I spent the weekend conferencing in Queensland. I got to talk about fiscal illusion – a topic I’ve discussed before. It all revolves around how the revenue lobby and the state works to manipulate of fiscal consciousness to pay more for government than we’d otherwise prefer.
The mechanisms of fiscal illusion are:
- tax complexity,
- deficit financing,
- hypothecated taxation, and
- tax myths.
I spoke about some tax myths. The usual sort of argument where we hear that “the rich don’t pay their fair share of taxation” for example. I concentrated on the tax myth, “If you’re not getting taxed, you’re getting subsidised”. That in the context of the diesel fuel rebate, superannuation, and negative gearing.
But there is another great tax myth that is being propagated at the moment. The Abbott government is not cutting taxes and is not cutting expenditure as it claims. Not only has the Abbott government increased the top marginal tax rate on individuals, it is repealing the tax cuts introduced by the previous government.
We’ve seen these graphs before but to remind ourselves. These are the dollar values of the payments and receipts over the budget forecast period comparing Swan’s last budget (MYEFO) to Hockey’s first budget.
As we can see there is very little difference. To be sure Hockey is reallocating expenditure but he isn’t cutting expenditure – debt continues to rise and that will have to be paid for out of future taxation.
In short, the Liberals do not have in place a budget strategy that will lead to reduced taxes in future. Right now they are planning to balance the budget at a higher level of GDP. The notion that balancing the budget at a higher level of GDP is equivalent to balancing at a lower of GDP is another tax myth.
All this, however, feeds into a political myth. It has come up in the threads, and again on the weekend, that with friends like me the Liberals don’t need enemies. The reply to a comment like that, of course, is that the Liberals needs to spend some time and effort investing in their friendships and listening to their friends. The great political myth on the centre-right is this: disaffected Liberal voters have nowhere to go.
That is simply not true. The peculiarity of the Australian voting system gives voters plenty of places to go:
- Preference the Liberals second and not first in the House of Representatives. Your vote will still end up with the Liberals in the two party preferred distribution, but you will have cost them electoral funding.
- Preference the LDP or Family First in the Senate.
The Abbott government has some of the bad habits of the previous government. It tells us that it is doing a good job, when clearly we can see that is isn’t. To be fair, things are a bit tougher for the Abbott government than Rudd-Gillard. That’s because the electorate is learning and updating its expectations; Hockey cannot get away with the silliness that Swan got away with because the electorate are onto that.
The key here isn’t to whine and whinge but rather to be decisive, get out there tell your story, cut expenditure, cut taxes and be confident about your strategy.