South Coast Spenders

Posted on October 29, 2007 by andrewleigh

The Canberra Times today reports on a poll of 400 voters in the bellweather seat of Eden Monaro. When asked whether they prefer $34b to be devoted to tax cuts or health/education, 10% say tax cuts, while 88% say spending. As Peter Martin points out in an accompanying commentary, it’s hard to fully explain this kind of result by respondents simply giving the socially acceptable answer.

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5 Responses to South Coast Spenders

  1. Andrew Norton says:
    October 29, 2007 at 12:23 pm

    Though there could be some bandwagon effect on the anti-tax result, I’ve always argued that there is a perfectly logical explanation for these results. In a period of prosperity, people want to increase consumption. For state-provided services like health and education $20 a week (a typical tax cut) won’t finance the best way to get better services, ie going private. So people want to the state to provide better services instead.

    Another factor worth looking at it is that the government has been emphasising how many people receive more in benefits than they pay in tax. While this has been well know among researchers for a long time, calculating voters would realise that their self-interest may be better served by continuing to plunder the affluent and single people.

    But when the prosperity does finally end, I am confident that we will see pro-tax opinion trend upwards again, as the emphasis shifts back towards balancing the household budget and away from increased consumption.

  2. derrida derider says:
    October 29, 2007 at 1:07 pm

    “For state-provided services like health and education $20 a week (a typical tax cut) won’t finance the best way to get better services, ie going private. So people want to the state to provide better services instead”
    – Andrew

    That’s a pretty amazing line, Andrew – it implies that people believe that at the margin they’ll get better value from more public expenditure on these services than on private expenditure. Which is a problem for you privatisers because theory says the optimum ratio of private to public provision is where the marginal cost of an additional quantum of services in each is equal. IOW we appear to be spending too much on private provison and/or not enough on public provision.

    The only way you can escape that is to say people have “false consciousness” and are mistaking their own interest – always, IMO, a dubious proposition for large groups of people over long periods.

  3. Leon says:
    October 29, 2007 at 2:05 pm

    Andrew, I think your first explanation holds a lot of water; not so sure about the second. I don’t think most people really know or care whether they’re net winners or losers from the tax system.

    Derrida – I don’t see the problem in saying many people are wrong about their own interests, especially if one option is extremely vague and unquantified (the per-individual benefits of X billion dollars going into healthcare). Even if you could be more specific (“$20 a week in tax cuts or a pair of moccasins for every pensioner in a nursing home”), the public spending option is really difficult to evaluate.

    I think it’s largely psychological. For someone to estimate the benefit to themselves (or anyone else) of $34 billion more public spending is very difficult, whereas a $20 per week tax cut is quantifiable. It may simply be that in our current prosperous climate, $20 per week may seem like a throwaway amount for John Citizen, compared with $34 BILLion (politician emphasis) going towards the “public good”, “better services”, etc. The extent of the mental evaluation is in most cases probably a comparison of the phrases “$20 per week cash in hand (~ an extra coffee a day)” vs. “better healthcare”

  4. Andrew Norton says:
    October 30, 2007 at 6:38 am

    DD – I you go private, much of your spend goes towards replacing lost public subsidy, and only part of it goes towards better services. There is generally little scope for a marginal move to the private sector. Your kid either goes to a private school or he/she doesn’t, you can’t just add $20 of private to a public school education (not even a tutor to help make your kid literate). You can’t shift to private provision on a large and rapid scale unless you actually cut both public spending and taxing significantly.

    Leon’s right, $34 billion sounds like (and is) a lot that if money made public services better would make a difference. Of course we’ve pumped far more than this into the health system with minimal improvement in public perceptions.

  5. amy johnston says:
    November 2, 2007 at 9:21 am

    I am so pleased to hear others also thinking about the context of tax cuts versus more public spending – our family finds itself spending more and more money on two cars (’cause public transport if becoming less and less reliable), on healthcare (’cause the public healthcare system is so limited and so overstretched), on education (private schools become a must as the state system becomes less and less funded and thus less viable as a realistic option for our kids) etc etc
    This is all worth MUCH more than the few hundred dollars we now get back in our tax cheque…….bring on more PUBLIC infrastructure and support – for everyone to use!

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