May 31, 2004 | Graham

Services versus taxes

Recent academic polling suggests that voters would rather have increased services than tax cuts. Despite that both Liberal and Labor are offering tax cuts as well as increased services. What is happening? Are they catering for all opinions, or do they think that the polls are wrong? Our research throws light on that. The question, and its answers, is much more complicated than the straight quantitative polling suggests.
Yes, many Australians want money to be spent on services, but only on the services that they see as important. If higher spending led to a higher cost to them personally, they would change their mind. That means that if their after tax standard of living is not sustained, they will reject higher spending, just as they will reject it if they see it as insufficient to meet their objectives. As some tax cuts are necessary to stop bracket creep, and as government will never be able to spend enough to convince the public that services have improved, then tax cuts and promises of additional services will continue to be the order of the day.
When we asked our participants what they wanted there were four different responses. Some, invariably Coalition voters, preferred tax cuts to increased spending on services. Others, invariably not Coalition voters, preferred increased spending. Then there was a group that wanted both. Maryruth – “both are important. tax cuts are necessary. we’re not that competitive in the global economy with incentive killing rates of tax ,” and Rick “I think a higher priority for service improvements. Tax cuts have the indirect benefit of stimulating the economy which is collectively a good thing so there is a place for them as well.”
Finally there were the skeptics. Bob, a Greens voter said “Agree; but what hope is there that they will do it, the money still goes to the haves, and a token to the services, look at mental health, disability services when they closed all the institutions.” Lindsay, Liberal, was in the same camp “It depends where the services are gong to go….not much ever comes this way from our state gov.”
Those who were in favour of tax cuts put a stress on individual effort and responsibility. Warren thought that “Personal choice makes for the best economic outcome.” Those in favour of services frequently saw it as helping to bridge the alienation they have come to fear in the community – “…we have wised up to what many of the best societies in the world have known for ages, that a strong community is worth more than money in hand. That it creates a wonderful environment to live in that makes life worthwhile, ” – Fiona.
Some argue that Australians would accept higher taxes for higher services, so we tested that proposition on the group. In fact, there were a few who would enter into this bargain (despite Peter Costello’s assertion that he’s never met anyone who wanted to pay higher taxes). Pat, a self-confessed high salary earner, said she would pay an additional $50 per week. Others nominated $5 per week and one $10. Issues of control were more marked on this question. Judith – “Only if I had some say on where it went.” Holly – “Depends on whether the taxes were earmarked for something.”
If control and choice are such big concerns, where would participants spend more? The answer is health and education (no surprise there), infrastructure, the aged, women’s shelters, employment services, defence, work for the dole, roads, and communications. In fact, just about everything that the government spends money on now. We didn’t probe, but the diversity of demands indicates that it is unlikely there would ever be enough additional funding to satisfy all voters. For example, if the average increase was $5 per week, then it would pay for only about $1.5 billion in new spending. It might fix some health or education problems, but not the whole list. This means that voter support would be highly qualified, even if spending involved maintaining tax rates without adjusting for inflation.
Which means no party running for government anytime in the near future is going to promise increases in services and no tax cuts. It may also explain why countries that explicitly entered into the high tax/high services bargain, like Sweden, are winding back both expenditure and taxes.
To view the original material on which this article is based go to

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