From: speednut@werple.apana.org.au (Mark Jose)
Newsgroups: aus.politics
Subject: Fightback! the politics and the sums
Date: 15 Dec 1992 20:30:47 +1100
Organization: werple public-access unix, Melbourne
NNTP-Posting-Host: werple.apana.org.au

Original Message From: chris@suite.sw.oz.au (Chris Maltby)
 
>So what will Fightback! do for income distribution? Hewson is very
>strident about the compensation of everyone for the effects of the
>GST. This is clearly sophistry, as if he was really compensating
>everyone he wouldn't need to introduce it as it would have no
>effect. The best he can do is mute the effect on the political soft
>targets and offer the other effects as benefits.
 
But isn't the idea of a GST and the related "compensation packages" of
Fightback to change the tax system from penalising business. Even if
the revenue change is nil the new system has shifted the burden of
the tax system from business. Whether you like this idea or not, I
cannot judge but to the coalition it must equate to the ability for
more businesses to spend more in other areas rather than having to
worry about paying taxes on productivity.
 
Added to this is the sure fact that the GST will pick up a lot of the
"cash transactions" that are currently being done with no payment of
tax.
 
>then expenditure < income, so the GST is regressive, that is it
>taxes high incomes less that low. It can only be progressive (as
>is stupidly claimed by some) if the poor can be convinced to save
>a higher proportion of their income than the rich. Sure, the rich
>eat more expensive food than the poor, but they consume less of
>their total income.
 
I agree. The fact that the upper tax brackets will get two adjustments
to their tax thresholds is a slap in the face for all those middle
income workers on the average wage or below who have suffered for
years under a totalitarian wages regime.
 
If anything I would like to see the tax free threshold raised and
bigger tax breaks for the average wage earner. This could easily be at
the expense of the "rich" due to the fact that as you say, the "rich"
will consume less of their disposable income. In fact the "rich" will
benefit nicely from less tax on savings. Meanwhile, as you imply, the
poor will continue to get poorer as food prices are hit by GST.
 
>To offset the inflationary effect of the GST there is a corresponding
>income tax reduction, and special assistance aimed at asset rich,
>income poor people (retirees). But this new income tax system is
>also less progressive than at present.  That is, the more income
>you get the greater the proportional income tax saving.
 
As the inflation is sure to rise, the next impact on the average wage
earner is the industrial relations policy. If you are locked into a
contract you may end up being squeezed even more. It is surely a goal
of the coalition to let the average man pay more and more.
Consequently, the belief must be that the richer a person gets the more
his business will be expanded.
 
But then you have tariff reductions which will force many businesses
to produce cheap goods to compete with the imports. This should keep
the price of goods down - or would it?
 
>Finally, to balance the books, Hewson will cut government expenditure
>on things like health, social security etc. These cuts are targeted
>at the "social wage" part of policy, and will fall more heavily on
>the less well off than the rich. When you include the industrial
>relations part, you are also opening up a much greater change of
>wage/income reductions for many people (again, mostly low earners now).
 
Doesn't the coalition want to push more people into private health
cover so that more of the burden for the people's health is shifted
from the public system to the private system. This equates to less
expenditure in the health budget.
 
Consequently, if the figures are to be believed, when the country has
better employment because of Fightback, the need for such high
social security expenditure is relinquished.
 
>So added up, the package is a large net transfer of wealth from
>poor to rich. This is partly why it has been so hard to sell (to
>non-Liberal traditionalists that is). The only justification is
>the "trickle down leap of faith" one - that is, the now much better
>off high income earners will both use more services (thus employing
>service providers like butlers), and invest more, hopefully in
 
I suppose they have got to find somewhere for their money. But if
savings are relatively tax free (are they?) what incentive is there to
invest their money in some business or productive aspect of the
economy?
 
>industries employing people and not into negatively geared real
>estate or other asset speculation. Mind you, the disincentive to
>consume (I wouldn't call it an incentive to save) is an attractive
>feature.
 
Yes I believe that most will shift there money into the unproductive
areas of real estate where the market will once again undergo a rise
which further takes the price of the average house out of the grasp of
the average person.
 
>The tax cut component was supposed to counteract the negative of
>the GST, and hitting the social wage doesn't look bad to this group.
>Attacking the union bogey is always a good tactic too. It may well
>be that these people will not obviously be worse off under Fightback!
>until they have to start paying extra for health insurance, or they
>lose their job.
 
I wonder would you pay more for health insurance. A portion of your wage
goes into paying Medicare and I can recall (ok I know this isn't the
greatest statistical survey you've seen) that when Medicare came in it
was costing me MORE than private health insurance. Now that isn't the
case because more and more people are opting out of the private system
to get into the "free" public system. This has caused rates to rise.
When more people go into private health insurance, the cost will be
reduced.
 
If you are unemployed you are definitely in the "basket-case"
category. Sure you have a higher tax threshold on your social security
payments, but what other compensation do you get. The big selling
point seems to be "well you'll get more in child endowment". Well what
happens if you are single or married and without children. Does this
mean that to be better off economically you have to have a few
children? You are definitely correct in saying that the unemployed
will be hit so hard they may never get up.
 
 
>you should oppose it. Note that I am not advocating a vote for
>Labor as the preferred way to oppose these ideas. Those who support
>it should note that 10 years of flattening of tax all round the
>world (including Australia under Labor) persuing the dogma of
>"economic rationalism" hasn't prevented recessions...
 
Nothing, not a GST or whatever, can prevent a recession. What it may
do is make us better able to handle it. Whether this is true or not is
a matter for speculation and I suppose (as you state) it all gets down
to your particular orientation whether political or social.