BABYSITTERS, CARS AND ECONOMIC GROWTH
Crikey, 7 May 2019
Ever struggled to find a reliable babysitter? Some years ago, a group of American parents reckoned they found the solution. They created a voucher system. The rules were simple: If you babysat someone else’s kids, they give you one of their vouchers. If someone else babysat your kids, you gave them one of your vouchers. The system ensured everyone was doing their fair share of babysitting. A perennial problem of parenthood had been solved.
Or so they thought. Problems arose when some couples in the group started to hoard their vouchers, worried they might need babysitters more frequently in the future. As the flow of vouchers slowed, other couples panicked and started hoarding vouchers themselves. The result was textbook economics. The babysitting cooperative went into recession.
These parents discovered a core tenet of macroeconomics: that my spending is your income and vice-versa. When some parents stopped spending their vouchers, they robbed other parents of the opportunity to earn vouchers. Those other parents, in turn, spent fewer of their vouchers. And so on.Read more
TAX PIRATES: ACTION PACKED DRAMA NOW SHOWING IN REAL LIFE
The Canberra Times, 4 May 2019
It is common for forms of serial fiction such as comic books, or film or television franchises, to have a new start of that universe – often called a ‘reboot’. The one I’m encouraging is Tax Pirates of the Caribbean. In this action-packed drama, a buccaneering team of tax specialists travel to Jamaica.
Armed with their rapier wit and a brilliant knowledge of the tax code, they confront multinational firms, headquartered in nearby tax havens, who’ve been luring away the revenue that should be supporting Jamaica’s schools and hospitals.
The script should be easy to write, since the events are playing out right now. The Jamaican tax authority has ‘borrowed’ a bunch of expert tax auditors from Germany. The accountant equivalent of Captain Jack Sparrow is German auditor Steffan Scholze, who said he ‘jumped at the opportunity to … fight inequalities and give countries added confidence in their dealings with large taxpayers’. Within weeks, he was helping Jamaica take on multinationals who’d refused to pay their fair share of tax.Read more
The sensible centre: Finding the right path for taxes, wages, and climate policy - Op Ed, APPS Policy Forum
THE SENSIBLE CENTRE: FINDING THE RIGHT PATH FOR TAXES, WAGES, AND CLIMATE POLICY
APPS Policy Forum, 24 April 2019
In March, journalist David Speers asked senior Liberal Party frontbencher Linda Reynolds, “Do you agree that flexibility in wages and keeping wages at modest levels is a deliberate feature of our economic architecture?” A reasonable question.
“No, absolutely not,” replied Reynolds. “For Bill Shorten to even suggest that –”
“I’m quoting Mathias Cormann,” Speers pointed out.
It was a telling moment for the Coalition. Their economic message was so out of touch with reality that it had become a caricature of itself. Even one of their senior figures couldn’t tell the difference between actual Coalition policy and what she thought was an absurd exaggeration. It didn’t need a scare campaign – the policy was a horror show all of its own.Read more
TALE OF TWO: COMPARE THE FIGURES
Daily Examiner, 4 April 2019
Susan is a primary school teacher, earning $67,000 a year. She pays $13,000 in tax. Susan would like to buy a home one day, but she’s struggled to break in to the property market. She doesn’t receive any government benefits, which she doesn’t complain about, given that she’s got a full-time job. Her main possession is a used car.
And then there’s John, a retired shareholder. When he was employed, he worked hard and saved frugally. He bought his home in the 1970s, when the average home cost about twice the average household income (today, homes cost about five times average income). John has all his investments in his share portfolio, which returns him $67,000 a year in income. On top of this, the Australian Government sends him a cheque for almost $29,000.
Is this fair? John’s cheque is a cash refund for excess franking credits, representing tax paid by the companies whose shares he owns. Because he doesn’t receive a government pension or allowance, Labor proposes to end this payment.Read more
A RANDOMISED ROUTE TO BETTER GOVERNMENT
The Canberra Times, 2 April 2019.
In the mid-1990s, researchers embarked on a massive clinical trial. Over 16,000 post-menopausal women volunteered to be randomly assigned to a treatment group, receiving hormone replacement therapy, or to a control group. Many had expected that the study would back the common view – basedon observational studies – that taking Estrogen plus Progestin was good for the health of these women.
Five years in, the trial’s data and safety monitoring board stopped the study. Not only did the research show no protective impact of hormone replacement therapy, but it those receiving the treatment were significantly more likely to have health problems. When the results were published in the Journal of the American Medical Association in 2002, they had a seismic impact. Millions of women worldwide were taking the supplements. Thousands of GPs had to tell their patients: ‘sorry, we were wrong’. Better evidence bruised a few egos, but it also saved lives.Read more
AUSTRALIAN HOTELS DESERVE A BETTER DEAL, WRITES LABOR’S ED HUSIC AND ANDREW LEIGH
Smart Company, 1 April 2019
Australia has some amazing little hotels. There are beachfront places where guests track sand into the lobby. We’ve got cosy bed and breakfasts off the beaten track. From Magnetic Island to Manly, there are a plethora of places where you can feel at home while enjoying a night away.
Over recent years, we’ve increasingly come to book those places through online travel platforms. They trade under a host of names — Expedia, Kayak, Hotels.com, Wotif, Priceline, Booking.com, Trivago and more — but they’re really just two large firms, which together control 84% of the market. Both are multinationals, headquartered in places that seem chosen more for their tax advantages than their proximity to the accommodation sector.
The online booking duopoly has used its market power exactly the way an economics textbook would suggest. The commission hotels are charged isn’t just a few per cent, as with a credit card, but can be up to 30%. That’s right: just for linking up customers with accommodation providers, they’re charging up to 30% of the bill. That leaves only 70% for the people who change the sheets, wash the towels, vacuum the carpets and run the reception.Read more
LIBS SUFFER TRUTH DEFICIT
The Daily Telegraph, Herald Sun and Courier Mail, 29 March 2019
Con artist George Parker was 20 years old when he first sold the Brooklyn Bridge. The trick was to start by asking a passing tourist for help on the tollbooth of the newly opened bridge. When the tourist got interested in the economics, Parker professed not to be much interested in the big picture, and suggested that the passer-by might want to purchase the whole structure. Parker reputedly sold the Brooklyn Bridge many times over, at prices ranging from $50 to $50,000.Read more
FEDERAL MEMBER FOR BASS
ANDREW LEIGH MP
SHADOW ASSISTANT TREASURER
SHADOW MINISTER FOR COMPETITION AND PRODUCTIVITY
SHADOW MINISTER FOR TRADE IN SERVICES
SHADOW MINISTER FOR CHARITIES AND NOT-FOR-PROFITS
FEDERAL MEMBER FOR FENNER
ENDING TAX REFUNDS FOR FRANKING CREDITS
Launceston Examiner, 21 March 2019
Tax loopholes occur when we write our tax laws in a way that inadvertently allows revenue to slip away. Those who use loopholes aren’t breaking the law, but the effect is that we don’t raise the revenue we need to fund vital services.
That’s what’s happened with refundable franking credits.Read more
UPTURNING THE MONOPOLY BOARD
Crikey, 20 March 2019
As a parent, I hate the board game Monopoly. It never takes long before one lucky player has bought up a slab of real estate, and the rest are mortgaging their properties just to survive. No matter how happy the kids are when they start the game, it invariably seems to end up in tears.
As it turns out, that’s how most economists feel about real monopolies. From the British East India Company to Standard Oil, monopolies produce too little, and charge too much. Like the strongest kid in the schoolyard, they sometimes throw their weight around - threatening to bankrupt or buy off competitors. Monopolies can become fat and lazy, living off their dominant market position rather than looking for ways to produce better and cheaper products.
In recent decades, Australia’s monopoly problem has come into stark relief. To see the size of it, Australian National University researcher Adam Triggs and I analysed hundreds of Australian industries. Across half the economy, we found that the biggest four players controlled more than one-third of the market.Read more
CRACKING THE CONFUSOPOLY
DevPolicy Blog, 15 March 2019
Okeny Secondo is a disability support worker in his early-30s who lives in Redbank Plains, a suburb of Ipswich. Born in Sudan, he fled to Uganda as a child, then migrated to Australia. Mr Secondo and his wife, who works as a meat industry processor, send almost one-third of their income back to help friends and families in Africa.
‘I know what it’s like to live with uncertainty in a war-torn country’, he says. ‘I’m very happy to be able to support my family and friends to make them more secure. Sometimes we get urgent requests for emergencies and it’s great to be able to get money to them immediately.’
Mr Secondo is among thousands who send remittances to help people in developing nations. With international migration projected to account for a growing share of the population in the future, remittances will only grow in importance. When a grandparent falls ill, or a child needs to pay school fees, families in developing countries often turn to generous relatives in countries like Australia to send over some cash.Read more