get it right

In an era where many different views abound regarding the state of play - whether the economy is up, or down, whether the markets are running on thin air, or whether a new type of fundamentalism is emerging in market selection techniques - there is always one thing that you can count on, a delusional, dis-connected, and almost irrelevant Federal Opposition, and a Government which lacks being challenged.

This was not always the case, as great ideologists, instrumentalists, and communicators were drawn to each of the mainstream parties, and ratbag, radicalists, expressive in ideas, but lacking in accountability, responsibility, or in maturity, were relegated to the roadside verges of society.

Even in spite of the speckled poll results, drabbed as they were across a landscape swathed in blue conservatism, the ALP could count upon some intellectualism to counter the vagaries (and excesses of Government).

Unfortunately for Labor, however, Crean badly mis-calculated on Iraq, Latham badly mis-calculated broadly, Bracks has lost his "mojo", and Swan is now at risk of a tailspin dive following is abject, and rather ordinary performances of this week.

At a time when the United States is about to embrace a sreamlined form of dividend taxation (ie: a smoothing out of the double taxation of dividends), just as Australia has for these past 10+ years, the debate for your hard-earned tax dollar rages at centre stage.

Howard may well be posiitoning himself for a favoured pre-election tax cut, next year. But, what of Labor.

2 compelling articles in today's Weekend AFR demonstrate just how out of touch the Labor leadership (and those who aspire to leadership) really are with the state of play in the economy.

According to Laura Tingle's article - "Why John Howard wants to tax you more and make you work for longer" (p21 and following) - Wayne Swan is quoted (@p28) as claiming that "the top 5% of Australian taxpayers now earn $43,000 per week - about the same as average income earners get in a year". But he doesn't then further explain this.

In a country where the active workforce approximates 9.2m, and the number of taxpayers is at, or above, 10m, Wayne Swan's claims put the "ultra elite" at greater than 500,000 taxpayers.

Now, if this were so, then Brian Toohey's Capital Idea's article (on p49) - Tax: where Howard and Bush don't agree - makes for a completely contrasting argument.

In his article, Toohey points out that"(e)stimates by HSBC's economics unit show a 30% top rate would cost $11B. Cutting the rate to 39% would cost $4.7B. If the rate applied from $80,000, the cost would be about $8B".

Extrapolated out, and polerated to reflect Wayne's world (but taken from an HSBC perspective), the top 5% of taxpayers would, collectively between them, be earning a gross income of somewhere between $58B and $64B (let's say a $61B midpoint).

At that level of activity, 500,000 taxpayers (the ultra elite) would, on average be earning (between them) $122,000 per annum (or $2,346 per week), or just under 3x average annual weekly earnings.

On a smaller base of 400,000 taxpayers, however, this figure would be $152,500, or $2,933 per week (or ~3.5x average annual weekly earnings).

This is a far cry from Wayne's swanning about. In his world, the ultra elite earn $43,000 per week, or $2.236m per annum. Extrapolated out @5% (or 500,000 taxpayers), that amounts to $1.12 trillion dollars (or $1,118,000,000,000).

Not $61B, but a figure 18.3x that figure.

A figure which is just under 3x the size of Australia's GDP (and that's just for the ultra elite).

Even expressed @400,000 taxpayers, this figure is closer to $894.4B, or >2x the size of Australia's current GDP.

No wonder Australia's political establishment, and the Labor party in particular, lacks credibility, or even the presence of a credible alternative to Government.

But, then again, as Brian Toohey says in his article - "Comparable polls do not exist, but it is doubtful if 19% of Australians are silly enough to think they are in the top 1% of income earners".

True enough, but then Brian Toohey never counted on Wayne's world.

Until the politicans get in right, and Labor improves its credibility, it is doubtful that our economy will truly reach its optimal potential.