Monday, October 29, 2007

Please, no tax cuts. We mean it.

This morning's Canberra Times outlines the results of its exculsive Eden Monaro poll:

"An overwhelming number of voters would prefer money spent on health and education than tax cuts, according to an exclusive Canberra Times poll.

Almost nine out of 10 voters surveyed in the marginal seat of Eden-Monaro would have preferred the budget largesse directed to hospitals, schools and such services, suggesting the Coalition and Labor have miscued their election strategies by promising more than $30billion in tax cuts.

The results held true for both Labor and conservative voters, with 88 per cent of all those polled in favour of health and education spending, 10 per cent preferring tax cuts and only 2 per cent undecided. Coalition voters wanted spending on services instead of tax cuts by a ratio of 4:1. "

My comment:

You’re kidding me! Nine out of ten voters don’t want tax cuts?

That’s the usual response to poll findings of this kind (and they are becoming increasingly common).

The politicians clearly don’t feel comfortable with them.

The offer tax cuts regardless, perhaps too scared to test whether people really mean what they say by actually directing their election money to hospitals and schools rather than tax cuts.

Even pollsters don’t feel comfortable with their findings...

When Newspoll found in the lead up to the last election that voters preferred spending on health and education to tax cuts by a very wide margin its then head Sol Lebovic suggesting that voters might be giving his interviewers “socially acceptable” answers rather than the truth.

But people do usually tell the truth to interviewers (except when asked about their alcohol consumption) and the arguments put forward to suggest that they are not telling the truth this time don’t stack up.

One is that when asked in isolation whether taxes are too high most people say yes. It is an answer that only appears to be inconsistent with a desire to spend money on health and education rather than tax cuts. But there is really no inconsistency. It is quite possible to think that tax rates are high while also believing that there are more important priorities than cutting those rates.

Another argument is that tax relief might be a bit like alcohol. We don’t want to admit how much we want it. Just as market research companies adjust up people’s claimed consumption of alcohol when trying to get at the truth, it might be wise to also adjust up their claimed enthusiasm for tax cuts.

Except for two things. One is that the reported enthusiasm for tax cuts in the place of spending on schools and hospitals has fallen so low – 10 per cent in this morning’s Eden Monaro poll - that it would have to be adjusted up an implausibly long way in order for it to look as if we actually preferred tax cuts.

The other is that voters’ answers to that question have changed. From 1974 until about 2001 a clear majority of us said we wanted tax cuts at election time, not promises of more government spending.

The lust for tax cuts began slipping in the mid 1980’s and the desire for desire for spending began climbing from 1990. In 2001 they crossed over. Since then spending on hospitals and schools has become more popular than tax cuts and the gap has been steadily widening.

It’s unlikely to be the result of us becoming less honest than we used to be. It is more likely that our priorities are changing, perhaps as a result of increasing wealth.

Still don’t believe me? Here’s the assessment of one of the Prime Minister’s favourite think thanks, the Centre for Independent Studies, delivered in a policy paper on tax in 2004.

According to its social research director Peter Saunders, the polling reveals “a population which feels more prosperous after years of sustained economic growth, and which wants to use some of this prosperity to buy better health care (and to a lesser extent, better quality schooling too)."