One for the Money

Well, the Coalition’s ginger group for tax reform should be happy with tonight’s budget. Below is the distribution of the tax cuts (based on data in the SMH), which I’ve prepared for a post-budget talk I’m doing for schoolkids at Parliament House tomorrow.*

Taxcuts1

Taxcuts2

Expect the biggest runup in inequality in the post-war era to continue.

As to welfare reform, I think the Coalition are right to see a need to reduce the number of people on welfare. But any solution should involve a combination of carrots and sticks, and here the carrots seem pretty trivial, while the sticks are hefty. A better solution would have involved a negative income tax for the poorest (Britain, Canada, the US, and many other developed countries have them; we don’t). At the very least, they might have raised the tax threshold from $6000, as the Centre for Independent Studies have advocated.

Three final thoughts.

1. Every time Costello talks about recession-induced borrowing as "Labor’s debt", and runs bare surpluses in good times, another nail is hammered into the coffin of sensible counter-cyclical fiscal policy.

2. The "future fund" clearly borrows from Clinton’s "social security lockbox" (I wouldn’t be surprised if they’ve borrowed some of the rhetoric too). Like the US lockbox, there’s nothing a parliament can do that the next parliament can’t undo.

3. If a politician uses the word "enhance" one more time, I’m going to scream.

* Note that this doesn’t take accout of the axing of the superannuation levy, which will also disproportionately benefit the rich.

This entry was originally posted on budget night. The graphs were added the next day.

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7 Responses to One for the Money

  1. Sinclair Davidson says:

    I hope the ‘ginger group’ (do you know the meaning of this phrase ‘ginger’?) are not happy. While this constitutes tax relief, it is not tax reform.

  2. Andrew Leigh says:

    Sinclair, that’s a most interesting question. Turns out that a ginger group takes its name from Ginger Godwin, a United Mine Workers organizer whose murder sparked Canada’s first strike (http://www.answers.com/ginger+group&r=67). I quite like the idea of a bunch of Liberal tax-cutters being named after a radical socialist…

  3. Sinclair Davidson says:

    LOL. That is quite funny. Although, many of my collegues tell me the Howard government isn’t conservative at all, but very radical.

  4. You do speeches to school kids? I wish we got that opportunity to see post budget analysis by professional economists at school. If you do some in Sydney could you let us know when and where on this blog.

    Thanks
    Alistair

  5. Andrew Leigh says:

    Alistair, thanks for your comment. I doubt I’ll be doing any post-budget presentations in Sydney, but prompted by you, I’ve posted a PDF of my slides.

  6. Alistair says:

    Thanks for that Andrew,

    I was just wondering if you know of anywhere where these sort of speeches are advertised. I know there is a section for it on Australian Policy Online and are sometimes listed on the onlineopinion.com.au daily emails but not being at university makes it really hard to find out when and where these events are on.

  7. Andrew Leigh says:

    Alistair, you could become a student member of the Economic Society of NSW for $35/year. See http://www.ecosoc.org.au/members.html. Or you could simply email the NSW Branch administrator, explain your situation, and ask whether she’d put you on their email list for free.

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