Morrison takes the batton

Well Scott steps into the position and the first things he says are crap. All the economists and senior economics journalists in the country have been arguing conviningly for two years that Australia has a revenue problem. Scott says we don't have a revenue problem. He thinks we have a spending problem. We have a revenue problem.

When challenged his justification for this is that he has control over spending and you have to concentrate on what you can control. This is a very strange statement because governments have control of both spending and revenue. Hmmm.

When pressed further he says, "You've always got to keep a healthy balance" (between spending and revenue). Well yes Scott, so why are you only focused on the spending side of the equation?

The new mantra: "We want people to work more, save more, and invest more".  Great, but that is no argument against moderate equitable redistribution.  But he seems to think it is.

If there are 800,000 unemployed and 400,000 jobs, then Scott's argument that the miserly Newstart allowance of $300 per week is a disincentive to work, is absolute crap.

New PM, Malcolm Turnbull, has said that his main philosophy is free markets and individualism. No mention of the actual society that provides those conditions, the infrastructure and the support that allows a lot of fortunate bods like him to actually be "individuals".

Looks like there is not going to be much financial joy from this government for anyone who isn't in the top 10%.

Joe Hockey and his Pseudonomics

Joe Hockey is at it again.  Every time he discusses economics he shows his profound lack of understanding of even the basics.

He is now promoting income tax cuts and a gigantic GST tax rise. In addition, by broadening the GST he is in effect introducing a completely new tax, that is a tax on fresh food or medical services or education to name a few. So a "Great Big New Tax" in Tony Abbott's parlance.

As we know the GST is a regressive tax. For example, people on a low income, below the tax free threshold of $18,200, get a large tax increase in that they will now be paying a 15% tax on these additional goods and services.  This is on top of having their GST tax increased on all existing goods and services. Since low income earners spend a much higher proportion of their disposable income it is they who will get the largest tax increase in percentage terms.

As for the idea of income tax cuts, his argument is that high income earners pay a disproportionately high percentage of income tax.  But that is exactly what progressive tax is, isn't it?  It is like he was reading some treasury  paper and came across this astounding fact that high income earners pay higher tax rates.  Hells bells!  This has obviously come as a shock to Joe.  It's also like he has never heard of progressive taxation, or understood why it is considered good policy, by, er, nearly everyone in the modern era.

I guess progressive taxation is, well progressive.  It is a civilized and balanced policy that still allows the rich to get richer, but affords some redistribution to those less well off.  It underlines a trait of Australian culture called fairness.  Not socialism of the "nationalization of industry" type, but a reasonable, moderate policy that both major political parties have included in their policy platforms ever since income tax was collected in Australia by the Commonwealth.  

Anyhow, Joe doesn't like it, probably because it is one of those "fair" things.  But we do have to pull him up on his lying via sophistry and omission.  He says that the top income tax rates in Australia are some of the highest in the world.  He knows, but omits to mention it, that the high income earners in Australian don't actually pay those taxes.  He fails to mention that we have many attractive tax deductions and concessions that those other countries do not have, and that as a result our high income earners, whilst having a higher headline rate, do not actually pay more tax than those high income earners in countries that have, on the face of it, a lower top marginal rate.

In short,  Australian high income earners pay the same tax, and often less, than high income earners in countries with lower top marginal tax rates, after taking our higher tax deductions and tax concessions into account.

Mr Hockey claims that he is concerned about bracket creep, but bracket creep is no more important when it comes to money in the pocket than higher wages.  But Joe is against wage rises. In fact he is in favor of wage decreases if you look at his response to the recent Productivity Commission report into penalty rates.  He is obviously not concerned about the well-being of those on low to middle incomes.  He tried to make them pay for doctors visits, while at the same time maintained the massive tax concessions to the very wealthy via the superannuation system.

Now to the pseudonomics.  It has been well known in economics that the classical "trickle down" thesis is highly conditional.  It applies inside narrow margins and thresholds.  And it has now been proved that the equity thesis is more correct and more important.  In short, the lower the gap between the top 10% of income earners and the bottom 40% the higher economic growth will be.  Inside reasonable parameters it is no longer thought that money given to very wealthy people finds its way, via investment in innovative and productive resources, into a driver of economic growth.  On the contrary, it is healthy universal incomes that drive economic growth.  

Joe talks of incentives, but again, it has been proven and peer reviewed economic science that the idea of incentives are highly conditional and also operate within narrow margins and only over high thresholds.  Joe says he worries that people will withdraw their labour if they are taxed at high marginal rates, but studies and research have proven that executives paying 70% tax will still go to work for the additional $30 in every $100.  They are very goal orientated, very results orientated, very competitive, and have a strong work ethic.  Nothing much stops these people from earning the extra dollar.  But we are only taxing our top execs 45% at the margin.  And because of the tax free threshold and the lower marginal rates on the way up, lets not forget that somebody earning $200,000 per annum only pays an average tax rate of 32%.  And after all the tax deductions and concessions, it can be anywhere from there down to zero!

So why has this so called treasurer decided that the biggest issue is income tax cuts, especially when he has told us that we have a budget emergency?  It either doesn't make sense, or the only sense that it makes is that he is just a guy whose job it is to further enrich the already very rich at the expense of low to middle income earners, and at the expense of national prosperity. 

Hockey an advocate of Pseudonomics

First we hear from Joe Hockey that government taxation receipts belong to the tax payer - "It's their money". Well no, it is the Commonwealth's money Joe. Once the parliament, acting on behalf of the citizenry, legislates the taxes to be collected, that proportion of a taxpayer's income becomes the rightful property of the Commonwealth.

Australia, along with most other civilized countries, has a progressive system of taxation. Should the government need to adjust tax rates to improve the equitable effects of tax laws, it is not an argument in the negative to say it shouldn't be done because taxpayers tax obligations are "their money". If that were the case then there would no taxation, no Commonwealth, no welfare, and a state of anarchy. 

Then Joe doubles up on the pseudonomics and says that to tax the income from certain superannuation accounts would amount to retrospective taxation. Well no, Joe. retrospective taxation is when you tax income from previous years. Changing tax rates for income in years to come is not retrospective taxation. 

Why is this pseudo economist our federal treasure?

Terrorism or Incompetence?

The shooting down of flight MH 17 happened because the international air traffic control system is flawed.  We assume that in this area there are sound and competent people and systems in place.  But apparently not. We are astonished to find that air traffic control allows passenger jets to fly through zones where there is air warfare.  This is mind boggling.  It is the reason that this passenger jet was mistakenly shot down by the combatants in that war.

So Tony Abbott calling this terrorism is wrong.  It is so obviously wrong that he can only be knowingly using the tragedy for geopolitical purposes. It is disrespectful of the dead to lie about the cause of their death.  They died because air traffic control allowed passenger jets to fly through an air war. Again, it defies belief that this was the case.

Do I have to state the obvious?  Terrorism would require intentional and purposeful murder of civilians.

The Russian backed separatists had every reason to believe that all flights overhead were Ukrainian military.  They had been shooting Ukrainian military planes and helicopters down in the days and weeks previous to the MH17 tragedy. This was an established war zone, with air warfare being prosecuted. Why would a passenger jet be flying through there!? They were incredulous when they discovered that a passenger jet had been flying overhead, and that they had mistakenly shot it down.

You can be on any side of this conflict as you want, and you can criticize the Russians for supplying the weapons.  But it doesn't give you the right to dishonour the dead, to use their death for political purposes: you cannot call this terrorism, you cannot lie about the cause of their deaths.

The passengers of Flight MH17 are dead because air traffic controllers negligently and incompetently allow civilian passenger jets to fly through air war zones.  It was a tragedy that was waiting to happen.

Toxic Tony

Another bizarre turn of phrase from the Prime Minister.  He calls the carbon tax a "toxic tax".

But it is the excessive production of man made carbon, the thing that the tax is trying to reduce, that is toxic.

So it is not a "toxic tax", it is a "toxicity  reduction tax".  Go figure.