Monday, January 23, 2012
Thursday, January 19, 2012
Tax, neoliberalism and fighting back via En Passant
I went to the annual Australasian Tax Teachers Conference at Sydney University this week and gave a talk called Reason in revolt now thunders: an end to the age of neoliberal tax cant?
I explained that the reason for looking at profit rates, strike levels, and understanding neoliberalism from the wider debates about wealth, power and inequity and the decades’ long shift of wealth to capital from labour was to understand tax and tax policy over that same period. Tax is part of that wider capitalist totality.
Neoliberalism is the idea that the state can and will intervene to save capital (‘to big to fail’ for example), that it will impose market imperatives on society and that it will curb the power of workers and unions. It privatises, cuts public services and attacks its own staff.
The last 3 decades in Australia have been the years of neoliberalism, lead by the Hawke and Keating Labor governments. They laid the groundwork for the Howard conservatives which in turn led to the current version of neoliberalism, the Rudd and Gillard Labor governments.
This was and is a global phenomenon. The end of the post war boom in the late 60s and early 70s – a crisis of profitability and falling profit rates as a consequence of increasing capital investment and the decline in arms expenditure – destroyed Keynesianism as the official lie of capitalist exploitation. It looks as if profit rates in many developed countries are about half what they were at the height of the boom
Keynesianism’s seeming bête noire, neoliberalism, became its successor. Thatcher and Reagan swept to power in the UK and US, and in Australia Hawke came to power in 1983 implementing the Accord, the agreement with the trade union leadership that was based on the neoliberal idea that what is good for the bosses is good for workers.
The defining action of Australian governments (and others in the developed world) has been to shift wealth from labour to capital. According to the ACTU the level of national income going to labour is at its lowest since records began to be kept in 1964 and that to capital at its highest or thereabouts.
Tax policy and tax law have not been immune from this process. They have aided and abetted it.
The OECD’s recent report on the global increase in inequality shows that the Australian tax system has become less progressive and so only slows down the trends to inequality rather than address it. Tax is part of the problem.
Why? Because tax policy and tax law are like all the other institutions and actions of capitalism – captured by the one percent and their ideology, neoliberalism.
The carbon tax for example reflects the idea that the market - a price on carbon – can fix the problems of the market. This is a classic example of neoliberalism.
The Minerals Resource Rent Tax is a watered down version of a fairly mild rent tax anyway, the Resource Super Profits Tax. Labor capitulated to one sectional interest of Australian capital and dumped a Prime Minsiter to do so. It did not perform one function of social democracy – imposing solutions on capitalists for the benefit of capital.
Further, the government proposed using the money from both the RSPT and the MRRT to cut company tax rates. This is a redistributive measure from a very profitable sector to less profitable sectors.
Rent taxes tax economic rent. This is the extra profit that arises from monopoly or oligopoly situations or private property monopoly over finite resources.
It is competition which leads to monopoly. Rent taxes act as some sort of surrogate for competition by reducing the return on the activity much as a flood of new investment into a super profitable industry or sector would do.
The other factor in resource rent taxes is that it is transfer of the wealth Chinese and Australian workers create to Australian mining bosses.
Essentially the state is one fo the band of hostile brothers along with productive captial, finance capital and rentiers fighting over a share of the surplus value workers create. However the state is ultimately dependent on the success of that exploitative process and so taxation cannot ‘threaten’ captial accumulation.
A look at the Henry Tax Review released in 2010 shows the same sort of neoliberal thinking. Henry was searching for a set of taxes that would remove both the legal and, if there is any, economic tax burden on capital (especially mobile capital) and that would tax less mobile factors such as labour, land and resources.
As I explained above the rent taxes are themselves neoliberal and redistributive adventures within capitalism, acting as a substitute for competition. Land taxes extract the surplus in another form, but hit the working class and tax the wealth they create through the urban centres they build and have built.
Henry also suggested a flatter tax system with workers on between $37000 and $94000 actually paying more tax. Labor rejected that version but is looking for other variants ofd a flatter (and more regressive personal income tax system.)
Can we escape this neoliberal wasteland?
If I am correct, that the infection that is neoliberalism is a response to falling profit rates and wealth shifting as a consequence, then it is only through real fightbacks for better wages and conditions, to defend jobs and for tax justice that stopping the shift and as a part of that, taxing the rich, can be implemented.
There is hope. 2011 was the year of resistance to neoliberalism.
The Global Financial Crisis Mark II last year and this year and the austerity programs of the ruling class and its politicians (of both ‘left’ and right) have provoked fight backs. Resistance broke out across Europe. The number of general strikes in Greece is approaching 20. In Portugal there was a general strike a few months ago. In the UK on 30 November 2 million workers struck.
In Nigeria the general strike against a doubling in petrol prices continues into its eighth day. In India on 7 September 100 million workers went on strike., the biggest general strike in history. Another general strike across India is planned for 28 February and could be even bigger.
Strikes played an important part of the downfall of the dictators in Tunisia and Egypt. The masses swept on to the streets and swept out the architects of neoliberalism and repressive rule. The struggle continues in Syria, Yemen, Bahrain and other countries across the region.
The Occupy movement took to the streets and there were over 800 demonstrations and occupations in more than 80 countries.
Clealry something is going on – we may be approaching an epochal 2012, like 1848, 1917 and 1968.
In Australia, since the class collaborationist Accord in 1983, strikes have fallen markedly. In fact in the 70s strike days lost per thousand workers were between 600 and 1200. For the last five years the figure has been around five strike days lost per thousand workers.
This collapse of strikes explains both the shift in wealth to the rich and the neoliberalism that has infected the Labor Party, including its tax policies and laws.
A return to the strike levels of the late 60s and early 70s over wages, jobs and taxes can reverse the wealth shift to capital from labour and the increasing inequality arising from that shift.
I finished off my talk with the first four lines of the Internationale.
Arise, ye workers from your slumber,
Arise, ye prisoners of want.
For reason in revolt now thunders,
and at last ends the age of cant!
Tuesday, November 8, 2011
Want a budget surplus? Abolish #tax breaks for the 1% | En Passant
Via: http://enpassant.com.au/?p=11511
Want a budget surplus? Looking for billions in savings? Easy. Tax the rich. Cut their subsidies.
The tax system is a disguised spending program, worth, according to Treasury, $113 billion last year. This is equivalent to 30 percent of all Federal Government spending and receives no attention when the Labor and Liberal neoliberals talk about cutting spending.
Attacking the $113 billion in annual tax expenditures – the tax lurks where income isn’t taxed or where extra tax deductions are given – could focus on the largesse to business and raise many tens of billions. Cutting capital gains tax concessions to business alone would raise up to $10 billion.
A wealth tax, gift and inheritance taxes, taxing the profit on the sale of the homes of the super rich – these too could raise billions from the big end of town. Not to mention raising income tax rates on the rich and big business and reducing dividend imputation.
What about abolishing the fossil fuel subsidies to business? An extra $10 billion there.
Now all of these would have consequences. Business would try to raise prices and/or sack staff.
But that could be met with strict price controls on the profit bludgers, mandated job retention and creation and wage policies that reverse the flow of wealth to the rich from the poor and working class. And if there is a threat of a capital strike nationalise the company or industry under workers’ control.
So maybe taxing big business might produce enough money to wipe out the budget deficit, improve our public health, education and transport systems and have enough left over for addressing climate change. So let’s do it.
There goes another porcine parachute.
The reason the neoliberals don’t raise this disguised spending program in the tax system is simple. It is spending on the rich and powerful. It is disguised spending on the one percent.
Treasury estimates are that direct spending through the tax system on business totals about $8 billion. On top of that the capital gains tax concessions give billions each year to business and the rich.
And the superannuation concessions, which overwhelmingly favour the rich, are actually a disguised spending program worth more than the pension.
Why doesn’t Labor tax big business and stop spending tens of billions on the rich through the tax system. Labor?
So here we have a Government and Opposition intending to attack the poor and ordinary workers to save a few billion when a few simple tax measures – like taxing the family homes of the rich, and abolishing the superannuation tax lurks for the millionaires, and getting rid of the tax concessions for capital gains – would raise tens of billions.
Funny, I don’t hear either side of conservative politics actually suggesting attacking the tax rorts for the rich.
Both like to keep these dirty little details of spending on the rich quiet because that is who they rule for.
It gets worse. In a speech in February last year Deputy Commissioner of Taxation Jim Killaly said that 40 percent of big business (those with a turnover greater than $250 million) had paid no income tax in the three income years between 2006 and 2008. He also said twenty percent of those companies were actually making accounting profits.
The global financial crisis is likely to have increased the number of big businesses not paying income tax to perhaps 50 percent or more. The latest ATO statistics show that for 2008/09 60 percent of all business (not just big business) paid no income tax.
Analysis by Adele Ferguson and Stuart Washington in the Sydney Morning Herald showed that most industries actually pay much less than the headline 30 percent company tax rate. For the finance sector for example they found the figure was 20 percent. For mining companies it is between 13 and 17 percent.
In other words almost half of all big business pays no income tax and those that do mostly pay much less than the notional 30 percent headline rate.
What is to be done?
Read more here...
Tuesday, October 11, 2011
Finally! #ALP Governs Like It's Their Job | Newmatilda #Auspol
federal politics
10 Oct 2011
Finally! Labor Governs Like It's Their Job
By Ben Eltham
Who knew substantial policy discussion would be such a success? The tax and jobs summits showed Labor's strengths and there are now chances to build on this momentum, writes Ben Eltham
It still languishes in the polls, but last week was a good one for the Government.
The Tax Forum, which had been widely written off by many commentators (including me) turned out to be surprisingly constructive. On the back of the tax event, the Government also hosted a one-day jobs summit, which focussed on Australia’s troubled manufacturing sector.
The tone of the debate during the three days of high-level policy talks was positive and respectful. Even if no big announcements emerged, a series of small but significant measures were agreed upon. On tax, Treasurer Wayne Swan will work to increase the tax-free threshold to $21,000, effectively cutting the taxes of hundreds of thousands of Australia’s low-income earners. There is also a modest but interesting proposal to improve cashflow for struggling businesses, with a "carry back" tax refund that will assist firms making a loss.
Perhaps most importantly, Labor has also broadened the tax conversation, including in difficult areas like raising taxes on the wealthy and eliminating inefficient state imposts. It’s not sweeping reform of the sort recommended by Ken Henry’s tax review, but it is an important step toward a kinder and gentler political debate — something that Labor proved itself incapable of fostering during the debate about the mining tax last year.
On jobs, the forum focussed on manufacturing, with strong union involvement but considerable policy input, most notably from Barack Obama’s manufacturing policy advisor, Andrew Liveris, the President of Dow Chemical. Liveris told the forum that "manufacturing in particular has the power to create jobs and value and growth to a degree that no other sector can — not tourism, not the financial services sector, not any services sector." These positive spillovers flow through the rest of the economy, and therefore require special government policies to encourage manufacturing, he argued. This is an argument you won’t hear from the Treasury or the Reserve Bank, and it was warmly received by the sector’s cheerleaders, who have had a hard time winning a policy beauty contest against the rampaging investment of the mining sector.
One upshot is that Julia Gillard will chair a prime ministerial taskforce on the manufacturing sector. Another is that the Government will introduce a special tariff concession to investment projects larger than $2 billion that can demonstrate an industry plan to involve Australian suppliers. As Heather Ridout remarked to reporters, it’s certainly no "silver bullet", but it will help manufacturers to bid for jobs on big infrastructure projects.
For the Government, the real benefits from the tax and jobs events were political. For months, the Government has been telling us that it is not worried about its manifest unpopularity and is instead getting on with the business of running the country. Unfortunately, no one has been listening. As the screenwriters like to say, the golden rule of narrative is "show, not tell", and that’s where the Gillard Government has struggled.
And that’s why three days of policy talks worked. Not only did they focus on the economy, Labor’s strong suit, but they also eschewed the vicious dogfighting that has marked parliamentary debate in recent months. By gathering high level policymakers in a room and forcing them to discuss and defend their arguments in a calm and deliberative manner, the government has finally been able to show itself getting on with governing.
Of course, it helped that the Opposition decided not to turn up. Then again, the Coalition’s credibility when it comes to serious discussions about taxation and budget policy is approaching zero these days, so it’s probably better for all concerned that Joe Hockey didn’t show. The media attention paid to the forum also had the happy side effect of sidelining Tony Abbott’s media stunts. (They still happened, it’s just that no-one much reported on them.)
The Government badly needs more tactics to keep Abbott off the television screens. And perhaps they have stumbled upon one, if they could only recognise it. The tax and jobs summits suggest that the Gillard Government might start to claw back some credibility by returning the political debate to concrete and substantial policy discussion. After all, the Coalition has never had much ability to engage in genuine policy debate, and since Tony Abbott has become leader, they haven’t had to.
In contrast, the best performing Labor ministers are those, like Greg Combet, who are able to muster a calm and methodical command of their portfolio. And yet, amazingly, Labor has generally struggled to build on this advantage. Instead, the Government has generally attempted to fight the media battle on the same terrain of one-liners and sound-bites that Tony Abbott finds so amenable.
Of course, you could argue that the entire CPRS debate was one about policy minutiae that failed to engage the general public, and you’d be right. Communication is not an either/or proposition, and the Government needs to explain policies on multiple levels: to the wonks and analysts with detailed and substantial discussion papers, to the media with stunts and pic facs, and to the general public with the full suite of social media and mass communication tools.
The Government now has the opportunity to build on last week’s momentum with a big week in parliament. It won’t be easy. Proceedings in the lower house will be dominated by the carbon tax and a vote about offshore processing, neither of which will be convivial, temperate or polite.
On the other hand, the prospect of getting the carbon tax through the House of Representatives must in itself be heartening for Labor’s embattled foot soldiers. For those who still believe, here is an example of a concrete economic and environmental reform that a progressive government is negotiating through a minority parliament — in the teeth of public and corporate opposition.
The carbon tax won’t be passed until it clears the Senate, most likely in November. And it is likely to be unpopular with voters for a long time after that. But it is undoubtedly a major policy reform addressing climate change, one which neither John Howard nor Kevin Rudd’s governments were able to implement (you can of course argue that they didn’t want to).
Labor’s membership might be declining and its party structure increasingly moribund. But here, finally, is a major reform which, if implemented, the party faithful can rightly feel proud of.
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David Grayling
Posted Monday, 10 October 11 at 1:35PMBen, this article is more about wishful thinking than anything else. A three day talk-fest happened but that is not the Government’s main job: it’s supposed to govern, it’s supposed to lead, it’s supposed to have vision.
The LABOR party is expert in having meetings, inquiries, community talk-fests, etc. But getting things done efficiently and successfully and on-budget is another thing altogether.
Gillard should be replaced. She’s had her chance and she blew it!
Stephen Smith would be a great choice for P.M. and would give LABOR a chance at the next election!
ben.eltham
Posted Monday, 10 October 11 at 2:03PMDavid - I don’t accept your argument. Carefully building consensus about complex policy reforms is exactly what constitutes governing. Ramming legisltaion through Parliament generally doesn’t make for good policy — see the Northern Terrritory intervention, for instance.
I agree with you that governments require vision and leadership. But Labor is showing plenty of leadership on issues like the carbon tax and mandatory pre-commitment on poker machines. I’m guessing though that this is not the sort of leadership you seek.
K Brown
Posted Monday, 10 October 11 at 3:23PMThe Tax Forum was a revelation. Special interest group views that have in the past been given pre-eminent treatment by News Ltd were subject to counter-argument and non-partisan expert scrutiny. This exposed the naked vested interest of these lobby groups. Saul Eslakes and Associate Professor Judith Yates demolition of the property investors’/real estate institutes arguments that negative gearing improves rental housing supply was brilliant.
The spineless response from our politicians to all this empirical evidence is so disheartening however. I hope all you journos have salted away this treasure trove of data to confront them at every opportunity in the future. That would be real “gotcha” journalism. Maybe they will then be shamed into action.
Maybe the tax forum should be an annual event so the case for reform can maintain momentum.
Jandamarra
Posted Monday, 10 October 11 at 4:06PM“Gillard should be replaced. She’s had her chance and she blew it! ” I have read your blog David and you are not a supporter of Murdoch, but here you are giving more life to his talking points.
GocomSys
Posted Monday, 10 October 11 at 4:39PM@David Grayling posted Monday, 10 October 11 at 1:35PM
Understandably your frustration got away with you this time. I am with
Jandamarra’s post on Monday, 10 October 11 at 4:06PM.
Consider also the alternative to the current government. Unimaginable!GocomSys
Posted Monday, 10 October 11 at 4:45PMLet’s stay positive. Give it time. Hopefully TA will self destruct soon and we might get a “credible” Opposition if not an “Alternative Government”.
Ben. Good balanced article.
Posts so far have been constructive. Can’t wait for the usual detractors. NOT.
GocomSys
Posted Monday, 10 October 11 at 6:28PMLast week: “Tax and Job forums”
This week “A smörgåsbord of legislation to be debated and/or voted on”.
Seems to me a government in action.
Can anybody by any chance list ONE “credible” opposition policy?
David Grayling
Posted Monday, 10 October 11 at 6:37PMBen, surely it is debatable whether the carbon tax should be introduced at this point in time. And the pokie issue may be well-meaning but it’s like trying to kill a fly with a bulldozer!
The Malaysia issue exposes the Government’s hypocrisy while the poll results show clearly that most people think that Julia has lost the plot.
As to what you mean by:’…that this is not the sort of leadership you seek,’ I am in the dark completely!
Jandamarra, surely backing Stephen Smith, a man without baggage, is still backing LABOR! I will probably jump off a bridge if Abbot becomes P.M. Cheers.
Perfidious Rex
Posted Monday, 10 October 11 at 11:58PMDG
For once I completely agree with your comments! Nice to hold summits and this one seemed to get lots of ideas aired so well done on that count BUT really it’s all about what happens afterwards. So we wait and see.
Not sure it is the time for Labor to be loading up Stephen Smith with a poisoned chalice though. K Rudd would be a better option heading into a bloodbath. Stephen Smith could then take over as opposition leader and have a crack at the world’s luckiest politician (aka Prime Minister Abbott) afresh. PR
Thursday, October 6, 2011
Insurance could help make super money last longer | #Ausunions
PEOPLE will be able to take out insurance against living longer than their superannuation lasts, under reforms being considered by the Gillard government.
Assistant Treasurer Bill Shorten said he had "heard loud and clear" the industry's calls for government action to improve the range of financial products available for people to draw down their superannuation.
"There is not a lot of point in building up a great system if, in the drawdown phase, there is inequity and challenges to the sustainability of the system," Mr Shorten said.
The Henry review said rising life expectancy meant new financial products were required to enable people to finance their retirement. The industry has been pressing for the government to allow superannuation funds to offer deferred annuities.
Challenger's head of government relations, David Cox, said that a person retiring at age 65 who was worried that their superannuation savings would only last their expected life span until 90 years could, for an outlay of $10,000 on retirement, buy an annuity that would deliver half the age pension from 90 years for as long as they lived.
These products were banned before now because of fears they may be used for tax deferral. However, Mr Cox said safeguards could be introduced.
Mr Shorten said there was a need for Treasury and industry to work together on new products for the "drawdown" phase of superannuation so that "people don't work hard their whole life and retire poor".
Lateral Economics chief Nicholas Gruen, a Keating-era economics adviser who helped devise the super system, called for workers in their 20s and 30s to be able to use their super as a house deposit and for the government's "Mickey Mouse" first-home saver scheme to be scrapped.
Dr Gruen, who served as an adviser to former treasurer John Dawkins, said young people's superannuation guarantee payments should be channelled into compulsory savings accounts to finance house deposits.
Monday, September 26, 2011
Imaginary pokies campaign | Crikey
The pokies debate has exploded over the past 24 hours after Clubs NSW used its influence over the NRL to try to impose its campaign against Andrew Wilkie’s reform agenda on the AFL’s grand final week program.
With no NRL or AFL finals on Sunday, elements of both codes leapt into the media vacuum yesterday and won themselves a truckload of coverage in today’s newspapers.
Collingwood president Eddie McGuire kicked things off on Friday morning’s Channel Nine Today show with his reference to a so-called “footy tax”.
News Limited’s Samantha Maiden then pulled this together adding some Jeff Kennett quotes for a mischievous beat-up in the Sunday tabloids, which suggested a full-on AFL public advertising campaign was about to be launched. This is rubbish.
Meanwhile, Clubs NSW leapt on this News Ltd distortion and CEO Anthony Ball summonsed St George Leagues Club CEO Peter Doust to a midday doorstop yesterday at their Kogarah Taj Mahal. But the PR didn’t go all their way.
The Australian’s colour piece this morning on the punters at St George featured a member called David Kavanagh who savaged his own club when stating: “Is it worth someone killing themselves because of a gambling addiction, to see footballers?”
Like with most tax-exempt NSW Leagues clubs, the St George’s facilities are grossly over-capitalised. However, St George CEO Peter Doust told The Australian the Wilkie reforms would bring down the shutters on his operation.
“It means jobs, 200 jobs,” he said. “This is about our club fighting to survive. We will close if this system is successful.”
But a quick look at the latest financial statements for St George show a club with no net debt, cash of $3 million, $45 million of property, plant and equipment, retained earnings of $37.8 million and operating cash flow last year of $2.5 million.
It is a typically asset rich NRL Leagues Club whose latest financial statements even boast ownership of “a number of residential properties”.
It is true that $32 million of its $39 million in gross revenue came from losses on the 418 poker machines that it operates, but no one is suggesting the Wilkie proposal will force St George to close them down. Moving to low-intensity machines with a maximum bet of $1 is easy and cheap to implement and would cater for all those recreational gamblers they claim to serve. If St George wants to retain machines where addicts can lose more than $10,000 an hour, then a system of mandatory pre-commitment will be imposed to stop vulnerable people being fleeced.
While Media Watch has regularly exposed over-the-top claims by the NSW pokies industry, the position of the AFL clubs in Victoria is a lot more sensitive.
ALH, the joint venture between Woolworths and pokies billionaire Bruce Mathieson, operates venues for Collingwood, Carlton, Hawthorn and the Western Bulldogs. The Carlton situation is tricky politically because Mathieson copped plenty of stick last year when he seemingly shafted the Western Bulldogs and Richmond by shifting some of their pokies business to his own team, Carlton.
Given the Mathieson connection as a former Carlton director, it made more sense for Woolies to prod its other client clubs to front a grand final week campaign.
Outgoing Hawthorn president Kennett and McGuire duly stepped up with their reference to a “footy tax” and Kennett even claimed they “threaten the survival of the code”. But two out of 18 AFL presidents does not make an AFL campaign. That position may be reached today at a meeting of all presidents, but Clubs NSW should not hold its breath.
The AFL itself has not joined the Clubs NSW campaign, as Anthony Ball and Peter Doust declared in front of a 15-strong press pack at the St George Leagues Club yesterday.
Indeed, new Geelong president Colin Carter stuck his neck out on the front page of The Australian Financial Review today when he was quoted as follows: “We are not at all opposed to this. The abundant evidence is that we have a national problem in this area.”
These words are especially important because Carter is a strong Christian who spent 15 years as an AFL commissioner and has served on the Wesfarmers board since 2002.
Wesfarmers operates several hundred pokies through its Coles hotels business but it has strongly differentiated itself from industry leader Woolies, agreeing to a range of concessions in 2009 after being targeted by anti-pokies campaigner Paul Bendat.
In a week when we should all be talking about the grand final, Jon Faine spent more than an hour on 774 ABC Melbourne this morning talking about the AFL and pokies. The pokies industry and people such as McGuire got slaughtered. Even NRL hero Steve Mortimer came across as a stammering fool. And it won’t help the AFL players either who are looking greedy with their hands out for massive pay rises after the record $1.2 billion media rights deal.
The question remains: why do these cashed-up athletes on huge six-figure packages need to be associated with targeting problem gamblers in the country with the highest gambling rates on earth?