Corporate tax is regressive

Andrew Leigh had a great piece in the AFR yesterday. It was a bit naughty.

On the morning that Tony Abbott released his proposal to pay for paid parental leave with a tax on Australia’s 3200 largest firms, I was reading Norman Lindsay The Magic Pudding to my three year old son. As you know, it involves a pugilist strolling around outback Australia, punching his enemies on the nose and promising his friends a free lunch. The Magic Pudding has a similar storyline.

No mention that Andrew is running for ALP preselection in Fraser.

It was the overall thrust of the piece that I liked. Abbott’s paid parental scheme is a form of corporate tax and the incidence of corporate tax is likely to fall on workers – low-income workers at that, so the tax is regressive.

Further down the pecking order, there are plenty of modestly-paid workers toiling in the retailers and banks that make up Australia’s largest businesses. If a company tax increase is passed on to employees, these are the people who will pay for parental leave.

That’s about right – it would be churlish to quibble. But that argument applies to the whole of the corporate tax. So if we have a regressive tax that falls on labour, well then the Labor Party should oppose it. So to with the payroll tax that Andrew criticises.

big businesses are already hit with a special tax that falls on workers, because the payroll tax doesn’t apply to small enterprises

We should all wish Andrew well in the preselection – we need MPs who will fight against the tyranny of corporate tax and stand up for the oppressed.

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33 Responses to Corporate tax is regressive

  1. TerjeP (say Tay-a)

    In my submission to the Henry Tax review I requested that they consider the Estonian model for corporate tax. Under that system corporate tax only applies to profit if and when it is distributed to shareholders. This would give companies that are profitable an improved financing position relative to businesses that are popular with bankers. The growth it would encourage would be great for wages. Companies are not people and taxing them instead of merely taxing shareholders is silly.

  2. Samuel J

    Peter Costello has a great article on the Abbott proposal here http://www.smh.com.au/opinion/politics/leaders-jostle-in-the-race-to-rock-bottom-20100316-qcni.html

    Yes, it would be better having Andrew as the Labor member for Fraser than the alternatives

  3. JC

    I guess the fact he didn’t mention his pre-selection will immediately be picked up by the right-wing leaning ABC and brought to account.

    Lol.

    Leigh has a nasty little habit of not mentioning conflict issues such as the time he signed on to the pink Batts spending binge and omitting the fact that he was given a temporary political appointment by the current government.

    He’ll fit right in the ALP as they love that sort of weaseling.

  4. Sinclair Davidson

    JC – that’s not right. He did a sabbatical at Treasury – that is not a ‘political appointment’.

  5. JC

    Yes, he’ll be coming out against corporate and payroll tax in a 5 part essay series he’s doing ala Hives Hamilton.

    Jesus H Christ.

    The weaseling starts even before they get into the party room.

    What’s worse about this one is that he puts on airs of being an academic when with examples such as this, he’s nothing but a distorter and turgid little partisan player.

    What a douchebag.

  6. jtfsoon

    Leigh is an honest Laborite. He does actually go where the economic evidence takes him.

    Sometimes he is wrong.

    He is worth 2 dozen of the tools featured on Menzies House.

  7. JC

    Sinc:

    Yes he did do a sabbatical at Treasury and then either right before or after, I can’t recall which the dick signed his name to the letter as a big time academic and smart person approving of the pink batts spendathon.

    In other words the dick was conflicted as it was a political appointment and he never mentioned it on his letter.

    It’s no different to the fact that he isn’t mentioning it now. The libs ought to clip the dude over the ears on this one.

    Furthermore, when did he write it? Did he write the piece on university time as it’s obvious it’s a political hit piece.

    Sorry I may sound curt but Leigh really annoys the shit out of me as a result of the cheap tricks he’s pulled in the past.

  8. Butterfield, Bloomfield & Bishop

    take a hint Credit crunch,

    you have been told by two people about his quality.

    As a literate economist of course he believed the stimulus would work and he was right. He did it well after completing his sabbatical at treasury.

  9. JC

    Jason:

    How is he an honest labourite when he published that shit awful lying junk suggesting The ABC is right leaning, which he is more than aware that the smug and dishonest BBC reject – Jonathon Holmes- used as a way to defend Their ABC against attacks of biased?

    Did he write a letter explaining to Holmes the “study’s” weaknesses and that it shouldn’t be used like that?

    Where was he during the Fuel and grocery watch wars?

    Where has he written about the shambles of the current government’s NBN and the disaster that awaits. I’m sure he would have got an op-ed on those topics.

    Of course not.

  10. daddy dave

    He is worth 2 dozen of the tools featured on Menzies House.
    .
    I love Menzies House because it makes me realise that I’m not “extreme” right wing.

  11. jtfsoon

    JC
    The ABC research was crap so he was just wrong in the inputs to that research (like the way certain people were classified as left or right).

    Leigh has a record of being intellectually honest. I doubt that he doctored the results.

    he is microeconomically a neoclassical and macroeconomically a Keynesian. So yes you can say from our perspective he has his blind spots. he is a Keynesian after all./

    But surely you are not attacking him for doing the economists’ duty of criticising an increase in corporate tax rates.

  12. Steve Edney

    Take a deep breath JC. He’s arguing against company and payroll tax. We need more people like him in the ALP.

  13. JC

    Homer:

    In all honesty the last thing Andrew Leigh or anyone else would be clamoring for is your support, so if you like Leigh I would suggest you remain really silent.

    It’s the kiss of death to anyone.. author or candidate.

  14. Butterfield, Bloomfield & Bishop

    congratulations on again showing you are a complete idiot.
    your sense of logic is truly astounding as is your ignorance of economics

  15. JC

    Jase:

    I’m sorry if it came that way, but I wasn’t implying that he doctored the results of that study. I’m aware that he used some sort of logarithmic key that he applied.

    —————

    Homer, whatever you do, do offer any public support to candidates as it could be terminal.

  16. Butterfield, Bloomfield & Bishop

    yeah Forrest he doctored the results. Perhaps one day when someone tries to explain statistics to you, you may have some understanding of what they did.

    Actually prominent academic economists have a bad record in Parliament.

    Harry Edwards, David Watson, John Hewson.

    Craig Emerson is perhaps doing better than they did but isn’t exactly setting the world on fire.

    Whereas both Hewy and Emmo were very good advisers.
    Perhaps there is a lesson there.

  17. JC

    Homer:

    I said I never even thought he doctored anything, you layabout.

    Yes, homer explain statistics to me… LOL. You should be the last ape (including baboons) on earth to be giving someone that advice about stats.

    Hewy and Emmo? Are they cartoon characters, Homes?

    Go away and stop infesting sites.

  18. Butterfield, Bloomfield & Bishop

    ‘he published that shit awful lying junk ‘

    ‘I said I never even thought he doctored anything’

  19. JC

    Every time you post a comment I’m surprised at the downward cascading level of your idiocy, Homer. Truly, you shock me every time.

    That paper was pure crap. It presented what I think is a dishonest representation of reality, but I never said, suggested or implied that he doctored the paper, you dolt.

  20. Butterfield, Bloomfield & Bishop

    yes Forrest you just do nor understand what you write.

    you can’t even lie straight in bed

  21. JC

    Homer:

    Let me explain the difference between doctoring and dishonest junk.

    Doctoring is what you were found doing by misquoting or deliberately dissembling the intent of the author… something that we most recently caught you doing to “Supermacs” speech.

    You were also caught redhanded doctoring the argument/intent of Tooze’s book.

    In other words doctoring would mean that I would be accusing Leigh of deliberately going into the stats and fudging the data. I don’t think for a moment he would do that.

    In my opinion the dishonest junk part comes from the paper’s finding that the Phillip Adams show has a right wing slant because of a badly put together set of logarithms.

    It’s different and I hope presenting examples with a personal touch (you) helps you understand the difference.

  22. C.L.

    yeah Forrest he doctored the results.

    So says Homer the McFarlane Kid.

    Leigh is a Laborite who has conveniently jumped on a wedge bandwagon. The chances of him criticising the coming (and inevitable) ensemble of Henrician tax increases are close to zero.

  23. Rococo Liberal

    Terje

    I’ve been suggesting what you call teh Estonian method, and what I call the American method, for years. Private companies should be taxed like trusts, ie the profits of the company shuld be taxed in the hands of the shareholders when paid out as dividends.

    Sinc

    How is coporate tax passed on to the employees of the company?

  24. Butterfield, Bloomfield & Bishop

    Forrest you have NEVER EVER been able to show I have said anything misleading about Tooze.
    Indeed I have doubts whether anyone here has actually read him, you certainly haven’t.
    I merely leave your words to speak for themselves. perhaps you have lied so much you do not understand what the word means.

    Cl L whose outstanding ability to confuse 1960 with 1890 is legendary. What wedge bandwagon is that?

  25. JC

    Forrest you have NEVER EVER been able to show I have said anything misleading about Tooze.

    Homer, you deadshit, I never claimed I read the the book, however others here have and they all corroborate the point that you not only got the book wrong but you emphatically lied.

    Frankly Homer, put yourself in my position, that is dream a little and pretend you’re me. If you were me would you believe you under any circumstance, let alone when an entire busy thread full of people are saying that you’re a lying distorting oaf?

    It’s not as though you lie infrequently, homes. You’re caught out lying red handed every day.

  26. Butterfield, Bloomfield & Bishop

    claptrap Forrest. A lot of people here CLAIMED to have read the book but each time it is brought up they seemed to have missed a major point he made.

    Perhaps we should give them a golden Forrest award.
    indeed the only person who actually claimed this was Snoopy who claimed ritschl said one thing when he actualy said another, indeed Snoopy so misunderstood Ritschl he undermined his whole argument.

    however this is typical of Catallaxy as for you you have been c=aught red-handed. It is simply you lie so often you do not know the difference.

  27. Sinclair Davidson

    RL – the argument is that corporate tax is paid for either by the owners of capital (lower returns), consumers (higher prices) or labour (lower wages). In an open economy the owners of capital are less likely to pay the tax, in a competitive economy consumers are less likely to higher prices and so, the argument goes, workers will have to pay the tax through lost earnings. One mechanism whereby that could occur is where firms reduce investment and so reduce long-run economic growth and productivity. This leads to workers having lower salaries over time. The Leigh argument was that lower income workers are more likely to be affected than higer income workers. That all seems plausible, I suppose. Although Tanner was on ABC TV this morning claiming that consumers will ultimately pay the tax.

  28. JC

    From Bolt’s blog:

    Liberal senator Simon Birmingham attacked the SA Labor Party for preferencing the Independent Climate Sceptics…

    The moral issue of our time seems to have been trumped by electoral preferences which now by default becomes the moral issue of our time.

  29. We should all wish Andrew well in the preselection – we need MPs who will fight against the tyranny of corporate tax and stand up for the oppressed.
    .
    Is anyone fighting against payroll tax? How can this absurd tax remain for so many decades? It’s Pythonesque.

  30. Leigh is a Laborite who has conveniently jumped on a wedge bandwagon.
    .
    Yep. You were right y’know CL when you aregued that the Tories should patent the Wedge. 🙂

  31. Hick

    To the person who left a comment as ‘Hick’ please provide a valid email address – Sinc.

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