YES there is a trickle down effect in the field of tax. Not in the Ronald Reagan sense whereby tax breaks for the rich allegedly result in more employment. That effect was often likened to a trickle down from the bladder whereby those at the bottom got worse than nothing.
Rather, this week, the CSIRO revealed a different trickle down effect when it comes to opinion. The CSIRO has been mapping attitudes to climate change for more than five years. It has found a remarkable correlation between attitudes to it and voting intention.
People may say they make up their own minds on issues, but on climate change the CSIRO work shows that a great many people follow the views of the leader of the political party they support.
Only one in four Coalition voters acknowledge human-induced climate change as against 62 per cent of the population at large and an even higher percentage of non-Coalition voters.
The CSIRO report said, “Politicians were also rarely nominated as a basis for opinions, despite the strong associations that opinions had with voting behaviour. This aligns with recent research suggesting politicians and political parties might be more influential than [people] think.
You see the same effect with referendum proposals. Initially the Yes vote often polls highly, but as soon as a major party lines up for No, the voters fail. Unless both major parties support a referendum proposal it has no hope. The sheep will not vote for it.
People might say their parents, other family, friends, academics or business leaders are more likely to influence their opinion on issues, but it appears that politicians have the most influence.
And politics pretty well covers the whole field of economic, social and moral issues.
It is perhaps a natural human tendency – fit in with the tribe and the tribe’s views on things. It also resolves the internal conflict of generally supporting a political party but not on certain issues.
Now we have a new Prime Minister who accepts human-induced climate change; supports marriage equality and Australia becoming a republic; and most likely wants to increase the GST. So, if the CSIRO correlation is correct, we will see more Coalition voters going that way, too.
We are seeing how this trend works. Once you change the leader, the frontbenchers – eager to please their new boss who has different views from the old boss – begin to express the views they formerly had to suppress.
Foreign Minister Julie Bishop has now supported marriage equality. Treasurer Scott Morrison who hitherto ruled out increasing the GST now says it is on the table.
A solution to the indefinitely detained refugees in Nauru and PNG might be next.
But the GST will be the real test. The other issues are Yes-No questions. With the GST the question is not should it go up, but also other questions. Should the base be broadened to include education, health and fresh food? How should those on welfare and low incomes and self-funded retirees be compensated? Should it be revenue-neutral or should it raise more money? In which case how should that be spent?
It will take a lot of explaining and persuasion to the population at large and to Coalition MPs, many of whom would like to increase the GST, impose it on fresh food, and hand the proceeds to business and high income earners.
Done fairly and properly, though, an increase and widening of the GST would ultimately make our tax system fairer and more efficient.
Prime Minister Malcolm Turnbull has promised that. His task has been made harder with this week’s National Centre for Social and Economic Modelling report on the GST. The research, commissioned by the Australian Council of Social Service, points out the obvious – that the GST is regressive and hits people on lower incomes harder.
But its conclusions on the extent of the regression seem quite puzzling. It models widening and raising the GST and shows that the portion of disposable income that goes to GST is much higher among low income earners than high income earners. But it says that, if the GST goes up to 15 per cent, households with an income of $26,131 would be paying 20.10% of their disposable income in GST.
How can that be? If the household spent all of its disposable income on goods and services upon which the GST is levied and it is levied at a maximum of 15 per cent, how can more than 15 per cent of that disposable income possibly be spent on the GST?
It shows how difficult the task of selling an increase will be.
A better way to look at it is this. The higher someone’s income the more likely they are to have tax arrangements like negative gearing, family trusts, income splitting, superannuation churning and the like.
But, by and large, they cannot escape the GST. Yes there is a bit of cash economy, but if you want the fashion statement from Myers or the French bubbles from Vintage Cellars you will have to pay GST.
Further, if it is imposed on health and education, the wealthy spend more on those things, especially private school fees. Again, they will have to pay some more tax.
A lot of high-wealth people reduce their income tax to under 10 per cent. If you hit them when they consume there is no escape.
Even with food, high-income people tend to have a higher portion of fresh food in their trolley.
Also, as a general principle, taxing consumption more and income and payrolls less is better economically.
But that does not help people on lower incomes who are suddenly faced with a five percent price rise on most things.
Yes, we should gain the efficiency of raising the GST and the fairness in ensuring high-wealth people pay a bit more tax, but it has to be done fairly.
It means significant increases in welfare payments and significant income tax reductions in low income brackets – especially the $19,000 to $37,000 bracket and beyond to, say, $60,000.
The efficiency dividend – and there will be one – can be spent on health and education.
CRISPIN HULL
This article first appeared in The Canberra Times and other Fairfax Media on 7 November 2015