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Putting some yeast in the electoral Magic Pudding - ways Labor can fund tax cuts and spending

By Graham Young - posted Wednesday, 15 August 2001

Taxation is a major issue this federal election in a number of ways. The government has given up trying to sell difficult policies to the public, leaving it only with the option of buying electoral support. To win, it will increase spending on projects, at the same time as aiming a tax cut at key voter groups like families with kids.

To stay in the game, Labor has to basically match the government's tax cuts and spending, as well as promising something more. However, it has a baseline advantage over the government. Earlier this year Howard was travelling so badly with all demographic groups that he had to bid up just to catch up to Labor. That meant large bribes to groups that normally support the Liberal Party overwhelmingly. Groups like those wealthy over-55s who are styled "self-funded retirees", and rural and regional voters.

Any realistic Labor election plan would assume that the Liberal Party would be getting those votes anyway and that it can probably afford to alienate them to some degree. It can afford to pare back benefits to them and redirect the savings towards the baby boomers with kids who are the election deciders in the seats Labor can win.


But the ALP will need more than just this natural advantage.

At this point it is worthwhile putting to rest a taxation furphy that is doing the global rounds. Don't believe the polls - electors are not interested in trading tax cuts for better services. This belief first reared its head in the US Presidential election where it was a key Al Gore campaign premise. It didn't work. Al Gore blew what should have been an easy campaign. One of the reasons was that the lightweight George Bush at least knew enough to promise to put more money in people's pockets. The debate is still going on in the US, and for an interesting excursion you might like to travel to where US citizens disgusted at tax cuts can use the net to donate their summer tax rebate to charity. I'm waiting to see a report on the site stats, but I think there'll be more traffic in downtown Cunnamulla on a Sunday night than on DonateRebate.

The same premise had a run in the UK elections. This time it was the loser who promised tax cuts. Perhaps the theory can be right? Wrong. Hague didn't even meet mimimum expectations with the electorate. He could have had the most perfect plan for government and no-one would have paid any attention to it because they didn't expect or want him to win.

Yesterday in Australia, the Sydney Morning Herald published an AC Nielsen poll which found that most Australians prefer spending on services to tax cuts. It was taken up by ALP frontbencher Bob McMullan who branded talk of taxes as the major election issue "elite prattle". The survey asked "If extra funds were available from a budget surplus, which of the following do you think should be the highest priority for the Federal Government...". 16% nominated "reducing personal income tax"; 11% "rolling back the GST"; 43% "spending on health care"; and 27% "spending on education". The problem with this poll is context. The questions have been asked but without wising the respondents up to some of the complexities of the situation.

To start with, most funding for health care and education comes via the states. What is the ALP going to promise in these areas that is going to make a dint on services? While Knowledge Nation has gone down well it is aimed at the tertiary sector. I suspect "education" in the context of this poll equals "primary and secondary education". On health perhaps they can fiddle with Medicare and doctor numbers, but in this context I think "health" probably equals "hospitals". Howard has already got his pitch worked out on these. He claims that the GST has secured the funding base of the states. In other words GST equals more state government services equals more spending on health and education. Which puts the survey response to Roll Back in an entirely different light.

So, eliminate the two spending issues which the Federal Government can't do much about and, of those who were deciding on genuinely federal issues, 45% more favoured tax cuts than Roll Back, and 100% thought taxes were important.


There is a broader issue here as well - human nature. We all like to think that we could be as good as Mother Theresa, but deep down we know we've got a fair bit of Eminem in us. So we lie about ourselves to ourselves and friends, because we need to be better than we fear we might be. And if we would lie to people who know us so well, why not lie to opinion pollsters? Better services sounds good, but in real life, given the choice between the money or the box, we'll generally choose the money.

Don't follow this star, Bob! You'll be lucky to find a stable by Christmas, let alone the government benches. However, you're not completely lost. Tax cuts won't win an election for Labor, and neither will Roll Back. You do have to offer increased and better services, but within the parameters of offering tax incentives as well.

Labor will undoubtedly release most of its detailed policies during the course of the campaign. The rest of this article is speculation on how they might plausibly claim to fund whatever it is that they have planned.

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About the Author

Graham Young is chief editor and the publisher of On Line Opinion. He is executive director of the Australian Institute for Progress, an Australian think tank based in Brisbane, and the publisher of On Line Opinion.

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