Wherefore art thou, Catholicism

The last few years in Australian society have been demanding and confronting times for Catholic clergy.  The revulsion and odium of priestly sexual abuse has not diminished and in substantive form has taken hold in the public imagination as a distinctive characteristic now associated with Catholicism.

The sad, new reality sees many priests avoiding children in their schools or as altar servers and displaying a reluctance to wear clerical attire in public, noting the intermittent yet growing public abuse and comment.  Another, perhaps not unrelated challenge concerns the liberty of the Church freely to teach what she believes and to express these convictions in public forums.  A recent complaint to the Tasmanian Antidiscrimination Commission concerns the Tasmanian Archbishop's right to produce and disseminate information, within his own schools, regarding the nature of Catholic marriage.  Whilst this complaint does arise from the loony fringe of society, the more serious aspect concerns the increasing willingness to use legal mechanisms to muzzle free speech and legitimate debate.

The Church also has been seriously distracted in recent years, perhaps from an insecurity surrounding its relevance, perusing with excessive attention causes not shared by the majority of Australians, such as increasingly open borders and high refugee intakes.  Sydney's Archbishop Fisher's recent call for an increase in Syrian refugees, but with a particular preference for persecuted Christians, was a welcome balance in this debate.  It remains to be seen if government is prepared to act in such a way.  Nevertheless, it is not hard to feel that the Church has been oblivious to many of the core social issues confronting Australian life, even those with a particular Catholic heritage or concern.  Many Australians are right to discern something unsound within our political and social fabric.  Of most obvious concern is the huge debt we have accumulated over the past decade.  Whilst this is not in the American or European stratosphere, net foreign debt standing at $976 billion represents 60% of Australian GDP.  The indifference of both sides of politics to rising debt and budget deficits, coupled with a falling trade deficit in 2015, sees Australia consistently living beyond its means.

This is a fundamental Catholic issue, which goes to the heart of our understanding of community and responsibility to future generations.  Even if other Australians are exclusively imbedded in the concerns of the present, Catholics are called to envision a society beyond ourselves.  Catholics cannot continue to remain indifferent to a public debt that allows the current generation to live at the expense of those too young to vote or yet unborn.  In these inter-generational transfers Australians are witnessing an erosion of our societal contract which notes that Western Society has a responsibility to treasure the heritage left to us but also to ensure that our children and grandchildren will enjoy this same heritage.

If Catholicism does not speak earnestly about the high cost of home ownership for the young or a national youth unemployment rate of 13%, then we can hardly expect young Australians fully to take their place in civil society.  We are already witnessing the great reluctance of young Australians to join churches or religious institutions.  This is mirrored in their avoidance of sporting clubs, political parties, professional associations, in art or educational organisations or even charitable and humanitarian groups.

Something is certainly broken when volunteerism for the young is desperately low, where sporting groups cannot find players or coaches.  Certainly Google and Facebook have a role to play and yet even here online communities in western society show large measures of indifference and lack of passion.  Australian society is under substantial stress when so many of its citizens, particularly the young, are unable to identify with any organisation apart from a government that is constantly called upon to provide security from "the cradle to the grave".

The Catholic Church is one of the few Australian organisations with a core interest in freedom, in modifying government and in highlighting choice and human flourishing.  It's time she spoke again for such fundamentals.

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Liberals don Labor's clothes

There's usually trouble when a Malcolm Turnbull-led Liberal Party has a policy indistinguishable from Labor's.  There's nothing wrong with bipartisanship, but it should be bipartisanship on the right issue.  Since the departure of John Howard, the Liberals have too often followed Labor's lead, rather than the other way around.

In 2009 it was climate change.  Back then, under Turnbull, the Liberals convinced themselves they should follow Labor and the received opinion of Canberra's policymakers and the media.  After Abbott replaced Turnbull, the Liberals effectively won two federal elections on the basis of their opposition to an emissions trading scheme and then the carbon tax.  After a fair bit of fluffing around the Liberals finally came up with a position that was both good politics and good policy.

In 2016 the issue is tax.  A few things are different, like the fact that Turnbull is now the prime minister.  But there's just as much fluffing around on tax as there was on climate change.  And just as in 2009 Labor and received opinion are in favour of doing something that is exactly the opposite of what the Liberals should be doing.

Instead of contemplating ways of increasing the tax burden, Malcolm Turnbull and Scott Morrison should be mounting the case for cutting government spending and allowing people to keep more of their own money.  It was a terrible look when Scott Morrison as a Liberal treasurer complained that the ALP's plan to restrict negative gearing didn't generate enough money.  Morrison said, "Like their famous mining tax, Labor's proposed change to negative gearing promises big, but raises very little revenue."  Following such logic, if Labor's plan had raised lots of revenue, maybe Morrison would have supported it.

For the Liberals to have increased the GST rate by 50 per cent would have been as foolish as them supporting a carbon tax.

Today's Liberal Party has lost its moorings on many issues — including federalism, the right to work and freedom of speech, to name just a few.  Once upon a time Liberals welcomed foreign investment.  But these days, Liberal MPs compete against their Labor counterparts by attacking the supposedly nefarious taxation arrangements of dastardly multinational corporations.  It's ironic that at the same time the Liberals were talking about forcing families to pay higher bills at the supermarket through a higher GST to reduce the tax rate for multinational corporations, Liberal MPs were abusing the multinational corporations that were already here.

TOO MANY NANNIES

And when it comes to the nanny state, Liberals can be just as big boosters of the concept as anyone on the Labor side.

Fortunately, some vestige of a commitment to lower taxes, and the increased personal freedom that comes with the government taking less money out of people's pay packets, remain in the Liberal Party.  A desire to reduce taxes isn't yet entirely eradicated from the Liberal Party's DNA, which is why there was such strong resistance from the backbench and the party membership to increasing the GST.

For most Liberal MPs, if they're running their party leadership's line about the need to raise taxes by increasing the GST, or changing superannuation, or negative gearing, or capital gains tax, they're arguing for something they don't believe in.

That's the real reason why the Liberals are in a muddle on tax.  They know that what Tony Abbott said at the time of his first budget was true:  "You can't tax your way to prosperity."

Labor Party MPs do honestly believe in higher taxes and more government spending.  That's why Labor leader Bill Shorten can speak enthusiastically and passionately about abolishing negative gearing on existing properties.  And that's why Labor MPs can enthusiastically and passionately support him.  Voters are not dumb.  They can sense when a politician is talking about something they believe in and when they're not.  Even if the voters don't agree with what what's being said, the politician at least gets points for sincerity.  This newfound authenticity from Bill Shorten could be some of the reason for Labor's rise in the polls.

The question now for the Liberals is when they too will begin to be authentic.

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Healthcare reforms a better response to soaring costs than tax hikes

The federal government's GST agenda has failed.  More voters came to realise that tax increases can't reform an expensive and increasingly dysfunctional health system.  Prime Minister Malcolm Turnbull's decision to rule out lifting the GST rate to 15 per cent is surely a welcome relief to Australians potentially confronting, in Paul Keating's words, a more intense "bang-you-over-the-head" tax.

Critics recited the regressive, distributional effects of raising the GST to powerful political effect, but there was also some recognition that tax reform shouldn't be divorced from questions about how governments might use the revenue they collect.  As the tax debate went on, there was growing unease that loosening constraints upon the power to tax would merely validate inefficient spending ventures of the past, and enable extra spending that's probably unjustified given today's budgetary circumstances.

In this context, the biggest political losers from Turnbull's GST about-face are the state premiers, especially Mike Baird (NSW) and Jay Weatherill (South Australia), who pushed hard for a GST increase to bankroll public hospital financing.

The states' desire to access more revenue seems reasonable, at least on the surface, with forecasts that long-term population ageing will contribute to increasing demands for hospital and other health services that must be paid for somehow.  Last year's Intergenerational Report indicated that Commonwealth real healthcare spending alone would increase from 4.2 per cent of GDP in 2014-15 to 5.7 per cent in 2054-55, with a considerable share of that coming in the form of extra public hospital funding to the states.

At the state-government level, several worst-case fiscal scenarios have been presented to suggest population ageing would lead to hospital costs absorbing most of the states' fiscal task in coming decades, supplanting other critical spending priorities.  In the face of the looming healthcare financing crisis, it's telling that premiers are seeking even more GST revenue from the Commonwealth as their saviour, rather than microeconomic reforms that would ease healthcare costs in the longer term.

That the states prefer the Commonwealth to do the "heavy lifting" collecting the bulk of taxes is aptly reflected in an old poem about the attitude of state officials to intergovernmental financial arrangements:

We thank you for the offer of the cow, But we can't milk so we answer now, We answer with a loud emphatic chorus, You keep the cow and do the milking for us.

Successive federal governments have willingly played their hand in crafting this perverse fiscal-incentive structure faced by the states in preferring other parties to finance their spending for them.  In the case of specific-purpose grants financed by federal taxes, the Commonwealth can dictate to the states how the money should be spent.  But even with GST general revenue grants, the feds can politically pressure the premiers into doing "the right thing" on spending.

The Commonwealth wields great control and influence over the states through the ways it doles out grants.  The flip side of this is the Commonwealth incurs the political brickbats for imposing Australia's major taxes.  But by pressing pause on the prospect of increasing the GST, Turnbull effectively calculated that any political heat his government would incur in raising taxes would exceed any benefit it gets in seeing the states spend more federal money on healthcare.

Accordingly, the political focus should now be trained upon the core responsibilities of the eight state and territory governments to constrain the costs of their respective health systems.  There is a lot of scope to make performance improvements to healthcare, especially within public hospitals owned and regulated by the states, without the need to spend enormous extra amounts of taxpayers' money in the process.

As reinforced in the recent Harper competition review, the capacity of government to compulsorily finance human services, such as hospital care, through taxes needn't imply that it must also provide the service, let alone maintain the buildings and other capital to ensure service provision.  As the review's final report noted, "lowering barriers to entry can stimulate a diversity of providers, which expands user choice".

This reform vision could be facilitated by states enabling some of their existing public hospitals to be owned and maintained by traditional for-profit and not-for-profit providers, as well as mutual co-operative bodies made up of health practitioners and other interested parties.  Greater diversity in service provision should enable providers to discover innovative ways to manage costs, including the exorbitant hospital labour costs now pressuring state budgets, and allow health professionals to better tailor medical caseloads for the benefit of local populations.

Encouraging greater structural diversity in hospital services provision should help to reorient the financing locus of control away from health ministers and their bureaucrats towards the patient, who can flexibly move their funding entitlement to their doctor, and thus hospital, of choice.

As well as more portable public funding entitlements, several health analysts have recommended arrangements such as "medical savings accounts", which encourage people to save more of their own incomes to attend to their healthcare needs.  Individuals and families on low incomes could still have their hospital care fully subsidised, but they would benefit under a more abundant healthcare choice set, as compared with existing public hospitals and their lengthy waiting lists, crowded emergency rooms and chronic bed shortages.

Australian governments are already high-taxing by international standards and public hospital cost growth consistently outstrips general price inflation.  Yet state governments, by and large, have stonewalled on health reform to keep costs down and provide even better services for patients.

Encouraging diversity in supply, empowering hospital managers, doctors and nurses to work together in providing the best available care, and enabling more flexible funding regimes should deliver significant improvements to healthcare outcomes and, thus, to people's lives.

Now that, rather than tax hikes to bankroll a state public hospital regime immune to structural change for too long, should stand as the real and genuine reform template for active community discussion.

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Negative gearing changes aren't bold or courageous

Why are we talking about negative gearing?

The simple answer is Bill Shorten released Labor's negative gearing policy.  (For better or worse, this is how you control the media cycle.  Release policies.)

The more complicated, more worrying answer is that the economic debate is so empty — that the range of acceptable discussion is so narrow, that big picture ideas are so thin on the ground — that changing negative gearing is the boldest economic reform the political class can reckon with.

Removing negative gearing has been done before.  Where in 2016 negative gearing changes counts as a courageous barbecue stopper, the Hawke government's abolition of negative gearing barely rates a mention among the great regulatory upheavals of the era.  It's a sad illustration of how our vision of the range of possibilities has shrunk in three decades.

An even more depressing thought is how disconnected the negative gearing discussion is from the big economic challenges we face.  There are two reasons one might consider negative gearing changes.  We might want to gather more revenue for the Commonwealth budget.  And we might want to ease pressure on the housing market.

That Labor has a more-tax-revenue approach to budget repair and favours negative gearing as an explanation for high house prices is well-known.

On the other hand ...

But it's a worry that the Treasurer, Scott Morrison, while defending negative gearing in general, believes that the "excesses" of negative gearing need to be tackled.

First, this goes against Morrison's apparently rock-solid belief that spending needs to be reduced, rather than revenue increased.

Second, it implicitly concedes the view that the house price boom is caused by demand — too many investors — rather than supply — restrictions on land release and NIMBYism.

Third, and most importantly, changes to negative gearing have nothing to do with economic growth.  Nothing.

It's true that you could make a creative, complicated, multi-stage argument that lower house prices might eventually lead to growth benefits.  But all else being equal, it is hard to see why removing money from the economy — as any proposal that increases government revenue would — might help the economy, rather than hinder it.

The unfortunate conclusion is that both the Government and the Opposition are talking about negative gearing because they have so few ideas of what to do next.

Just look at Morrison's speech to the National Press Club last week.  As a generic political speech it was perfectly adequate — an outline of the economic climate and reiteration of previously announced policy positions.  But as an attempt to articulate the economic direction of the Turnbull Government it was empty.

On the question of budget balance Morrison only managed to demonstrate that very little had been done to reduce the deficit — as his 7.30 interview made perfectly clear, the Coalition has spent $70 billion of the $80 billion it has saved.

Perhaps the problem is that the bank of reform ideas is empty.  Property commentators have been hyperventilating about negative gearing for ages.  Maybe it's only being talked about because the political class has run out of other things to talk about.

Yet the Australian policy community is rich with ideas:  big bang ideas and small marginal ideas.  The Abbott government commissioned the production of many of them.  We've had the Harper review into competition policy, the Murray inquiry into the financial system, and the encyclopaedic audit commission report.  These reports offer hundreds and hundreds of pages of policy discussion, recommending everything from intellectual property law changes to returning some income tax powers to the states.  So where is the shadow of that formidable ideas production in our federal parliament?

Morrison has given a partial answer.  From a growth point of view, cutting the company tax rate could get the biggest bang for our reform buck.  This would be hard politics, especially if the revenue loss was compensated with a GST rise.  As the Treasurer explained, "the proposition that you tax mums and dads more so companies can have a tax cut has an obvious problem."  Yet that problem has been surmounted before.  Company taxes were cut in 2000, and again in 2001, at the same time as the GST was introduced.

It seems clear that politicians feel more hemmed in than they were in the past.  That's either because they lack courage — or because they lack the stable foundations on which to be courageous.  Australian politics has now experienced half a decade of leadership instability, brought about by the fractious decision to roll Kevin Rudd in 2010.

Our policy debate is more shallow, limited and parochial than it has been for decades.  Yet at the same time the need for major changes — changes that would spark economic growth — is as pressing as it has been since the 1970s.  That changing negative gearing is the best that Labor and the Coalition can come up with is a condemnation of their failure to lead.

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The canned tomatoes war and the conspiracy against consumers

On Thursday last week the Turnbull Government announced it was going to impose tariffs on two brands of imported Italian canned tomatoes — Feger and La Doria.

There's a long and dirty backstory here, which I'll relate in a moment.  But first things first.

In his press release announcing the new tariff, Industry Minister Christopher Pyne declared a "win for Australian tomato growers and producers" who could not compete against the cheaper Italian imports.  Notice who is missing?  What about tomato consumers?  The bulk of the Australian population is now forced to pay more than they otherwise might have for this basic kitchen staple.

Yes, this is the basic calculation of protectionism and has been for centuries, but it's worth pausing to consider how terrible it is:  the Government is forcing up the price of food on everyone to support a tiny industrial minority and their shareholders.  Needless to say, raising the cost of canned goods at the bottom end of the price schedule disproportionately affects the poor.

So why have they done this?  The Government's Anti-Dumping Commission believes that Feger and La Doria have been "dumping" canned tomatoes in Australia at a price below their normal value.  You can read the commission's final report.

The commission concludes that the market for tomatoes is highly price sensitive and that Feger and La Doria have "caused injury" to local producers by suppressing the competitive price.  But this, you might fairly object, is exactly how market competition is supposed to work.

The theory underpinning anti-dumping regulation is pretty simple.  The fear is that a foreign producer might pour cheap goods into the Australian market below the cost of production.  Unable to compete against loss-making products, Australian firms will go out of business.  Then once those Australian firms are kaput, the importer jacks prices up, and reaps "predatory" profits.

This is an entirely theoretical concern.  No obvious example of any firm pulling such a Machiavellian manoeuvre exists.

Indeed, the canned tomatoes market shows why.  Once the scheming importer starts charging high prices they are themselves vulnerable to being undercut by competitors.  Even if Australian tomato producers were unable to quickly return to the market, other importers could swoop in.

Thursday's decision is the denouement of a legal war against canned tomato imports waged for more than two decades.  In 1992 the then-anti-dumping authority imposed tariffs on Italian, Thai and Spanish canned tomatoes at the behest of the local industry.  These tariffs only expired in 2007.

SPCA then launched an anti-dumping complaint in June 2013.  In April 2014 the commission decided that every Italian tomato importer was dumping — except for Feger and La Doria, whose dumping margins (the difference between "normal" price and price charged in Australia) were calculated by the commission to be below the minimal threshold for action.

SPCA waited a few months, then launched another complaint specifically targeted at Feger and La Doria.  After more than a year of debate about what constitutes a normal Italian market price, the commission found in SPCA's favour.

(It's worth noting that the fact that there are many Italian companies importing tomatoes into Australia, each with different price structures, makes the theoretical fears of predatory dumping more than a little ridiculous.)

While doing all of this, SPCA also convinced the Government to launch a Productivity Commission investigation into whether "safeguard" tariffs — emergency tariffs designed to protect domestic producers against sudden surges in foreign imports — could be slapped on Italian canned tomatoes.  The PC found that no surge had occurred.

Then over the summer of 2013-14, SPCA campaigned for a bailout package from the Federal Government.  You'll remember the political fight that ensued.  The young Abbott government refused SPCA a bailout, but in the end the prematurely aging Victorian Napthine government was happy to supply one.

As this suggests, SPCA has done everything to make canned tomatoes not a contest of economics but a contest of politics.  Anti-dumping law is supposed to prevent predatory business practices.  But who is the predator here?  A diverse range of Italian firms?  Or the Australian company moving mountains to raise prices on consumers?

Two claims by SPCA and their supporters in the press need to be addressed.  The first is that Italian canned tomato producers unfairly benefit from the European Union's agricultural subsidies.  This is undoubtedly true, but it is really unfair to EU taxpayers, who are in effect subsidising Australian consumers.

The second claim is that Italian producers are paying migrant workers less than the minimum wage and are connected in some way to the mafia.  It's easy to see the shadow of a public relations campaign.  Even if the allegations are true, foreign labour standards have nothing to do with whether canned tomatoes are being dumped in Australia.

In a 2010 report, the Productivity Commission argued that anti-dumping regulation ought to be subject to a "public interest" test.  This would at least allow for the interest that consumers have in cheap imported goods to be considered.

The fact that no public interest test has been introduced is revealing.  Australia's anti-dumping regime is a conspiracy against consumers, using the law to raise the prices of basic commodities to protect private profit.

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High anxiety in Liberal heartland

The Labor Party and Liberal Party are very different these days.  One of the differences between the parties can be seen in how they each treat their own supporters when they get into government.  The Labor Party rewards the people who voted for them.  In contrast, the Liberal Party increases the taxes on the people who voted for them.

The unique mixture of naivety and high-mindedness the Liberals suffer from isn't found in the Labor Party.

In 2014 the Liberals increased taxes on high-income earners in the hope that somehow such self-sacrifice would encourage Labor, the Greens, and the welfare lobby to accept cuts to government spending.  The plan didn't work.  While the Senate blocked the budget cuts, it gleefully increased the rate of personal income tax for anyone earning more than $180,000 a year.

Treasurer Scott Morrison said he considered raising the GST because of Australia's heavy reliance on personal and company income tax.  But only two years ago his predecessor Joe Hockey was putting up income taxes.

Now the Liberal Party looks like it is about to go after its own supporters again.  In the wake of the Turnbull government's failure to convince the public that increasing the GST was a good idea (which it wasn't), the Liberals are turning their mind to changing the tax treatment of superannuation, negatively geared property, capital gains, and apparently even company dividends.

Many Liberal Party members wonder aloud why the party they belong to and voted for doesn't spend as much time arguing for industrial relations reform as it does trying to squeeze every last dollar out of taxpayers — taxpayers who already hand over to the government 49 per cent of their income.

Sometimes it's appropriate to be high-minded.  A parent coaching a junior football team might deliberately decide to give their daughter less time on the field than her teammates to make the point the coach doesn't play favourites.  It's an unfortunate outcome for the daughter, but good for the team.

NOT CHILDREN

But taxpayers aren't children.  Very few people earning more than $180,000 a year receive that level of income because they're lucky.  It's more likely they've worked hard.

Among all the talk of "fairness" in the tax system, there's seldom discussion of the fact that 50 per cent of all personal income tax is paid by just 10 per cent of taxpayers.

Make no mistake.  Any changes the government makes to superannuation or negative gearing is only about getting more money.  Any time a so-called "tax concession" is removed taxes go up.  The only reason tax concessions on superannuation look so generous is because of the punitive top rate of personal income tax.

Superannuation and property investment are the two main ways the middle class save to provide for their retirement.  More than 1.2 million taxpayers negatively gear property.

The median income for taxpayers with a negatively geared property is $60,000 a year.  The quickest way to stop people diversifying their lifetime savings and to stop them thinking about how they can care for themselves without relying on a government pension is to threaten to change superannuation and negative gearing.

Changing the rules on superannuation and property investment is not just bad policy, it's bad in practice.

People have made financial decisions with time horizons stretching into the next few decades according to pre-existing tax rules and rates.  If tax laws are to operate fairly they need a degree of certainty and predictability.

A Liberal government shouldn't be disturbing long-established principles of tax law simply because it wants additional revenue.  During the debate about the renewable energy targets the Liberals bent over backwards to provide investment certainty to the renewable energy lobby.  That's not a courtesy the Liberals are extending to self-funded retirees.

There's approximately 2 million Australians whose retirement is entirely or partially self-funded.  They've seen the value of their share portfolio shredded and record low interest rates mean they can't rely on the income from their bank deposits.

Now in the midst of all this the Liberal government is contemplating increasing taxes on their superannuation and investment properties.

It looks like Scott Morrison and Malcolm Turnbull are about to embrace some strange policies — and some even stranger politics.

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Republicans can teach the Coalition about principles

While many Australians are enjoying the theatre of the United States presidential primaries, the contest is revealing a vast difference between the philosophical approach to tax reform of the main Republican contenders and that of the Turnbull government.

Australia's Liberal and National political leaders are living in a parallel universe.

In both countries, which face an election in 2016, government spending, the budget deficit, national debt and low economic growth are big policy issues.

Yet only in the US, with a budget deficit set to reach $US544 billion ($768 billion) in 2016, is the size, influence and spending patterns of the federal government acknowledged on the political right as a problem.

Every Republican candidate is arguing that a significant reduction in the size of government, together with significant structural personal and corporate tax reform, is imperative to drive long-term economic growth.

Frontrunner Donald Trump is promising to cut the number of personal income tax brackets from seven to three, reduce the top personal rate from 39.6 per cent to 25 per cent and the corporate rate from 35 per cent to 15 per cent.

Texas Senator Ted Cruz will introduce a flat personal income tax rate of 10 per cent and replace the corporate tax with a business flat-rate tax of 16 per cent.

ABOLISH CAPITAL GAINS TAX

Florida Senator Marco Rubio will also reduce the number of personal income tax brackets to three, cut the corporate rate to 25 per cent and abolish capital gains tax.

Retired neurosurgeon Ben Carson wants to tax all income at a flat rate of 14.9 per cent and also abolish capital gains tax

Even the more centrist Jeb Bush, John Kasich and Chris Christie all promise to reduce the number of personal income tax brackets to three, levy a top rate of only 28 per cent and cut corporate tax to either 20 or 25 per cent.

All candidates are committed to slashing tax deductions, corporate welfare and "special interest loopholes" and are promoting the role the tax system plays in encouraging investment, innovation, productivity and employment.

But the tax reform and government spending debate in Australia is a lot more anaemic.

Despite domestic government spending stuck at global financial crisis levels, an alarming increase in government debt since 2008 and a budget surplus pushed further into the never-never, mainstream debate revolves around ideas to increase revenue.

HIGHER SUPERANNUATION TAXES

These include higher superannuation taxes, raising the GST or increasing the capital gains tax burden, either by levying it on the family home or curtailing the discount.

Increasing the Medicare levy, chasing multinationals for daring to base themselves in countries with a lower tax rate, or that oldest and laziest of ideas, ratcheting up taxes on cigarettes.

The Abbott/Turnbull government has already re-introduced the indexation of petrol excise, added a levy to the top personal tax rate, and has been toying with raising the GST.

Proposals under consideration appear to centre on the least politically damaging ways to increase revenue, with personal or company tax cuts intended to only partially compensate for tax increases elsewhere.

In fact, it is difficult to discern the motivation driving the economic policy of our Liberal and National politicians.

Do they have a genuine commitment to reduce the size of government?

LOW TAXES DESIRABLE END GOAL

Do they have a genuine belief that low taxes are as desirable an end goal as a cleaner environment or maintaining public order, or that government should be funded only to do what it must?

Or is tax reform just a phrase to give politicians cover for new programs like the National Disability Insurance Scheme or the back-from-the-dead Gonski package?

If the Turnbull government is truly interested in reform and in energising its voter base, it will seek inspiration from its Republican cousins, ignore public sector interests and promise to radically shrink the public sector, while flattening and lowering personal and business tax rates.

To quote one of the US candidates, "growth doesn't come from government, it comes from individuals and from enterprise".

With all of the US candidates pledging to cut corporate and private income tax rates by at least 30 per cent, the Republican Party clearly understands the link between taxes and growth.

Does the Coalition?

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Is the Government chasing growth, or just revenue?

How on earth did tax reform come to be seen as the great white whale of economic reform in the 21st century?  The debate about whether to raise the GST to 15 per cent is a classic case study in out-of-control policy making.

A White Paper into taxation was part of the Coalition's 2010 election policy platform, intended to set an incoming Abbott government with an agenda for a second term.

Having cautiously sympathised with the arguments for increasing the GST while in opposition, in 2013 Joe Hockey revealed the GST would be part of the White Paper process.  This had a political message.  The Rudd government hadn't even allowed its "root-and-branch" Henry Review to consider changes to the rate or breadth of the GST.

Half a decade after it was announced, the White Paper process is as good as dead, and over the weekend Malcolm Turnbull was backpedalling furiously from a GST increase.

There's been lots of sound and fury.  Remember Rudd's pantomime about Vegemite in the 2013 election?  Now nothing.

There is of course a very sensible economic argument for a GST increase.  The GST is a relatively efficient tax.  It is also very transparent.  We know who pays the GST — consumers.  In this sense it is much better than some of the other mainstays of the Australian tax system, like the corporate tax, which is levied on corporations but the economic burden of which is actually shouldered by a combination of workers and investors.

Consumption taxes encourage saving and do not discourage earning, as personal income taxes do.  Swap inefficient taxes for efficient ones and all else being equal there will be economic benefits.  Stop me if you've heard this all before.

But in practice, as Turnbull became more interested in a GST change over the last few months it became clear those benefits were illusory.

First, much of the new revenue would be eaten immediately by compensation to lower income groups.  Second, some of it would probably be given to the states to satiate their demands for revenue and pay fidelity to the original GST revenue bargain.  Only what was left could be traded off for tax cuts.

In the Australian on Monday, Paul Kelly argued that dropping the GST showed that, for Turnbull, short term politics had trumped sound policy.  Kelly asked:  "Where does the growth dividend he badly needs come from once ambitious tax reform is rejected?"

Yet by the time all the stakeholders had been bought off, it is not at all clear that an ambitious GST increase would bring a growth dividend — and certainly no growth dividend large enough to justify the cost of political capital.

The lesson here is that politics and policy are not really opposed.  We live in a democracy.  Everything is compromise.  Good policy that is politically impossible cannot be considered truly good policy.

Anyway, even in a perfect world an increased GST would be a hard sell.  Probably much harder than the original GST, even though a five percentage point increase is smaller than the original 10 percentage point introduction.

The Howard government was justifiably able to pitch their new 10-per-cent-on-everything tax as "not a new tax, a new tax system", because the GST was novel, coherent and substantive.

Anything an Abbott or Turnbull government might do — even the grandest trade of a consumption tax increase for income tax cuts — could only appear as marginal changes to the Howard tax settlement.  And without the look of revolution it was going to be hard for GST changes to look like anything more than a tax increase, and one widely believed to burden poorer Australians.

Imagine if the Government actually proposed a GST boost in order to fund a tax cut for corporations.  This would be at the same time economically sensible (that is, likely to bring a big boost to economic growth) yet it would also be politically suicidal — especially for a government struggling hard with the "unfair" legacy of the 2014 budget.

There is no question that marginal efficiencies could be found if the tax system was rewritten.  But not of the sort of economy-boosting significance that the Turnbull Government hopes.

The GST has taken on an aura of bold reform that it does not deserve.  And, having taken that aura, it has crowded out discussion and debate about alternative growth enhancing strategies that would leave the tax system as it is.

That aura means there is lots of support for tax reform in the press.  But so what?  There is no agreement as to whether tax reform is supposed to help the economy, or whether it is simply to raise more revenue.  The Government has been stuck haplessly between these two forces ever since Hockey released his tax discussion paper last year.

Right now Turnbull and Scott Morrison are casting around for new approaches to tax in the lead up to the May budget.  But they first need to answer a simple question:  why are they interested in tax reform at all?  For revenue, or for growth?

It has to be said, once again:  persistent budget deficits are a terrible time to attempt tax reform.

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We can't tax our way out of inequality, whatever Oxfam's economic fantasies suggest

The latest Oxfam report's prescriptions for ending global inequality would only worsen inequality by entrenching economic influence in political hands.

In recent years, Oxfam, an international development NGO, has released reports that capture significant media attention, which have obliged political and business leaders to respond to the issues it raises about inequality around the world.

Its latest report, An Economy for the 1%, raises the spectre of a heavily stratified distribution of economic rewards in that people within the top 1 per cent of the global income distribution possess more wealth than the rest of the world combined.

The major headline from the Oxfam report is that a vanishingly tiny cohort of the richest 62 people living today had the same wealth as 3.6 billion people, accounting for half the global population in 2015, representing an extremely skewed distribution of wealth.

Adding insult to injury, in the period subsequent to the 2008-09 global financial crisis, most of the increase in wealth has been received by the wealthy, at the expense of the poor.

There is little doubt that these statistics are expressed in such a way to elicit the greatest shock value, but the details of the Oxfam study methodology and findings are readily open to challenge.

Numerous economists have already made light work of the dubious statistical methodology and questionable presentation of data employed by Oxfam, which artificially worsens the skew of global wealth distribution.

It has been widely noted among the critical responses that using net wealth statistics, which subtract debts from assets, amplifies the incidence of wealth deprivation, particularly in developed countries.

But as mentioned by economists such as Tim Worstall, Mathieu Bédard, and Eric Crampton, Oxfam is effectively implying that a young American with student debt and a mortgage is in some way just as badly off, if not even more so, as a farmer in the developing world lacking access to sound financial institutions and secure property rights.

It has also been mentioned in dispatches that movements in net wealth over time presented in the Oxfam report are sensitive to exchange-rate movements, rendering an attempt to interpret any sense of a data trend almost meaningless.

In fairness, Oxfam concedes the seismic reductions in the numbers of people around the world living in extreme poverty, most recently defined by the World Bank as earning $US1.90 ($2.64) a day or less, over the past few decades is a profoundly significant development both in economic and social terms.

The NGO also decries the extent to which material inequalities are influenced by "rent-seeking" activities, whereby firms and other economic actors strive to attain advantages "through entrenched relationships with people in power, the distortion of regulations and laws in their favour and the exploitation of market failures to their advantage".

The problem with political lobbying, and similar forms of rent seeking, is not only that it diverts scarce resources toward the pursuit of political privileges coercively enforced by the state.

As Oxfam correctly indicates, the securing of discriminatory tax, regulatory or subsidy benefits benefiting one or some, at the expense of all others, effectively tethers the relationship between income or wealth generation and the attainment of productivity or added value.

These perspectives happen to be shared by classical liberals and libertarians, who have long warned of the grave risks of rent seeking not only for the performance of the economy but the maintenance of freedom itself.

Despite having correctly identified several sources of wealth inequality generated through rent seeking, Oxfam curiously engage in a most glaring form of cognitive dissonance when arguing in favour of even more government intervention as the solution to redress inequality.

A more precise reading of the Oxfam position goes is that they see a recombination of, rather than a reduction in, political privilege as the most appropriate response to the observed wealth distribution it trenchantly criticises.

But the problem with this intellectually awkward outlook is that it enables Oxfam to pick and choose, albeit with no strong basis in logic or principle, which policy changes it deems best to serve the objectives it wishes to pursue.

The proposition that low-taxing jurisdictions, such as tax havens, should desist from providing economically friendly fiscal climates, or that taxation authorities should more severely punish individuals and firms that avoid punishing tax liabilities, is a case in point.

Oxfam says "fairer" (read:  more burdensome) taxation regimes are key to suppressing inequality, not only because governments can use the additional revenue proceeds to fund more public services for the poor but because the rich will be compelled to pay their tax dues.

If only it were that simple.

The available empirical literature largely indicates raising tax rates or extending tax bases would not only serve to diminish the capital stock which, in turn, aids labour productivity, but it would constrain the incentive for workers to supply more labour.

Both of those economic effects would tend to deprive income-earners, who are usually less well off, of even better opportunities to accumulate their own wealth and help to some extent even out the distributional skew.

By raising the relative cost of productive activities such as entrepreneurship and innovation, higher taxes would also be counterproductive because they discourage new entrants from entering markets and undercutting the economic influence of crony capitalists.

Another problem with the Oxfam perspective is that suppressing taxation competition may, given Laffer curve effects, increase the capacity of governments to collect even more revenue, enabling politicians much greater potential to allocate fiscal benefits and motivating even more rent seeking.

It is argued that increasing the power to tax is justified on the grounds of reducing material inequalities, but as American economist Daniel Mitchell has pointed out, there are considerations of justice which, in fact, rationalise tax competition principles.

Low-tax environments enable minorities and other groups subjected to financial suppression by the state to find a safe haven for their incomes and assets, thus ensuring their wealth is not unjustly expropriated.

There is also insufficient attention by Oxfam to the fact that shadow economies are extensive around the world partly because of punitive tax regimes, and so the implications of higher taxes on inequality, given the presence of a shadow economy, need careful consideration.

Oxfam has served up an impassioned plea to reduce extreme discrepancies in wealth holdings, citing rent seeking pressures as a key cause of inequality.

But its policy recommendations will only magnify coercive political control over the distribution of resources within societies, exacerbating the very inequality problem it seeks to address.

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Repeal section 18C, the ''Andrew Bolt'' law: it stifles free speech

The freedom of speech debate is about to be reignited after a complaint this week demonstrated the ongoing danger of section 18C of the Racial Discrimination Act.

The case is an example of section 18C making day-to-day conversation unlawful, and dividing Australians rather than uniting them.

Cindy Prior, a Queensland University of Technology academic, has made a complaint against students and other staff at the university.  Her complaint is based on several comments made by the staff and students following her decision to eject students from an indigenous-only computer lab in 2013.

Prior has complained that the comments have caused her to suffer "offence, embarrassment, humiliation and psychiatric injury", and has made a claim for just under $250,000.

The case is a sad indictment on the state of free and open debate in Australia.  In my opinion, the comments in question would offend only a hypersensitive individual, and none of them are directed at Prior's particular "race, colour, or national or ethnic origin" — the basis of offence required by the Racial Discrimination Act.  Prior isn't named, and the comments don't seem to exhibit any form of bigotry or racial intolerance.

So ridiculous is the application of Australian racial vilification laws that they can now be used to punish anti-racist sentiment.  The comments above are an endorsement of the idea that students at the university should all be treated equally — no matter their race.

But 18C is now used as a gag to any debate about race and ethnicity.  The same was true of a case whose inauspicious five-year anniversary looms later this year.

Prior's complaint demonstrates the legal and cultural significance of the 2011 case against conservative columnist Andrew Bolt.  That case also used 18C as its legal basis.

Here's a refresher.  Section 18C makes it unlawful to "offend, insult, humiliate or intimidate" a person because of their "race, colour or national or ethnic origin".  Bolt was found in 2011 by the Federal Court of Australia to have breached 18C in writing two articles published in 2009 in the Herald Sun.

Most Australians had never heard of section 18C before the Bolt case.  Debate raged at the time the bill that included the provision was passed by parliament in 1995.  But between 1995 and 2011 section 18C was barely mentioned in the mainstream media.  Section 18C was the means by which several legal complaints were made in that period but it was only after 2011 that it became the serious issue of public contention that it is today.

The Bolt case launched 18C into mainstream Australian consciousness.  This has had two key effects.

First, it has become a major touchstone for a growing debate about freedom of speech in Australia.  Since the Bolt case in 2011 there has been a sustained campaign in favour of repealing 18C.  This campaign was partly born out of the deep concern about the provision being used to silence a prominent and well-respected columnist in a mature liberal democracy such as Australia.

But it also brought to the fore the idea that governments have passed laws which restrict this most fundamental human right, and that something must be done to turn back that tide.

Second, political activists and their lawyers have come to realise that section 18C can be used to aggressively pursue political goals.

The case against Bolt was not merely a group of offended individuals making a legal complaint in an effort to remedy personal loss.  It is possible that the complainants could have made out a defamation suit against Bolt.  But the case was pursued using 18C as a battering ram because of the negative perception that would be created by a breach of the Racial Discrimination Act.

Prior's complaint this week demonstrates that the reverberations created by the decision in the Bolt case are still being felt today.

Too often the law is being used opportunistically.  Section 18C is being used not as a shield but as a weapon.  In silencing, or threatening to silence, opponents in a debate using legal means, complainants remove the possibility of debate.  It's unhealthy and it's undemocratic.

At a time when we are in the midst of a debate about recognising Aboriginal and Torres Strait Islander peoples in the constitution a provision which prevents discussion of these issues should be of concern to all Australians.

Section 18C must be repealed.

Is Abetz right about the same-sex marriage plebiscite?

Eric Abetz's comments on same-sex marriage expose deep confusion about the relationship between politicians and voters.  Are MPs there to do the bidding of the electorate, or follow their own whims?

Senator Eric Abetz's statement to the Guardian last week that he would not consider the results of a plebiscite on same-sex marriage binding — that is, he might vote against a same-sex marriage bill even if a majority of the population had voted for it — is revealing.

Yes, it has an obvious political explanation.  There's been a lot of "clever" politicking over same-sex marriage.  The plebiscite was an attempt to kick the issue into the long grass — an expensive delaying tactic.  Nominally conservative politicians have even called for pointless constitutional change to hold back a policy that has a clear majority of support.

But Abetz's statement is more interesting in that it exposes deep confusion, uncertainty and ambiguity about the relationship between politicians and voters.  Aren't politicians supposed to be our representatives?  And if so, what does that mean?

Abetz made two arguments.  First, he reserved judgment as to whether the plebiscite would be a fair reflection of the public's views.  If he felt it was stacked against traditional marriage (say, through an unbalanced distribution of funding) he would not consider it binding.

But Abetz also left it open to reject the plebiscite's results regardless.  As he said:  "People elect us so that we exercise our own best judgments on all the issues that come before us."  Politicians must "take into account the views of the electorate, the views of the nation and their own personal views."

But why should the "personal views" of politicians have any weight in political decision making?  What is so special about political consciences?

I can think of few professions that I would trust less to follow their consciences than politics — surely the only industry where megalomania, narcissism and confrontation is not just tolerated but is actually a positive.  And the idea that political consciences need to be protected is precious beyond belief, given that the practice of politics involves trading off personal beliefs for electoral gain.

There are workarounds to Abetz's objections.  The enabling legislation for the plebiscite could be written so that same-sex marriage is legal automatically after a positive popular vote.  Concerns about unfair funding balance should be resolved by not funding any side at all.

But the real question raised by both the plebiscite (which suggests same-sex marriage is too important to be resolved by Parliament) and Abetz's insistence on a conscience vote (which suggests same-sex marriage is too important to force parliamentarians to go against their beliefs) is why we elect politicians in the first place.

Are they there to represent the views of the voters in Parliament — effectively employees whose job is to do the bidding of their electorate as faithfully as is practicable?  Or are they there as sort of an elected aristocracy — placed into power as a popular endorsement of their inner selves?

It is in the interests of the political class to believe the latter, with all the quasi-mystical implications about power and political authority it brings.  The most famous expression of this worldview was offered by the great conservative Edmund Burke in a speech immediately after he was elected for the first time as the member for Bristol in 1774.  Burke argued he was first and foremost a member of parliament with a responsibility to deliberate on behalf of the whole nation, and was not there to reflect "local purposes" or "local prejudices".

The speech to the electors of Bristol is one of the basic texts of Western democratic politics.  But rarely are the views of the electors of Bristol reported.  Burke was not a popular local member.  When the next election came around — six years later — he had so clearly dissatisfied Bristol voters that he deliberately ran dead, ultimately coming fifth in a ballot of five candidates.  Burke did not represent the electors of Bristol again.

The voters seem to have believed Burke had been elected to represent them, and had no hesitation dumping the great conservative thinker when they learned he did not share that view.

In this light, the decision to hold a plebiscite on same-sex marriage rather than a parliamentary vote was a rather devastating indictment of the Australian political class.  First it suggests that our so-called representatives are unable to adequately represent our views — whether those views be for or against marriage reform.  Second, for those who hold to a more Burkean vision of democracy, it makes politicians look less like confident, deliberative aristocrats and more like cowards, unable to come to decisions on policy questions they find uncomfortable.

Don't get me wrong.  If the goal of democratic choice is to discern what most people want, then direct democracy is much more effective than delegated representation.  But then we should be subjecting more government policy to a plebiscite.  Things like tax increases, spending programs, military engagements, regulatory interventions, law and order schemes — they could all go to a popular vote.

I know, I know.  This is fantasy stuff.  Imagine the political class admitting it was not competent to rule on the big issues.

Church negativity erodes Australia

Australian Churches have undoubtedly had a lot to say to the Australian community over the last 20 years.  Unfortunately, the message is almost certainly not what you might have expected from organisations claiming centrality for a person called Jesus for all our lives.  Banners strung from Cathedrals demanding freedom for David Hicks (an Australian jailed for fighting with the Taliban) or changes to refugee policy, are often backed up by statements from those in Church leadership positions slamming various policies of Australian government on an endless array of issues.

Refugee policy is described as “inhuman and demeaning”, reductions in overseas aid as “a devastating blow to the global poor and breach of trust with the Australian Public”, detention centres are “measures of intentional cruelty”.  A Prime Minister's “trustworthiness” is regularly called into question, western missionary activity is “very aggressive and lacking in cultural sensitivities”, the collapse of Christianity in the West is “a good thing”.  Even mum and dad shareholders are encouraged to divest shares which are “deeply embedded in damaging corporate behaviour”.

Concurrent with all this commentary on our community and government is a dramatic collapse in Church attendance, particularly for Anglicans and other protestant groupings.  In recent years, another community concern has also arisen.  That is a realisation that many younger Australians seem unenthusiastic about their national identity, generally delaying commitments to marriage, family and home buying and sometimes lost in consumerism and self-indulgence.

Naturally, it is unfair to lay the blame for disengaged, bored or cynical youth at the feet of churches alone, yet they have a significant role to play in advocating for a positive narrative on the astonishing benefits still offered by this nation to its citizens.

Almost totally, they have failed in this endeavour.  In the course of my work, I come across a substantial cross-section of locally born young Australians.  Almost all of them are inculcated with a view that suggests migrants to Australia are fabulously lucky as they bring with them a culture, language, family and a group identity that provides extended support.  Yet, few of them see how fortunate they themselves are, living in a country where democratic and free principles are strong, where women have significant opportunities and where drive and determination will still unfold opportunities found virtually nowhere else!

Two of the colleagues with whom I am fortunate to work, both psychologists, highlight to me two underlying views found with most Australians who undergo psychological counselling.  The first is an increasing sense that things are not fair, (but one that is not always based on supporting fact), the other, a feeling of lack of support, a lack of community, a lack of place where their own identity is valued and supported.

What a shame that most of Australia's churches have absolutely nothing to say or do in this space.  In my view, it is only the Catholic Church which still seeks to speak to this “place” in Australian life.  The right to life, the joy of finding a lifelong partner in marriage, the wonder of starting a family, of buying a first home, of raising a child, of starting a business, of actually taking some pride in Australian things and of generously sharing with others.

All of the above can be sometimes tough and may not all be achievable, but that does not make them boring, depressing or worthless.  Whatever other journeys some may make, these are all still the building blocks of a happy, healthy and contented life.  Wouldn't it be a shock for a few other Churches to see some value and centrality in such “ordinary” things?  Perhaps then, those churches may not be so empty!

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