Debate on tax and 'small government' flares again

Recently debate has arisen once more about rates of tax in this country. Again Joe Hockey has come out with totally unfounded claims  that individuals on average pay half of their income in tax.

In response ACOSS chief executive Cassandra Goldie has argued that in fact middle income earners pay only 11 per cent of their income in personal tax, and higher income groups only about 20 per cent.

Peter Martin of 'The Age' further explains how: "ACOSS [arrived] at the figures by including all household income in its total, including untaxed or lightly taxed…Income washed through superannuation, family trusts and negatively geared properties."

Martin also explains how:

The bottom one-fifth of households pay 3 per cent of their income in personal tax, the next group pays 7 per cent, middle group 11 per cent, the second-top group 15 per cent and the top group 20 per cent…

But [this] progressivity vanishes when other forms of tax are included. Including the goods and services tax and other consumption taxes such as petrol and tobacco excise, the lowest earning household pays 24 per cent of its income in tax and the highest earning household only a little more at 28 per cent.

So the existing system is also barely progressive when taken as a whole; and the Conservatives want to dilute or reverse this even more!

And also recently Gareth Hutchens of 'The Age' has questioned the facts surrounding Joe Hockey's claim that increased taxation through bracket creep is 'the only alternative' if Labor does not support the Conservatives' austerity agenda. In addition we should also question improper reliance on the GST and other regressive taxes and charges – including user pays mechanisms.

The Liberals' offensive against any and all forms of progressive redistribution rests upon their commitment to a classical liberal economic philosophy which naturalises the inequalities in wealth, income and power that arise under capitalism. Employers rather than workers are seen as 'the real wealth creators'. Workers are seen as freely entering into contracts with employers. Their bargaining power as relates to skills in the marketplace are recognised; but the influence of trade unions in improving that bargaining position of workers is not. Differences in recompense based on demand and supply in the labour market are also 'naturalised'. Because of this 'naturalisation' government intervention in the economy is rejected outright – except perhaps in cases where this paradigm is enforced – for instance, through impositions against the industrial liberties of organised labour. Hence the Conservatives and economic libertarians press for 'simpler' tax and lower tax because that means less redistribution.

It follows there is the question raised by economic liberals of whether or not we are better off to determine our own 'needs structures' freely through consumption. This deserves genuine consideration.

Many socialists today would recognise the place of 'the market' as a medium by which workers and citizens in their capacities as consumers hold corporations accountable through the play of market signals and forces. Importantly, though, this should entail the organisation of people in their capacity as consumers – both to improve the quality of information they can access – but also improving their market power through collective bargaining. (ie: as consumers)

But there are problems with this 'market utopia'. Information is not perfect. Consumers are not sufficiently organised. There are monopolies and oligopolies which minimise the effective role of competitive market forces and signals. And there is the possibility of consumers prevailing to the expense of the more poorly organised workers. That is: the prospect of more – not less –exploitation.

Also where there is intense competition there is the problem of investment in 'the means of production' growing so disproportionate compared with recompense through wages that the market is no longer able to absorb these costs – or provide sufficient consumption power to absorb what is produced.