I have been attending the Tax Forum in Canberra for the past two days. I made a submission to this Forum on congestion pricing on roads and I made a presentation based on this submission in the Environmental and Social Taxes session. To be honest this was the only session at the Forum where I had expertise. I must say too I was disappointed with the session. Many wrong views (particularly from the ACTU/AWU) were presented and, because there were many participants who wished to talk, these erroneous views were left unrefuted and the discussion was relatively diffuse. Paul Howes, National Secretary of the AWU, thought that a binding case against congestion taxes was that they were regressive. Of course, so too are taxes on cigarettes, booze, carbon, gambling, fat etc etc. The standard counterargument is that one should not evaluate the equity implications of particular environmental or social taxes but at the impact of the overall tax/transfer mix. This is a crucial – and well-recognised point – because these individual taxes have revenue implications. Indeed all redistributive objectives can be carried out by means of the income tax.
Generally I found the trade union representatives at this meeting were among the least interesting of the various groups who attended. I couldn’t work out if they were intrinsically stupid or just outlining a preconceived union viewpoint in bad faith -certainly they were not engaging with those who showed their views were wrong. A number of other attendees of various political persuasions made the same observation. I recalled with sadness the reasons I abandoned Labor in the mid- 1970s. These unionists embodied a kind of bullying stupidity that must constrain the Labor Party and Australian politics.
The other sessions on corporate taxes, state taxes, personal taxes and tax administration were much more interesting to me because they introduced me to broader areas where I had less expertise. Again the union representatives did not distinguish themselves either in terms of intelligence or good faith. They are a bunch of reactionaries. On corporate taxes these representatives did not seem to understand the idea of effective tax incidence. Almost everyone in public finance agree that in an open economy with freely mobile capital that the corporate income tax falls primarily on labour creating a case – from the viewpoint of labour – for cutting corporate taxes to levels comparable to those of our major trading partners to increase investment and drive up labour productivities and hence wages. The ACTU dinosaurs saw arguments for cutting the corporate tax rate as a move that disadvantaged labour by giving a greater fraction of income to profits. They refused to even engage with the alternative consensus scientific view. These unionistss act in ways that disadvantage Australia and their own members.
The discussions on state taxes covered the standard disasterously inefficient state taxes such as stamp duties, taxes on insurance charges and mining royalties. The questionable status of payroll taxes – are they in the main analogous to income or consumption taxes? – was also raised. Good session.
My negative comments on the unions are part of a general issue of the role of uninformed public discussion in complex debates on public policy. Of course some weight must be given to public discussions for strategic reasons but perhaps there is the need to provide information to the various groups before discussion occurs.
Did I waste two days on a talk-fest? No, not at all. I know from long-term experience that arguing for efficiency-based economic reforms is a long-term project. But at this meeting I got the impression that efficiency-based reforms also have to be formulated in a way that cannot be demonised by deadheads and ideologues. I also think that the deadheads themselves need to understand a little bit about public policy issues before they spin their homespun views. Finally I got some good publicity in the press and on TV on the case for congestion charging. It helps to keep an important issue on the agenda.