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With Simon (Mr-16-percent) Crean at an all-time low in the popularity
polls, the number crunchers in the ALP are doing some serious
thinking about their voter base, and have clearly come to same the conclusion
that the rest of us came to a long time ago: their True Believers are truly
stupid. There can be no other explanation for Wayne Swan's response to the
not-so-shocking revelation that 1 million Aussie Battlers have an
effective marginal tax rate of 60 cents in the dollar.
Hard-working Australian families don't go to work to have Peter Costello and
John Howard take sixty cents in every additional dollar they earn. They don't
sacrifice their family time to have John Howard take sixty cents in every
dollar of overtime they earn.
Effective
marginal tax rate, of course, is the amount of money you actually get to keep
when you earn an extra dollar of income. It's not just the marginal rate of
income-tax, but also the welfare benefits you lose because of your higher
income. Some low income earners only keep 10c for every extra dollar they earn
- not because the tax rate is so high, but because they lose so much in other
benefits. People generally accept that affluent, educated and motivated
people wouldn't bother to earn an extra dollar if they only got to keep 10c of
it. Should it surprise anyone that low skilled, uneducated unmotivated people
wouldn't bother either? Disincentives to work and production do not actually
happen as a result of high taxes, but high effective marginal tax rates. The ALP is quite right to criticize the welfare system for its poverty traps, and the fact
that the 'small government' Liberals have entrenched
rather than removed them, and it's great to see little Johhny squirming and
saying that 'It has always been the case that ... as people's incomes rise,
.. benefits are reduced''. And he made vague promises about 'tax relief'
in the middle of next year. As if another $4 a week tax cut was going to solve
the problem. But the funny part is the ALP's solution - more welfare for richer people.
That is, more middle class welfare! Never mind the fact that giving more
welfare will mean raising more tax, and therefore (you guessed it) raising
marginal tax rates! The ALP seems determined to create a society in which
everyone is on welfare! Socialist utopia! The ALP know that John and Jane Average are annoyed about losing so much of any
extra dollar they earn, but they are banking on their True believers not
actually thinking it through. Unfortunately, with Simon Crean's approval rating at 16%, many Australians
do seem to be thinking it through. This is really the fallout from the ALP
fighting so hard on the GST. So
many people were so focused on taxation for so long that they actually worked
out where taxes actually came from, and suddenly the question 'where are you
going to get the money for that?' was understood by 51% of the voters. Some of
them even understood the answer. But there are still many True Believers out there. And the great thing about
being a True Believer is that once you believe it you don't have to think about
it any more.
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