Today Treasurer Joe Hockey said that his proposed increases in the fuel excise were fair because the poor owned fewer cars and drove less than wealthier people (my emphasis):
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Soonceagain again, a senior government minister was wrong about the facts they purport to use to support their policy. And again, if you reverse the fact, you reverse the policy conclusion.
This is embarrassing and unacceptable. Again. Again.
But I think there's a slightly deeper point about Joe Hockey, which is that it seems from some of his public statements that he doesn't understand what progressive taxation and spending is.
Take the example above: Hockey is correct in saying that the rich spend more in absolute terms on fuel than the poor. But he's wrong because he says it is therefore "meant to be...a progressive tax".
The point of a progressive tax is that the wealthy are taxed at a higher proportion of their income than the poor. It's not that the rich pay more than the poor. The rich paying more tax than the poor is a feature even of regressive taxes - like this fuel excise or the GST - that impose the same percentage tax rate on everyone.
I detect the scent of the same misunderstanding in the way Joe Hockey talks about redistribution in the budget. He seems to be deeply upset by the fact that some people are net recipients of government spending (e.g. some people on pensions or with lots of family tax benefits) while others pay on net more to the government than they receive. He has in the past refused (on 7.30 IIRC) to concede his budget cuts from the poor, on the basis that removing an income entitlement is not a cut. Here's one example of these kinds of comments.
Not everyone says this state of affairs is necessarily correct (I think it is). But Hockey appears to have a deep problem with redistribution in and of itself, without being willing to actually say that. And just as a matter of logic, the only situation in which no one is a net recipient of government services is also one in which no one is on net paying more tax than they receive in services. That would be a very, very strange economy indeed.
But the upshot is that once again, a senior cabinet minister doesn't appear to understand key concepts in his portfolio. Or at least, he was once again making policy conclusions based on completely incorrect information.
“I don’t think that a cursory look at the budget is enough for people to understand what we’re really getting at. You have to look at the detail of what people actually receive now, and people are receiving tens of thousands of dollars in payments from other Australians.
“What we’re asking is for everyone to contribute, including higher-income people. Now, I’ll give you one example: the change to fuel excise. The people that actually pay the most are higher-income people, with an increase in fuel excise, and yet the Labor party and the Greens are opposing it. They say you’ve got to have wealthier people or middle-income people pay more.
“Well, change to the fuel excise does exactly that; the poorest people either don’t have cars or actually don’t drive very far in many cases. But they [Labor and the Greens] are opposing what is meant to be, according to the Treasury, a progressive tax.”Jess Irvine from News Corp was quick to point out that actually, lower income earners pay a higher proportion of their income toward petrol than higher income earners (pages 33 and 34 here). People in the first (lowest) quartile of the income distribution spend 4.5% of their income on petrol, compared to 1.3% for people in the fifth (highest) quartile.
Soonceagain again, a senior government minister was wrong about the facts they purport to use to support their policy. And again, if you reverse the fact, you reverse the policy conclusion.
This is embarrassing and unacceptable. Again. Again.
But I think there's a slightly deeper point about Joe Hockey, which is that it seems from some of his public statements that he doesn't understand what progressive taxation and spending is.
Take the example above: Hockey is correct in saying that the rich spend more in absolute terms on fuel than the poor. But he's wrong because he says it is therefore "meant to be...a progressive tax".
The point of a progressive tax is that the wealthy are taxed at a higher proportion of their income than the poor. It's not that the rich pay more than the poor. The rich paying more tax than the poor is a feature even of regressive taxes - like this fuel excise or the GST - that impose the same percentage tax rate on everyone.
I detect the scent of the same misunderstanding in the way Joe Hockey talks about redistribution in the budget. He seems to be deeply upset by the fact that some people are net recipients of government spending (e.g. some people on pensions or with lots of family tax benefits) while others pay on net more to the government than they receive. He has in the past refused (on 7.30 IIRC) to concede his budget cuts from the poor, on the basis that removing an income entitlement is not a cut. Here's one example of these kinds of comments.
Not everyone says this state of affairs is necessarily correct (I think it is). But Hockey appears to have a deep problem with redistribution in and of itself, without being willing to actually say that. And just as a matter of logic, the only situation in which no one is a net recipient of government services is also one in which no one is on net paying more tax than they receive in services. That would be a very, very strange economy indeed.
But the upshot is that once again, a senior cabinet minister doesn't appear to understand key concepts in his portfolio. Or at least, he was once again making policy conclusions based on completely incorrect information.