Tony Abbott’s paid parental leave proposal is very unpopular. Unpopular with big business and the government. Big business shouldn’t like the proposal because it undermines an existing comparative advantage. Many large corporations already have paid maternity schemes and they use these schemes as a drawcard when hiring labour. Any uniform national scheme becomes a subsidy for small business. The government doesn’t like it because they have been outflanked on the left.
We should remember that Australia already had a paid scheme – the baby bonus – that got means tested by the current government, so Rudd and friends only have themselves to blame. Similarly big business haven’t been paying the Coalition enough attention and, while I’m sympathetic to their position, they too have themselves to blame. This is especially the case for AIG and BCA.
One of the sillier arguments was published this morning in the Australian – either by Michael Stutchbury or David Uren. The basic argument is that a parental levy will raise Australia’s corporate tax rate to the fifth highest in the OECD. The Uren article has a nice graphic showing this.
This argument is misleading. It is true that another levy will add to the overall tax burden. But this analysis makes two assumptions that are incorrect. First it assumes that businesses only pay corporate tax and no other taxes or levies. But that isn’t true, comparing the Australian headline corporate tax rate plus parental levy to OECD headline corporate tax rates is not comparing like with like. Second, it ignores all the other taxes and levies that business already pays. A couple of years ago I worked on the IPA State Business Tax Calculator (the 2009 version online here). This project consisted of analysing the taxes paid by a standardised business in different Australian States. The bottom line is that the business tax burden is greater than the headline rate suggests.
This represents about 18 per cent of the amount of Commonwealth corporate income tax (CIT) paid (i.e. in addition to the reference business paying company tax levied by the federal government, the business pays the state government tax imposed upon it which equals approximately 18 per cent of what is paid to the federal government).
There is an excellent argument for lowering taxes on business – they are far too high. But the argument that the parental levy will push us far up the tax ladder is not correct – we are already high up on the ladder. The parental levy will add to an already high tax burden, not create that tax burden.
So higher taxes are ok if business doesn’t give the coalition enough love?
Amazing mental flexibility.
Steve Edney
10 Mar 10 at 9:50 am
No. If business doesn’t get out there and tell the world what they’re doing the world will assume the worst. As it is we see the most competitive segment of the economy, big business, providing paid leave already.
Sinclair Davidson
10 Mar 10 at 10:00 am
So what are you sayinging exactly Sinc? I would’ve thought you’d be spewing chips at this, it’s pure social engineering. I’ve read figires as high as $75000 are going to be dished out. That’s just silly. How it can it not significantly boost the tax burden?
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Of course Abbott also says he’ll wait until the govt’s debts are paid so I guess it’s just smoke. He seems to be pulling ideas out of his arse. Kevvie’s gonna wipe him.
Adrien
10 Mar 10 at 10:07 am
This does read like a feeble defence of the Libs. The bottom line is the measure does reduce our international competitiveness because it does increase the burden of taxation.
How can you deny it doesn’t take us further up the tax burden ladder?
jtfsoon
10 Mar 10 at 10:11 am
According to this guy
So we are looking at about 0.35% decrease in GDP.
Steve Edney
10 Mar 10 at 10:13 am
If this measure is so important it should be funded by an increase in the GST.
jtfsoon
10 Mar 10 at 10:15 am
hmm if Rudd spouted this nonsense I doubt if this would have been written indeed quite the opposite
Butterfield, Bloomfield & Bishop
10 Mar 10 at 10:15 am
I’m not defending the Libs at all. I’m saying that the argument that this measure will take us to fifth on the OECD corporate tax burden ladder is wrong. I’m saying this is small business welfare. I’m saying that this is outflanking the government on the left – note the headline of the AFR today (unions and small business like the proposal). I’m saying that big business needs to tend to its relationships. Afterall they already have paid maternity schemes. I’m saying Australia had a paid maternity system called the baby bonus.
Sinclair Davidson
10 Mar 10 at 10:24 am
Following the gdp estimate above and logic that this guy here used on the ETS. Abbotts levy would lower:
GDP growth is 0.35 per cent per year lower over 50 years.
GDP is $688 billion lower at 2050.
GDP is 15.3 per cent lower at 2050.
The cumulative GDP loss is $11,708 billion over 50 years.
GDP is 4.4 times higher than 2000 levels in 2057 instead of in 2050, a delay of seven years.
Steve Edney
10 Mar 10 at 10:28 am
Steve – so why do you think that guy was right then and is a numbnut today?
Sinclair Davidson
10 Mar 10 at 10:52 am
Careful guys – Australia’s corporate tax system is more like a withholding tax since there is dividend imputation. Uren’s analysis doesn’t take this into account. That’s why I tend to favour action on the individual income tax side in preference to corporate taxes. Of course for other corporate taxes, there is a strong case to reduce those.
Samuel J
10 Mar 10 at 10:57 am
GDP is $688 billion lower at 2050.
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Hah! That’s it. He’s toast. It’s too late to go into reverse mode and that is shocking! Kevvie bleeds money and Abbott decides that the priority is to continue Howard’s Back To An Imaginary 1950s Programme, National Socialist Lite. He doesn’t deserve the job. He would have plenty of people who could tell him why that’s a brain fart of a policy.
But sigh. Three more years of Kevvie. No choice. We go broke either way.
Adrien
10 Mar 10 at 11:09 am
I don’t think that that guy being a numbnut but I do I think he’s is not being consistent in his criticism of various tax increases.
I never saw the argument that the the ETS will just add to an already high burden. I saw that it will cost us billions of dollars.
Steve Edney
10 Mar 10 at 11:19 am
Abbott decides that the priority is to continue Howard’s Back To An Imaginary 1950s Programme National Socialist Lite
WTF are you on about?
dover_beach
10 Mar 10 at 11:21 am
Steve – I’m not saying this is a good thing, I’m saying that argument is wrong. (Not just wrong, but that argument will lose the debate. People don’t care about ‘greedy’ uber-rich corporations paying tax. But they might care if those same corporations stood up and said, ‘not our problem, we’re doing this already’).
Sinclair Davidson
10 Mar 10 at 11:25 am
“WTF are you on about?”
The 1950′s thing seems to be the latest ALP talking point… been mentioned in various news articles and user comments.
Fleeced
10 Mar 10 at 11:25 am
Yes, Fleeced I recognise it as a persistent lefty talking point but how can Adrien associate ‘the 1950s’ with paid maternity leave? And the reference to “national socialism lite” is gratuitous nonsense.
dover_beach
10 Mar 10 at 11:31 am
Sorry Samuel dividend imputation merely means the shareholders do not get taxed twice.
It does nothing for companies paying tax except to encourage companies the full company rate.
Butterfield, Bloomfield & Bishop
10 Mar 10 at 11:35 am
I said to myself I wouldn’t comment here today, but I’ll make an exception to note Bernard Keene’s point at Crikey:
Slugging medium and large businesses to the tune of $2.7b a year dwarfs the cost of the CPRS on business. The CPRS actually hands money from taxpayers to businesses for its first five years, costing the Budget over $4b. Thereafter, it turns revenue-positive, but only reaches $740m in 2019-20. It’s not until the mid-2020s that the CPRS finally cancels out the early generosity to business and becomes a net tax.
Over the same period, Abbott’s parental leave scheme would cost over $31b. It’s not just bigger, but bigger by several orders of magnitude.
Don’t forget that the Government’s scheme is also funded by taxpayers; it’s just that Abbott has told a specific and vocal minority of taxpayers that they’ll have to pay extra for his version.
http://www.crikey.com.au/2010/03/09/tony-abbotts-great-big-new-tax/
I reckon Abbott continues to be the Labor advertising agency’s dream candidate.
steve from brisbane
10 Mar 10 at 11:36 am
Interesting to see all these lefties now finding economic “rationalism” in terms of raising taxes. How cute.
Steve now quotes Bernard Keane here as a voice of reason. LOl.
JC
10 Mar 10 at 12:16 pm
I reckon Abbott continues to be the Labor advertising agency’s dream candidate.
I notice you’re still having problems with the tags, Steve from B. I’m enjoying how some of those on the left (B. Keane, etc.) are foaming at the mouth about Abbott’s proposed scheme.
dover_beach
10 Mar 10 at 12:23 pm
It is ironic that Abbott is in favour of Another Big Tax and even more ironic that his proposal replaces the free market with regulation.
Some companies voluntarily award maternity leave and others dont and employees are able to make a decision based on these benefits.
rog
10 Mar 10 at 12:25 pm
rog – exactly. see the next post.
Sinclair Davidson
10 Mar 10 at 12:26 pm
I forgot, this is an irony free zone
rog
10 Mar 10 at 12:26 pm
It ought to be a mirthless Doctors Wives free zone, Rog.
JC
10 Mar 10 at 12:28 pm
It could be worse.
Sinclair Davidson
10 Mar 10 at 12:30 pm
I love how lefties like Adrien and Homer are suddenly concerned about business tax rates. They apparently believe Labor’s statutory scheme is “free.”
The 1950’s thing seems to be the latest ALP talking point.
Not surprising considering their current leader is a bad Richie Cunningham who abuses women for not preparing his dinner on time and wants to up the drinking age. But Menzies would never have dreamt of addressing the nation from a churchyard every Sunday.
C.L.
10 Mar 10 at 12:52 pm
Abbot’s proposal, in the light of current market conditions vis a vis taxes, will simply mean that Australia will suffer low capacity through discouraging economies of scale.
Larger businesses are subject to payroll taxes and will subsidise small business on-costs on top of paying their own.
Semi Regular Libertarian
10 Mar 10 at 12:56 pm
CL – to be fair, the levy is a crap idea.
Sinclair Davidson
10 Mar 10 at 12:57 pm
This of course means a lower marginal output per worker, hence lower labour demand.
This means lower wages, but with a more regulated labour market, less jobs for marginal workers or less jobs for marginal economic zones.
Semi Regular Libertarian
10 Mar 10 at 12:57 pm
Dover – WTF are you on about?
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This: National Socialism is the mixture of ‘traditional’ social values and socialist ideology: the notion that the state is responsible for virtue and happiness.
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These values are: tribal primacy realized in the nation-state, the centrality of (male headed) stable family households where children are disciplined in tribal mores, the assertion of specific interests and customs as universal whether they truly are or not and the use of the nation-state/tax dollar to make this compulsory.
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It is not in any way as draconian as Mussonlini and Hitler. Hence ‘Lite’.
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Comprendez pour favore?
Adrien
10 Mar 10 at 1:09 pm
I write: No choice. We go broke either way.
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Cl responds: I love how lefties like Adrien and Homer are suddenly concerned about business tax rates. They apparently believe Labor’s statutory scheme is “free.”
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Ya gotta admit. Them CRM-114 gizmos really do the job.
Adrien
10 Mar 10 at 1:12 pm
This: National Socialism is the mixture of ‘traditional’ social values and socialist ideology: the notion that the state is responsible for virtue and happiness.
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…and you got that from Abbott’s maternity leave policy. That’s a stretch, to say the least.
daddy dave
10 Mar 10 at 1:21 pm
This: National Socialism is the mixture of ‘traditional’ social values and socialist ideology: the notion that the state is responsible for virtue and happiness.
This is pure nonsense. National socialism and its values were NOT in any way ‘traditional’, Adrien.
These values are: tribal primacy realized in the nation-state, the centrality of (male headed) stable family households where children are disciplined in tribal mores, the assertion of specific interests and customs as universal whether they truly are or not and the use of the nation-state/tax dollar to make this compulsory.
Firstly, you can’t realise tribal mores in the nation-state; and are you seriously arguing that this what the Coalition is attempting? And secondly, your argument implies that the Harvester judgment, for instance, was ‘National Socialism lite’.
Comprendez pour favore?
Yes, Adrien, I understand you’re speaking nonsense.
dover_beach
10 Mar 10 at 1:26 pm
This is pure nonsense. National socialism and its values were NOT in any way ‘traditional’, Adrien.
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Hence the quotes around traditional. Don’t be tedious, you know what I mean. Saying ‘nonsense’ doesn’t make it so.
Adrien
10 Mar 10 at 5:03 pm
Hence the quotes around traditional. Don’t be tedious, you know what I mean.
Hence the scare quotes???? National socialists never pretended their values were ‘traditional’. Wanting more then glib generalisations is not tedious; it is the glib generalisations that are in fact tedious. You’ve provided a definition that would classify almost the entire politics of the modern period as varieties of ‘national socialism lite’. If you think such a definition sheds light on either national socialism or modern politics, you are sadly mistaken. BTW, I’ve given reasons that suggest that what you’ve said is nonsense. Your response, to date, hasn’t convinced me to change my mind.
dover_beach
10 Mar 10 at 5:21 pm
Don’t know how we ended up on this track but Adrien National Socialism is more a revolutionary modernist movement than a traditionalist one. You’re confusing it with the far less homicidal Francoism. Incidentally one of the few people with the guts to try to kill Hitler to the cost of their own lives were traditionalist usually Catholic aristocrats who were repulsed precisely by the revolutionary nature of Nazism including how it undermined their traditional notions of German honour and who likened it to its evil twin Bolshevism
jtfsoon
10 Mar 10 at 5:28 pm
Don’t know how we ended up on this track
Here’s how Jason. Adrien wrote:
dover_beach
10 Mar 10 at 5:31 pm
If Kevvie ‘bleeds’, perhaps Germaine Greer will taste it?
Peter Patton
10 Mar 10 at 6:03 pm
Jason – Don’t know how we ended up on this track but Adrien National Socialism is more a revolutionary modernist movement than a traditionalist one….who likened it to its evil twin Bolshevism
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Just a thought:
AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAARRRRRRRRRRRRRRRRRRRRRRRGGGGGGGGGGGGGGGGGGGGGGGGGGGGGHHHHHHHHHHHHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!!!!!!!
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Egad! Please again:
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A little like when CL refers to an ‘artist’. Dig?
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Forget it. Tony Abbott thinks the govt’s job is to pay people to live like the Flinstones. Yes?
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What is it. There’s some new Obtuse Pills on the market.
Adrien
10 Mar 10 at 6:38 pm
Adrien, stop digging.
Pedro
10 Mar 10 at 6:39 pm
National Socialism was absolutely Socialism. NS was a nationalist response to Soviet Bolshevik imperialist incursions into the German polity. Except the Nazis substituted the “nation” for “class” as the supreme socio-political category.
Peter Patton
10 Mar 10 at 6:45 pm
Undemocratic socialism would be a better description PP, it was still quite different to marxism, though in my view the Nazis were the Commies closest cousins.
Pedro
10 Mar 10 at 6:47 pm
Pedro says stop digging. Okay. Why? ’cause it’s Peter’s turn to dig?
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I think it was ‘race’ more than nation. Zhey vur ze maztda race. Zat iz vhy zey got ze azzes kicked mit der doo Verlty Varz unt ze 1950 Verld Kup. Zhey hef lazt ze more verly Cop finalz zhen anybaty. Unt zhey are Nihiliss Lebooski.
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It’s not fair.
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I’m sorry about the ‘National Socialism’, truly. It was, I thought it was obvious, a statement half in jest.
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Tony’s competing with Kevvie in the care for Australia policy. If he doesn’t reverse the polarity quick and/or if Kevvie doesn’t fuck u big time, he’s toast. It’s the Opposition Tango.
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Next.
Adrien
10 Mar 10 at 7:06 pm
Adrien actually it was Volk which is slightly, though significantly, different.
Peter Patton
10 Mar 10 at 7:14 pm
In other countries the corporate tax rate only applies to large companies. Small companies are not taxed at all, as all their profits are taxed in the hands of shareholders.
That is a reform the Coalition needs to push. Tax small companies like trusts and you get rid of thousands of complex trust structures overnight. Not only that, but you encourage firms to undertake capital expansion in the knowledge that they don’t have to faff about with capital allowances and depreciation schedules.
Rococo Liberal
11 Mar 10 at 1:07 pm
Adrien actually it was Volk which is slightly, though significantly, different.
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I beleef in ze Veztern philasaphee off conquering. It’s nat a tooma.
Adrien
11 Mar 10 at 5:56 pm