageing population. I know people aren't a fan of increasing the GST. But there are plenty of other revenue raisers out there that wouldn't touch the lower income group at all - capital gains tax concession, inheritance tax, land tax. We also need to talk about EV taxes; petrol excise will go down as people transition to electric vehicles, but roads still need to be maintained. I wouldn't phase it in right now when we want more people to be taking up EVs, but later on down the track there should be some sort of EV tax.

[Paxter]

The similarities are certainly there with the GOP...gimme a tax cut baby! 

On the bright side, at least this whole conversation is a (possible) genuine point of contention between the two major parties. There is precious little dividing them at the moment, other than culture wars stuff like ScoMo's religious discrimination bill. 

When I think about it, Albo effectively conceded all major policy points in order to gain power. 

Edited October 11, 2022 by Paxter

[Jeor]

20 hours ago, Paxter said:

When I think about it, Albo effectively conceded all major policy points in order to gain power. 

Yes, I think that's one of the main issues here. The centre-left has essentially moved to the right in order to win power but in conceding much of the policy ground, they now have a disconnect with their core supporters who are still on the centre-left. Still, Albo will have more staying power than someone like Turnbull who did the opposite thing from the right, because I get the feeling Albo has more support in the party room than Turnbull ever did.

At the same time, a lot of the current problems have to do with the Coalition straying from their lane too. While the COVID stuff did unprecedented damage to the budget, and couldn't have been foreseen, the Liberal government really weren't fiscally sensible in the way that most conservative governments are. The tax cuts weren't paired with other reforms to raise revenue, for example. I think the Coalition made the same calculation as the GOP did in the US - distract everyone with the culture wars and don't really do anything else besides a tax cut.

[The Anti-Targ]

On 10/11/2022 at 11:11 AM, Jeor said:

I agree balanced budgets are silly for developing countries that need more expansionary policies and development, and the IMF probably goes too far on this. However, the developing countries still need to be able to service their debts. Which is a lower bar than a balanced budget, but still a bar that some dysfunctional countries don't clear.

But what does that mean? Debt servicing burden is in the hands of the creditor not the debtor. The creditor can be extremely mean in their terms or very generous, even to the point of debt forgiveness. So it is the imposition of crippling loan conditions by the creditors that causes developing countries to not be able to operate deficit budgets over the period of decades that is necessary to bring the core elements of a developed country up to scratch. The only hard and fast conditions of the credit should be transparency and elimination of corruption with very close scrutiny of meeting those conditions, and even then some flexibility on the time-frame for eliminating the "greasing the wheels" type of corruption. Whereas the straight up theft type corruption needs to be stomped on without mercy.