Does The Morrison Government Have The Strength To Slash Red Tape?

The future of freedom in Australia was dealt a blow at the start of the year with Senator David Leyonhjelm's announcement that he will be resigning from federal politics to have a tilt at the state level in New South Wales.

The Liberal Democrat Senator from NSW was one of precious few voices in Canberra who could be relied upon to advocate for the freedoms of all Australians.

Whether it was lower taxes, freedom of speech, or reducing crony capitalism, Leyonhjelm was front and centre.  And while he may yet do great work in the NSW Parliament, the nation as a while will miss his voice in Canberra.

Amongst all of his achievements the one that will perhaps have the longest lasting legacy is the Senate Red Tape Committee which Leyonhjelm established and chaired.

The Committee investigated the effect of red tape in Australia across a range of industries, from health services to liquor licensing to the resources sector.

All told the Committee handed down nine separate inquiries, with a total of 57 recommendations for how governments around the country can cut red tape.  The quality of analysis in the inquires puts the Treasury and the Productivity Commission to shame.

The inquiries by the Committee reveal that red tape is by far the single biggest impediment to economic opportunity in Australia.

At the macroeconomic level, red tape reduces economic output by $176 billion each year, which is the equivalent to 10 per cent of GDP.  This cost isn't just financial.  It represents forgone human potential:  all of the businesses that are never started, the jobs never created, and the dreams never fulfilled as a result of red tape.

This red tape is supported by an intimidating array of unelected, yet well-funded and powerful regulators.  My research estimated that as of 2016 the commonwealth government maintained some 1,181 entities, bodies, and administrative relationships all of which operate behind the curtain of Canberra's power politics and out of sight of the voters.  Of those bodies, some 497 are involved in policy design or enforcement of the federal regulatory system.  And that doesn't include all of the bodies that exist at the state or local level.

These costs are being felt at the coalface by working families.

The Senate Committee's findings make clear that red tape is holding back new private sector business investment, which currently sits at just 11.7 per cent of GDP.  This is only just above the rate that prevailed during the recession of the early 1990s and is lower than during the economically hostile Whitlam years.

Lower business investment stunts capital formation, depriving the next generation of Australians economic opportunity and the inherent dignity entailed in an honest day's work.

Low capital formation also reduces the demand for workers which holds back employment and wages growth.  This is why wages growth in the private sector have barely kept pace with inflation over the past three years.

Of equal concern is the disproportionate impact that red tape has on smaller businesses.  Small businesses are not just smaller versions of big businesses.  They do not have the human resource departments, the IT systems, or the in house legal, accounting, or tax expertise of their larger counterparts.  This means the marginal cost of extra red tape is far higher for smaller than larger businesses.

This is a key reason why larger businesses often advocate for more regulation.  It helps impose disproportionate costs on their smaller competitors, causing some to exit the market and stopping others from entering.

What the Committee highlights is that urgent work is needed to reduce red tape to unleash prosperity and expand opportunity.  This means introducing broad-based, systemic approaches to delivering sustainable reductions to red tape.

Initiatives such as a one-in-two-out approach, where two pieces of regulation (or "regulatory restrictiveness clauses") are repealed for each new piece introduced is an approach that has great promise.

Yes, such an approach is simple.  But it has delivered great success.  The Canadian province of British Columbia, for example, achieved a 41 per cent reduction to red tape from 2001 to 2015 utilising such an approach.  During this time, the province went from being one of the poorest-performing economies in Canada to among the best.

More recently, in 2017 the Trump Administration in the United States set a goal of repealing two new regulations for every new one introduced.  So far Trump has dramatically exceeded that goal, cutting six regulations for each new one introduced, fuelling economic and employment growth.

Australia, too, can experience such an economic renaissance with an ambitious red tape reduction agenda.

Senator Leyonhjelm will be remembered for his good humour, sharp arguments, and for the enduring contribution he made to the future of freedom in Australia.  To honour that legacy, state and commonwealth governments should heed the advice of the Senate Red Tape Committee and slash away at Australia's overbearing red tape problem.

Labor's Franking Credits Plan Adds Up To A Nana Tax

Australia's dividend taxation regime is a complex solution to a simple problem.

It is well known and understood that double taxation of corporate income gives rise to economic distortions.

The simple solution to that problem would be to make corporate income tax-free in the hands of shareholders.

But no.  So a somewhat complicated system was introduced that taxed dividend income at the shareholder's marginal rate with company tax effectively becoming a withholding tax.

The first version of this tax allowed franking credits to offset taxable income and excess credits were lost.

In effect this meant that taxpayers with a zero liability, and corporate income, could face a marginal tax rate at whatever the company tax rate was at the time.

The second version — introduced by the Howard-Costello government — took the policy to its logical conclusion.  Taxpayers with a zero tax liability and excess credits would be refunded the full amount of pre-paid tax.

This is not a radical idea — millions of taxpayers over-pay their tax and get a refund every year.

Labor now proposes to roll back to the first version of the tax.

A range of arguments have been proposed in support of this reform.

It's a return to the original policy design.  Cash refunds are some sort of rort.  Shareholders are rich anyway.  The money is better spent on public hospitals.

Only 8 per cent of taxpayers are impacted.  Australians are over-invested in the Australian economy anyway.  This latter argument is particularly strange — an Australian government would be discouraging local investment.

The questions that should be asked are "Is the revenue actually there?", "Are there behavioural responses that will undermine the policy?", "Where is the burden of the tax going to fall?".

In an attempt to answer these questions I had a look at the ATO individual taxation statistics for 2015-16 (the latest available year) and specifically at their individual sample file.

This data file provides detailed tax information for a representative sample of the taxpaying population.

REVENUE EXPECTATIONS

According to the ATO data some 21 per cent of the Australian population report receiving franked dividends in that year.

I then used the tax tables to calculate an imputed tax payable for each taxpayer and compared that amount to the amount of franking credits.

Some 6.1 per cent of taxpayers appear to earn excess franking credits — less than the 8 per cent Labor claims.  That could be good or bad for Labor's expectations as to revenue.

So the next question is, who are these 6.1 per cent?

Women make up 56 per cent of taxpayers earning excess franking credits but only 48 per cent of the sample data.

Of those women, 68 per cent are over 60.  Labor wants to tax your Nana.  But maybe Nana is rich.  Maybe Nana and Pops have organised their affairs so that the share portfolio is in Nana's name so as to minimise their joint tax liability.

So I went and had a look at the total and taxable incomes for all women and then those women with excess franking credits.

Taxable and total income figures for those women with excess credits tended to be lower than all women on average, and for each age group.

To be certain that this wasn't due to tax planning I then added the franking credits back to total income and recalculated all the average and found the same result.

These women are not "rich" and, on the assumption that not reporting spousal details indicates single status, some 47 per cent of these women are either single or widowed.

So a whole lot of (widowed) elderly women are about to face a marginal 30 per cent tax rate under a new Labor government, and will lose a portion of their current income.

The numbers go down once I account for the pension guarantee that Labor has proposed — but not by much.  We are being invited to believe that this tax grab on the elderly won't have any flow-on effects to their children and loved ones.

What could these women do to "avoid" the tax on their livelihoods?

I expect that many will sell down their share portfolios to qualify for the pension (or for more of the pension) and use the proceeds to renovate their homes.

I doubt that this is the policy intent, but it does suggest Labor will raise a lot less revenue than it imagines, and that the social costs of this policy are higher than they anticipate.

Australians And Their Original Sin

In his book The Strange Death of Europe — Immigration, Identity, and Islam the British writer Douglas Murray compares the attitude many Australians have about their country's history to that of the Europeans.

"Whereas for contemporary Europeans, colonialism is just one of our middle-ranking, midway sins, for Australians, colonialism has become the nation's founding, original sin.  And not because like European nations it stands accused of having plundered other countries in its search for wealth, but because it stands accused of plundering itself — of being a colonialist project still sitting on its colony," he writes.

Murray goes on to comment that the "conquering of one group by another and the ill-treatment of the losers by the victors is the story of most nations on earth.  But for Australians the historic treatment of the Aborigines and other first peoples is a subject that has in recent decades moved from the margins of public debate to the core — to the country's deepest, founding sin."

To some extent the contest about Australia's history and the meaning of things like Australia Day is a testament to our humanity.  The fact that in the weeks leading up to January 26, as Australians are coming back to work from their summer holidays of the beach and watching cricket, the nation is engulfed in a conversation about what it means to be Australian is not entirely a bad thing.  Sometimes this conversation is derided as unimportant and merely an aspect of the "culture wars".

Given what the government and its associated entities devote to telling the public what it means to be Australian, its entirely appropriate to interrogate the story they're communicating.  The federal government is spending $48 million to commemorate the 250th anniversary of Captain Cook's arrival in Australia.

Douglas Murray's assessment of how parts of elite opinion view this country is surely correct.  For the Greens Party, celebrating Australia Day represents an attempt to "airbrush" from history "200 years of dispossession, oppression, and resistance".  But this is not the view of Australia Day held by the vast majority of Australians.

In a survey of 1000 Australians conducted earlier this month by Research Now, only 10 per cent of respondents said the date of Australia Day should be changed while 75 per cent said the date should not be be altered.

Eleven per cent of those surveyed disagreed with the statement "Australia has a history to be proud of", while 76 per cent agreed.  These findings are consistent with a poll from Advance Australia showing 71 per cent of Australians believe Australia Day should not be moved.

There were two other noteworthy outcomes from the Research Now survey.

The first was that 92 per cent of people agreed with the statement "freedom of speech is an important Australian value" and 77 per cent said the same about freedom of religion.

The second outcome was about the attitude of young people to Australia Day.  Only eight per cent of respondents between the ages of 18 to 24 believed Australia Day should not be celebrated on January 26.  55 per cent of that age group said Australia Day shouldn't be moved and 37 per cent didn't have an opinion on it.  This finding about the attitude of young people to Australia Day corresponds with a phenomenon that has confounded the left in this country — namely that one of the reasons for the resurgence of public interest in ANZAC Day is because of support from the nation's youth.

On practically any measure you could care to think of, while of course Australia faces many challenges, this country ranks as one of the very best places in the world to live, which goes some way to explaining the Australians' attitudes to Australia Day.

And it appears the rest of the world has a pretty positive attitude to Australia and to its companies.

The 2019 Edelman Trust Barometer released a few days ago surveyed 33,000 people across 27 countries on a range of questions.

When people across the world were asked about their level of trust in global companies headquartered in specific countries, Australian companies were ranked the fifth-most trustworthy, behind Switzerland, Germany, Canada, and Japan, but ahead of the UK and the United States.

Australia Day Discord Devised By Academe

To understand the self-loathing narrative pushed on us by some Australians about the date of our national day, you need only examine the way Australia's history is being taught.

There is a direct correlation between the version of our history taught in universities, and the story that is yearly trotted out to Australians in the lead-up to January 26.

And the historical themes preoccupying the academic community tend to frame public debate as well as policy decision making.  The themes are based on class, race and gender, which are of course the Left's trope du jour.

In my audit of Australian history teaching at universities — Australian History's Last Stand — by far the most dominant theme is identity politics.  The report found that of the 147 subjects taught across 35 universities last year, a total of 102 either focus on or make reference to class, race and gender.  This means the vast majority of subjects offered by history departments employ the lens, to a greater or lesser extent, of identity politics through which to view our past.

It is almost impossible for students to study this nation's past without encountering the modern obsession with class, race and gender.  It appears that our history has been enlisted to support political causes by academics who are more concerned with rewriting the past through identity politics than they are with a narrative motivated by professional concerns.

It hasn't always been so.  Historians such as Manning Clark, Geoffrey Blainey, Allan Martin, John Hirst and Stuart Macintyre might have been divided by politics, but they all shared a traditional approach to the discipline of history.  They saw their roles with clarity, which was to understand and study Australian society, agreeing that history is about the expanse of time in which human beings have lived and acted.

All operated under the assumption they were able to paint a fairly accurate picture of past events by using a linear model of historical thinking and sifting through historical evidence.  However, in the 1960s there appeared a range of radical post-structuralist and postmodernist theories invented by a group of mostly French philosophers who essentially rejected such notions of the linear model, historical evidence, objective truth and knowledge.

Perhaps the most influential of these was Michel Foucault, philosopher, historian, social theorist and inventor of the neologism power-knowledge.  He proposed that knowledge is power, and history is fiction, and the historian's only role is to be social commentator and political activist.

The approach to Australia's history in academe carries all the hallmarks of Foucault's radical postmodernist theory.  Many individuals who specialise in Australia's history have wholeheartedly embraced the idea that they are political activists and social commentators whose self-proclaimed role is to rewrite the past as a way of empowering minorities and the oppressed.

The problem is that history is distorted when it becomes a conscious vehicle for advancing contemporary political agendas.  In Australia's case, much of our history is not only being distorted but is being ignored completely.  Because the story of our success as a modern nation based on the ideas of liberalism is almost absent from the university curriculum, it is completely omitted from the narrative being pushed by the anti-Australia Day lobbyists.

There is little if any discussion of the fact that Australians laid the foundations of one of the world's most successful liberal democracies, which has achieved unprecedented levels of personal freedom and social equality and which continues to attract people from all over the world.  There is little, if any, recognition of Australia as a beneficiary of Western civilisation.

But you only need to look at the result of the recent poll conducted by Research Now to understand just how wide is the divide between academe and the nation, and how mainstream Australians regard themselves and this country.

The results showed that 75 per cent of Australians want to keep Australia Day on January 26, that 76 per cent are proud of Australia's history and 88 per cent are proud to be Australian.  Moreover, 92 per cent think freedom of speech is important and 77 per cent believe freedom of religion to be an important value.

There is clearly no identity crisis among the majority of Australians who turn out in force each January to celebrate this country's past, present and future.

Anti-Australia Day Activists Claim There Is A Groundswell Against January 26. Polling Says Otherwise

If your only way of finding out about what's happening in this country is either by listening to ABC or reading the Guardian, you'd think the entire country is embarrassed about being Australian, wracked with guilt about Australia's history and overwhelmingly opposed to celebrating Australia Day on January 26.

Indeed, you'd likely wind up mistakenly thinking that there is a groundswell of anger from mainstream, everyday Australians who believe that Australia Day is by far the most pressing issue facing Australians in 2019.

However, a poll conducted by Research Now, has revealed that this is exactly the opposite to what mainstream Australians really think about themselves as Australians, their history and their values.

In fact, Australians are fundamentally optimistic and positive about being Australian.

The results of the poll show that 87 per cent of Australians are proud to be Australian, while a tiny 3 per cent are not.

When it comes to Australia's history, 76 per cent of the respondents believe this country has a history to be proud of, while only 11 per cent did not.

The polling also found that 75 per cent of Australians think that we should continue to celebrate Australia Day on January 26 while only 10 per cent actually want the date to be changed.  Chances are that if you polled the Canberra Press Gallery with the same questions, the numbers would be significantly different.

These results expose the massive divide between the majority of Australians and the minority of vocal individuals who continually push the narrative of national self-loathing and self-flagellation on to everyday Australians.

The results simply reveal that there is an enormous disconnect between what Australians think about themselves, and what we are being told Australians think about themselves.

Every year, when Australia Day comes around, elements of the media, the political class and a small but noisy group of activists on Twitter, pull out all stops to impose their own version of Australia's history on the nation.

They are, however, completely and utterly out of touch with mainstream Australia.

Not only are they out of touch, but it seems that the more strident they are in their opposition and the more they obsess about changing the date, the more that Australians want to keep the date.

When Research Now asked the same question about Australia Day in 2018, 70 per cent of Australians were favour.  This year, the number has gone up to 75 per cent.  The poll also shows that young people are not being drawn to the divisive argument of opposing our national day.

The more this vocal, activist minority pushes its agenda down their throats, the less inclined everyday Australians are to go along with it.

The poll found that last year 17 per cent of young Australians between the ages of 18-24 said that Australia Day should not be celebrated on January 26.  This year's poll shows that, that number has plummeted to just 8 per cent.  They, like the majority of Australians know that there are more important issues to think about.

The incessant hounding of the public by activists is having the opposite effect than they intend.

Similarly, our political class likes to present the issue of freedom of speech and freedom of religion as fringe cultural issues being pushed by a small number of conservatives.

Yet again, the poll reveals that the opposite is true.

When asked what they thought about these values, a whopping 92 per cent of the respondents considered freedom of speech to be an important Australian value while 77 per cent said freedom of religion was an important Australian value.

Again, this exposes the disconnect between mainstream Australians and our political class.

Many of the left-wing activists that will be taking part in protests on January 26 have moved on from the change-the-date campaign and are advocating the abolition of Australia Day all together.  These activists will never be happy until there is no celebration of our successful, liberal, prosperous, modern nation.

Prime Minister Scott Morrison is right when he says there is a majority of "quiet Australians'' who aren't obsessed with the issues pushed by the Canberra bubble or a noisy minority.  He was right to come down hard on radical local councils who are refusing to hold citizenship ceremonies on Australia Day.

The Federal government is correct to insist that citizenship ceremonies should be celebrated on the 26th because it is the federal government that gives councils the power to hold them.

The government is perfectly entitled to take away that power from rebellious councils such as Darebin in Victoria, which last year actively encouraged people to go to work on January 26 and take another day off.

Critics of the Prime Minister's decision have said this is a "public relations stunt designed to further divide this country'' but the refusal to participate in celebrating Australia as a united country is the truly divisive force.

January 26 marks the foundation of modern Australia and it should be celebrated by all Australians.  Rather than being ashamed of it, we should be proud of it.

On January 26 the majority of Australians will be rejecting the overwhelmingly negative rhetoric about this nation's history.

They will not be out in the streets in force, but they will be with friends and family, celebrating what it is to be Australian.

Federal Election: A Paltry Policy Battleground

With this year's federal election now only a few months away, the main themes of the Liberals' campaign are becoming clear.

The Liberals will spend a lot of time talking about Labor's policies on two particular issues — border protection and taxes.

It's says a great deal about the Liberals' policy development processes (or lack thereof) that after more than five years in power they're left with basically just those two things to campaign on.  The Liberals are terrified to talk about industrial relations, they don't have an energy policy and on questions of values such as freedom of speech and freedom of religion they can't agree among themselves on a position.

Meanwhile, the two big social policy initiatives pursued by the Liberals, namely significant increases in funding for education and disability services were instituted by the Labor Party as the "Gonski" reforms and the National Disability Insurance Scheme.

The Liberals are likely to have more political success talking about border protection than taxes.  The Coalition has shut 19 immigration detention centres and there are approximately 1300 people in detention.  In July 2013 there were 10,000 people in detention.

The differences between Liberal and Labor are less obvious when it comes to taxes.

Over their five years in office the Liberals have increased existing taxes and introduced their own new taxes — which is exactly what Labor plans to do too.

LIBERALS ARE FRUSTRATED

The sense of frustration among Liberals that they appear to be gaining little electoral advantage from Labor's proposals to further increase taxes might have something to do with the fact that it was the Liberals who first started down the road to higher taxes when they introduced the so-called "deficit levy", which increased the top personal income tax rate (including the Medicare Levy) to 49 per cent.

Since then, of course, the Liberals have increased the rate of tax on superannuation savings (in the process breaking an explicit election promise), introduced the bank tax and abolished the GST-free threshold on imported low value goods.

The Liberals have been reduced to trying to convince voters that when they raise taxes it's necessary and it's good policy, but when Labor raises taxes it's unnecessary and is bad policy.  It's certainly true that Labor's plans to restrict negative gearing, increase capital gains taxes and eliminate cash rebates for dividend imputation credits are of a different nature to the kind of tax increase pursued by the Liberals, and have potentially far-reaching consequences, but it is still the case Labor is merely following down a road a first trod by the Liberals.

Treasurer Josh Frydenberg is correct to point that if a future Labor government reintroduces an increase in the top rate of personal income tax to 49 per cent, Australia's top marginal rate will be among the highest in the world and it will cut in compared to other countries at a relatively small multiple of average weekly earnings — 2.2 times.

The trouble is, it was the Liberals who raised the top marginal rate of personal income tax to 49 per cent in in 2014 as a temporary "deficit levy".  Before that the last time the highest marginal rate of personal income tax was 49 per cent was in 1988.

As yet neither the Liberals nor Labor have talked about taking the top marginal rate back to 60 per cent, which is what it was when Bob Hawke became prime minister after Malcolm Fraser.  Perhaps Australian taxpayers should be thankful for small mercies.

The Liberals' tax problem is part of a bigger challenge they'll have in prosecuting their economic case.  For example, the government is fond of saying that since it was elected more than 1.2 million jobs have been created.  But as was reported on Tuesday, nearly all of the jobs growth in 2018 was in the public sector.  Over the year government jobs increased by 300,000 while the number of people employed in the private sector fell by 93,000.

At the next federal election the Labor Party is promising higher taxes and more government — which is not very different from the Liberal's track record since 2013.