The politics of the top income tax rate

Regardless of what the national fiscal situation looks like at any given point in time, few topics divide the commentariat right from the commentariat left as keenly as whether or not the top rate of income tax should be cut. The right will have you believe that cutting the top rate of income tax encourages the rich to spend more and the entrepreneurial to expand their businesses; that a heavy top tax rate discourages people from striving to earn more and encourages them to find ways to cheat the tax system. The left will have you believe that cutting the top income tax rate, explicitly (as it is) in aid of the affluent, cannot be morally justified when there are so many more worthy targets for government expenditure out there. Why put a few more dollars into the bulging pockets of society’s most fortunate, when you could put a few more dollars into schools, hospitals, or to help the needy or vulnerable? Ethically it just doesn’t add up.

As someone firmly on the “left” side of the argument, I do wonder whether there would be any circumstances under whether I would feel that a cut in the top rate of income tax could be justified. Society, I think, would have to be motoring along swimmingly, with a high median income and a high quality of public service provision for people from all walks of life. There would need to be a clear sense that people on high incomes were really being stifled by the tax system, or that the tax system was configured in such a way that the top tax rate was proving ineffective in delivering revenue.

Two of the giants of Western Europe have seen some of these philosophical issues rise to the forefront of public debate in recent weeks. In France, the Socialist presidential candidate François Hollande has proposed a bold tax rate of 75% on personal income earned over €1,000,000 per year. Contrastingly, in the UK, a furore has arisen in the lead-up to the Budget (to be delivered on Wednesday at 12:30PM UK time) after it emerged that the Conservative/Lib Dem Coalition are planning to cut the top income tax rate from 50% to 45%. Andrew Rawnsley at The Guardian has a ruminative piece summing up the machinations, and asks the question most LP readers are probably wondering:

Reducing the top rate will please a lot of Tories and it won’t have escaped Mr Osborne’s notice that these are the people who will ultimately select Mr Cameron’s successor. It will obviously go down well among the minority who earn enough to pay the top rate. No doubt it will be justified on the grounds that a 50p rate sends a negative signal to entrepreneurs and deters talented people from working in the UK. But the chancellor will struggle to explain why he has made a priority of cutting the top rate to the far greater number of less affluent voters who are suffering the worst squeeze on their living standards in decades.

In short, cutting the top tax rate (as Rawnsley quotes “senior Labour figures” as describing it) really does sound politically mad. It will literally benefit just the top 1% of tax-payers, leaving a sizable proportion of the remaining 99% feeling appalled at the government. It provides the struggling Labour Opposition with a stonking great club with which it can beat the Conservatives and condemn them as being out of touch.

This is an act that reeks of the Tories’ self-perceived need to touch up their own supporters, with scant regard for either the state of the economy or the vast majority of the British population. The next election is still a few years away – so there is a palpable sense of “now or never” for the blue-bloods, with a few years grace yet to patch up their image before the public gets to pass judgement on them again. What is ironic is that Hollande in France is taking a mirror-image approach; 75% is a hefty headline-grabbing number seemingly designed more to mobilise and appeal to his party’s base rather than to solve France’s economic woes or to aid the struggling.

When did the top income tax rate become little more than an intellectual chew-toy for the political classes?

Crossposted at Larvatus Prodeo.

Are you experienced? Working for free in an economic apocalypse

Since the global financial crisis shook domestic economies across the planet in 2008, the labour market in Europe has remained a buyer’s market. With austerity measures still biting hard and the Eurozone crisis rolling on without a defining resolution in sight, only blithely optimistic souls would argue that the mood is going to lighten in the short-term. Unemployment in the UK rose yet again for the three months to December 2011 to 8.4%, its highest level in sixteen years. Youth unemployment stands at an astonishing 22.2%. Unemployment across the channel in France remains high at 9.3%, down slightly from the peak of 9.6% reached in the throes of the GFC in late 2009. These figures provide a distinct contrast with the numbers coming from North American and indeed down under; Australia’s unemployment rate of 5.1% seems much more than a twenty hour flight away right now, and Barack Obama has seen unemployment drop on his watch by close to 2% since late 2009.

Under the Conservative / Liberal Democrat Coalition, swingeing public sector cuts, the squeezing of people off welfare and the prevailing economic climate on the continent has engendered a ferocious level of competition for jobs. Quoth the Jimi Hendrix Experience, are you experienced? If you don’t have experience, there is nothing to separate you from the tens or hundreds of other applicants out there, most of whom are willing to put their shoulder to the wheel for less than you. Put to one side for just a moment the perennial Western problem of kids dropping out of school early: even well-qualified British graduates are today truly struggling in the fluid labour environment of the EU. Why would a company hire a green youngling with no experience when they could hire someone who knows what they’re doing because they have done it before – perhaps even at the price of a graduate given the desperation many immigrants and locals have for paid work?

The path increasingly well-travelled for young people and those trying to get a foothold in the world of work is unpaid work: volunteering, or “interning”. A desperate jobseeker wants what they can’t get without a job: experience. A company or charitable organisation gets a warm body to do with what they like, effectively free of cost to the bottom line. Everybody is happy. The Cameron Government was so enamoured with the concept of getting jobseekers experience in this way that in early 2011, it extended a scheme operated by the Department for Work and Pensions, so that some lucky welfare recipients would be forced to work for free at Tesco, Sainsbury’s and other large for-profit businesses. Suddenly what seemed an innocent swap of free labour for some much-needed experience seems rather more sinister. Has modern capitalism created conditions so toxic that there is an expectation that some people should effectively work for nothing for enterprises making multi-million or billion pound yearly profits? When does volunteering become exploitation – is it really when one initially decides to offer up their labour, free of charge?

Thinking back to my own experience after university – I don’t think I would have hesitated to embark on an unpaid short-term stint with an IT company if necessary, as a stepping stone to a “real job”. As a young graduate with basically no working experience and no life skills, how could I compete otherwise? What would I have to offer, besides some witty interview responses? A close relative has had a wonderful experience volunteering – after around 20 years out of the workforce and with his self-esteem at rock bottom, he decided to volunteer with a local thrift store: this led after some time to a paying job, and a 180 degree turnaround in his life’s fortunes. Still, I am sure for every happy ending, there may well be just as many (or more?) unhappy ones. There is a fine line between exploitation and the market offering a helping hand to people who are in dire need of one. I don’t see how it can be fair for people to work practically in the same way that salaried staff do without being renumerated for their efforts, purely because they are so desperate for work. It’s undignified, unjust, and whips people’s wages along on a merry race to the bottom.

What of your own (no pun intended) experiences? Do you feel you have been exploited by your own volunteering or unpaid work, or were you, under the circumstances, quite happy to work for free? Is the holy grail of a bit of experience ever a just reward?

Cross-posted at Larvatus Prodeo.

End days for dead paper and “Murdochracy”?

The intensity may have reduced since James and Rupert Murdoch and Rebekah Brooks appeared before the UK Parliament’s Culture, Media and Sport Committee, but the crisis besetting News International is still burbling along in the background, bunted doggedly onwards from time-to-time by The Guardian and the BBC. As the embarrassing allegations continue to slide out, one gets a clear sense (as Kim has observed) that things will never by the same for the tabloid press again – in the UK, at least. The saga has been that rare civil society event that unites everyone from all walks of life in moral outrage (whether real or confected) – from Nick Griffin’s BNP and David Cameron’s Tories, through to Ed Miliband’s Labour, the Greens, and everyone in between, even including the Murdochs themselves!

There are a few key interlinking threads here that I think invite some serious discussion: the state of the Murdoch brand, the UK media context and finally the Australian media context.

The News International media brand, in the United Kingdom at least, has been positively smashed, perhaps irrevocably. When News of the World published its final edition, with all proceeds going to charity, it had trouble finding charities willing to accept its money. The details of recent formal and informal meetings between the Prime Minister and the Treasurer with members of the Murdoch family are now being pored over with genuine distrust and disdain in the public, rather than the indifference that is typical. James Murdoch, the youngest Murdoch scion (strangely relatively unknown in Australia), has had his character brutally tested and his reputation as an executive dragged through the mud by all the allegations of wrong-doing on his watch. Rupert Murdoch’s image has morphed instantly from the powerful media mogul to end all media moguls into a tottering 80 year-old man who you wouldn’t be overly surprised to find in your local nursing home. Corporate dynasties suddenly seem just a little “last century”, relics of a more feudal, slightly more despotic capitalist era. If I were a financial advisor or a stock market activist, I would have some serious concerns about the transparency of the dealings of the various family members perched around the top of the News hierarchy, and advising my clients accordingly.

In the UK, the phone-hacking scandal has emerged in an age where circulation is in decline and newspapers seem on the fast track to extinction in their current form. Prices are being forced down (The Sun is just 20p!) and so is quality. Travelling on the underground in London, it quickly becomes apparent that the majority of people who bother to read a newspaper read the Metro, a free rag churned out by Associated Newspapers, who own the right-wing Daily Mail. Dead paper is – let’s face it – nice on a lazy weekend, but in this age of portable, wireless technology, really quite dumb. Personally, I’ve just subscribed to the Guardian Kindle edition – and boy does it make massive sense: cheaper than the paper edition, more convenient (downloads automatically each morning, readable on a packed train), and so much more environmentally friendly to boot. Is this the future of news?

If indeed it is the future of news, from what I can gather (admittedly from several thousand miles away), it might take Australia more than a little time to catch up. Australian newspaper circulation is of course also in long-term decline. Evolution in the Australian publishing market is also restrained by its diabolical levels of concentration; Fairfax and News Limited dominate the scene to such an extent that their half-life as newspaper publishers in the traditional sense is probably going to exceed that of their UK counterparts. I am not getting the sense that the Daily Telegraph or the Herald Sun are suffering from any significant amount of backlash from the exploits of the News of the World (please correct me if I am wrong in the comments!).

Will this saga be the watershed for publishing and the media/political nexus in Australia that it seems it will prove likely to be in the UK?

Cross-posted at Larvatus Prodeo.

Towards conservative oligopoly; east and west

State political journalists in New South Wales are doing it tough just at the moment. Generating vaguely interesting material from a government that most people have written off and an Opposition that assumes (correctly) that it will dawdle into government in March 2011 must be pretty challenging. Even the disturbing developments surrounding Premier Keneally’s proroguing of parliament seem like a footnote to a book that was published and swiftly remaindered a year or two back. Most ordinary folks one talks to apropos of nothing are weary of politics, but when it comes to politics in New South Wales, they are livid. The trail of disappointments, petty infighting, incredulous scandals and broken promises has not just served to damage the Labor brand, but smashed the democracy brand altogether. The credibility of democracy in New South Wales is pretty much sub-zero; democracy as a celebration of mediocrity.

The most recent [PDF] bi-monthly Newspoll from early December painted a frankly disastrous picture for Premier Keneally and NSW Labor; Labor is sitting on just 39% of the two-party preferred vote – and a primary vote of just 24%. The pain that Labor feels is undoubtedly going to be sharpened by the optional preferential voting system that we have in New South Wales, whereby electors are able to exhaust their preferences in the lower house if they wish. One gets the feeling that there are going to be quite a few voters out there who cast a vote for a independent or minor party and neglect to preference either Labor or Barry O’Farrell’s evidently vision-free Opposition. Given the general ill-feeling out there in the electorate, it is difficult not to see this mentality strengthening O’Farrell’s hand and his grip on a massive parliamentary majority.

Interestingly enough, it is not just New South Wales where it seems that the conservatives have a whip hand in state politics. Anna Bligh’s team is struggling in Queensland. Ted Baillieu has of course recently lead the Coalition into power in Victoria, slightly surprisingly. A recent Newspoll [PDF] in Western Australia has Eric Ripper’s Opposition on the ropes, with Labor commanding just 29% of the primary vote and 42% on two-party preferred. Western Australia is arguably a unique case; although we always like to assume that people treat state and federal politics separately, it is difficult not to view politics in the West through the prism of the great mining tax kerfuffle that Federal Labor have yet to find a wholly decisive resolution to. I don’t think there is much doubt that some of the unseemly scuffles that Rudd and Gillard have been trying to fight through during the last couple of years have oozed into the consciousness of people weighing up their vote at a state level.

In New South Wales, of course, we will have a resolution first. In my view, the best argument for a vote or preference for Labor is that democracy in the state stands to be damaged further if the O’Farrell Opposition are gifted a monstrous majority by political circumstances. I’m not sure its in the interest of people in any state for a government to be crushingly controlled by any one party or coalition. The mandate that Barry O’Farrell will have, presuming his team takes power in March 2011, will be a mandate borne out of the chaos of the previous government, and hardly an ounce of his Coalition’s political ingenuity or vision. This hardly augurs well.

Cross-posted at Larvatus Prodeo.

On philosophies of giving

It’s that time of year again. A time when we commemorate the birth of Jesus Christ, embark on a consumerist frenzy, get together with family and friends, set out milk and cookies for the patron saint of Coca-Cola, or at least some of the above. It’s probably a good time of year to reflect on giving; how we like to give, how much we give, and whether or not we’re each individually giving enough back to society.

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In defence of compulsory voting in Australia

Compulsory voting is one of the more idiosyncratic features of democracy in Australia, enforced as it is at state and federal levels of government, as well as at local elections for all states and territories except South Australia, Western Australia and Tasmania. In “coercing” citizens to participate in the democratic process, Australia is somewhat unique; as a research paper published by the UK Electoral Commission in June 2006 [PDF] notes (p.21):

Australia is widely considered to be, and is often identified as, the leading example of an effectively functioning compulsory voting system with compulsory registration.

By far the most common criticism of Australia’s compulsory voting system relates to the coercive element; the fact that the state is forcing individual citizens to do something. In a twisted philosophical sense, one could even argue (as many hardline libertarians, cynics, and just plain lazy folks do) that Australian governments impinge the human rights of citizens by forcing them to participate in the democratic process. It is an ironic commentary on the bodypolitik down under. In the developing world during the last century, thousands or perhaps even millions of activists gave up their lives or livelihoods for democracy and the right to vote, to select the people who govern them. In contrast, in first world Australia, we are probably more likely to get organised and fight for the right not to vote; to not have a say. Or perhaps more realistically, to just switch off, tune out, and coalesce with the couch.

Peter Brent, the author of the excellent Mumble blog (now resident at The Australian) recently posted an alternative critique of compulsory voting, focusing on the negative implications our current system has for participation. Brent observes:

… fewer young people are enrolling. Many assume it’s something that’s done automatically by “the government” and are surprised to find they can’t vote.

At last month’s election some 370 thousand people tried to vote but couldn’t, mainly because they weren’t on the roll. And more (we don’t know how many) simply turned around and left the polling place upon finding they weren’t on the roll.

The argument goes, in essence, if both enrolment and voting were voluntary, young people and other slightly addle-brained, unenrolled folk who rocked up at a polling place on the day of the election could have their vote counted. Furthermore, the coercive element so distasteful to libertarians would be removed from the picture, and potentially a greater proportion of people who wanted to have their say, could do so.

It is a fair point to make, but let’s take a step back and remind ourselves of the reality of compulsory enrolment and compulsory voting in modern Australia. One would have to think that it is in the interests of a functioning democracy to maximise the number of people who involve themselves in the democratic process. A democracy where less people participate is, almost by definition, less legitimate then one where a greater proportion of people participate. Even considering the additional 370,000 people who theoretically could have cast their vote at the August 2010 election if enrolment was simplified and voluntary, it seems certain that this figure would be dwarfed by the likely millions of people who just wouldn’t bother turning up if they didn’t think they had to. Voter turnout in the UK at the 2010 general election was around 65%, and in the United States presidential election of 2008, around 61%. Contrast this to the 93% of enrolled voters who turned out for the August 2010 federal election in Australia. That’s not a reflection of the Australia’s fervour for democracy, sadly, that frankly laudable figure is a product of compulsory voting.

Secondly, squarely blaming compulsory voting and enrolment for our electoral system’s failings seems a bit wrong-footed. If there are indeed thousands of electors out there who were unaware that they had to be enrolled at their current address in order to vote, surely this is suggestive of a failure in electoral education or “ease of use”, as much as anything else. Technology-wise, clearly the AEC needs to allow people to directly update their enrolment online; this need has been underscored by GetUp’s legal victory just prior to the election. The bottom line is that the AEC should be granted the wherewithal by government to ensure that people know their democratic responsibilities. Where feasible, interdepartmental information (e.g. records of address changes) could be leveraged to assist this process, and to prompt people to ensure that their enrolment information is up to date.

Finally, let’s reconsider the “coercive” line of argument. Really, when it comes to the crunch, our system of compulsory enrolment and voting is not really very coercive at all. We’re not talking carrot and stick here; we’re talking carrot and wet noodle. One could even successfully argue that both enrolment and voting are effectively voluntary in Australia already. The fine for not voting federally is a not particularly catastrophic $20. People who decide to vote on the day but who do not want to support a particular candidate as a “protest” can vote informal if they so choose. For those who find it logistically difficult to vote on the actual election day, there are a myriad of excuses one can provide to the AEC in order to vote early or via the post. That are quite literally a barrel of ways to skin the coercion cat for those self-absorbed voters who are really interested in doing so.

Do we want a political system where more people have a say in who forms government, or one where less people have a say? Obviously its a rhetorical question, and to the extent that we can greater empower the AEC and government departments to help people exercise their democratic responsibilities, compulsory voting is not something we should be whinging about. The right not to participate in keeping democracy healthy in Australia is not a right people should be wasting valuable intellectual energy fighting for.

Time to put the miners in charge?

Whichever way you look at it, it is difficult to avoid the fact that the Rudd Government’s botched framing of the Resource Super Profits Tax (RSPT) was one of the key factors behind both the Gillard “putsch” and Labor’s poor result at the polls on Saturday August 21. The Minerals Council of Australia, with the help of some of the deepest pockets in Australian business, rivalled the success of the union movement’s anti-WorkChoices advertising during the 2007 federal election campaign. In terms of opinion-making, one could even argue that the mining lobby’s campaign was more singularly effective than that run by either the ALP or the Coalition during the election campaign proper.

Immediately after dethroning Rudd, Julia Gillard was compelled to seek a temporary advertising “truce” with the mining industry, which is testament to the brutal impact the campaign was having on Labor. She then wasted little time brokering an agreement with the big miners on a watered down regime, carving up the RSPT into a 30% Mineral Resource Rent Tax (MRRT) for iron ore and coal projects, and a proposed addendum to the existing 40% Petroleum Resource Rent Tax (PRRT) for oil and gas projects. This deal “stopped the rot” politically and placated the most vocal amongst the mining lobby, but realistically, a lot of damage had already been sustained to Labor’s credibility in the minds of voters. Furthermore, vocal billionaires Andrew “Twiggy” Forrest and LNP backer Clive Palmer continued to publicly attack the government, and the Association of Mining and Exploration Companies, representing many smaller mining companies, quite vocally (and rightly) criticised Labor for not inviting it to the negotiating table for the revised regime.

So with the miners having pretty much dictated play on one of the most hotly contested political issues of 2010, its rather interesting that BHP Biliton CEO Marius Kloppers is evidently now seeking to do the same on climate change. Kloppers, strangely enough, is now making the case for unilateral climate action independent of other countries, and for a local carbon price to be established. It is quite a remarkable intervention, particularly when one considers that previously the mining industry had by and large toed the conservative line on climate change, at best recommending that Australia only act on climate change as part of a binding multilateral agreement.

Given the pussy-footing and focus-group gabbling generally favoured by the major parties with respect to climate change policy during the past year, it really does make you wonder whether we should just cut out the middlemen and middlewomen in parliament altogether, and let the mining industry run the country? When one considers the influential interventions made by the miners during the last six months of politricking and electioneering, once gets the sense they already do, at least in a de facto sense. Perhaps it is time to end the charade and install Mr. Kloppers, Mr. Palmer or Mr. Forrest as our “Prime Miner” in chief?

At least we know they’ll run some killer ads come 2013.

He’s a loathsome, offensive brute, and yet we can’t look away

There’s now less than a week left to go in the campaign, and at least as far as I can tell, all parties of note are out of puff. The grandiloquent vision phase of the campaign [momentary or illusory as it was] is behind us, and what lies ahead is merely mad scrambling and pork scratchings. We are living in the curious purgatory that exists between the meaningful cut and thrust of the campaign and the Australian people’s collective decision. Despite my fleeting engagement with the whole shebang, and my geographical detachment (I am typing this from my hotel room in Gloucester), this feels like it has been a really long campaign. It has felt like a campaign about nothing, echoing the bilious taunts of Mark Latham leading into the November 2007 election; funnily enough an election that really did mean something to a lot of people. It’s certainly important to keep Tony Abbott and his intellectually malnourished team out of The Lodge, but it’s a bit of a shame that Labor’s driving urge in this campaign has been reduced to this.

But back to Mark Latham. The latest gem to emerge from Iron Mark, television journaliste extraordinaire, is that voters should leave their ballot papers blank “as a protest” when they vote in this Saturday’s election. This is a shameful contribution to the public debate that lays bare the depths to which 60 Minutes and indeed Channel Nine has sunk during the last year or two. An informal vote is a wasted vote; a vote for ignorance, disengagement and ultimately, recklessness. In order to perform its function as the “least worst” system of government available. a democracy needs to embody the will of the people. In a regulated, ordinated democratic environment like Australia’s, mass delinquency at the ballot box fundamentally undermines this principle.

Everyone – even Mr. Latham – ultimately has a preference. He can spin all the pseudo-anarchist bullshit that he wants to out to all of us, but at the end of the day, he is only lying to himself by arguing that he doesn’t have any preference between the major parties in this country. If he really believes he hates them equally, then he should opt for change and preference the Coalition, and stop being such a fence-sitting coward.

With gritted teeth, a parental leave scheme

Today the Rudd Government managed to deliver on one of its major pre-election promises by sealing the passage of a parental leave scheme through parliament, with the begrudging support of the Opposition. Breaking the cycle of negative news that the government has had to contend with in recent weeks, the passage of the scheme is not only a good thing for Australian families, but also a good thing for Federal Labor’s credibility heading into a fiercely fought election campaign. It is a tangible, practical achievement worthy of a Labor Government.

The behaviour of the Coalition on this issue has proven particularly interesting. The Coalition, has, since anointing Tony Abbott as Opposition Leader, been characterised by an unflinching negativity, an eagerness to play the man rather than the ball and a reluctance to announce policy positions lasting longer than a few press conferences. All of this makes the Opposition’s prolonged willingness to play ball with the government on parental leave rather surprising. For a number of months now, the Coalition has indicated that it would support the passage of the government’s scheme, despite proposing an alternative plan of its own earlier in the year.

One senses some disingenuousness in the Opposition on this issue. Despite the family friendly angle of parental leave, it runs counter to the “small government” economic mantra of the Liberal Party. There is a sense that the Opposition’s alternative scheme was cooked up purely as an attempt to gain traction with women voters and to try to out-point the government. With little doubt, Abbott would prefer to deny the government its scheme, leaving Federal Labor with one less policy hook to hang its hat on heading into an election campaign. The decision to break the cycle of negativity and support the government is undoubtedly in part motivated by fear that any opposition to the scheme could be politically fatal.

There is no policy conviction at all from the Coalition on this issue.