The Moral Case for Economic Freedom

Kerrod Gream

Kerrod Gream analyses the effects of economic freedom and the positive benefits for those poorest in society.

“The rich are getting richer and the poor are getting poorer” is the catch cry of the left, but this statement is hardly based in reality. With Australia’s income statistics showing that the lowest income households had an increase of 5% between 2009-2010 and 2011-12, with middle income households having an increase of 4% in disposable income.   This in addition to total share of household income between 2007-08 and 2011-12 increased for low and middle income households, and decreased for high income households. This holds true against the argument from the left.

 

 

Changes in Mean Real Equivaliesed Disposable Income

[i]

It’s common to just look at home for the overall quality of life, but of course being a first world nation even our poorest are well off comparatively to underdeveloped nations. It is however a problem of today that we don’t grant those nations the same benefit we had while developing, with calls to remove cheap energy sources such as coal and force them to use inefficient sources such as solar, and to only continue to buy goods from those of us better off. Economic freedom overall is something that should be looked at and the benefits to the poorest not only in first world nations, but in the most impoverish as well. It does have a casual link between economic freedom and the overall wealth the poorest in society hold.

With this being the case it’d be best to look at the relevant cases as to the effects of income when looking at economic freedom. The Fraser Institute does a yearly analysis of economic freedom based on a variety of factors, these being: size of government, legal structure and private property rights, access to sound money, freedom to trade internationally, and regulation of credit, labour and business.  Australia regularly scores well on this metric having scored between 7.9-8/10 between 2005-2010, and scoring 7.88, and 7.87 in 2011 and 2012 respectively. Having been ranked 5th in the world in 2009-10, in 2012 we had dropped to 8th.

But these statistics are best looked at as a global analysis. Nations that are in the top quartile of economic freedom had higher GDP Per Capita; with the top nations having an average per capita GDP of $38,601 in 2013, compared to $6,986 for those nations in the lowest quartile.[ii] While GDP Per Capita does give a good overview we are best to look at the situation for the poorest 10% in each quartile.

In the top quartile of nations the average income of the bottom 10% was $9,881, with the bottom quartile’s bottom 10% of earners having just $1,629 on average in 2013.[iii] This however has improved since 2008, with the bottom 10% in the nations in the highest quartile having an average $8,474 yearly earnings, compared to $910 for those in the bottom quartile of nations with economic freedom. [iv]

Economic Freedom and the Income Earned by the Poorest 10%

[v]

These benefits of higher income levels result in higher life expectancy, with the average life expectancy in the top quartile nations at 80.1, and the lowest quartile sits at 63.1 years.[vi] Those in more economically free nations report a higher life satisfaction, averaging 7.5 out of 10, compared to 4.7 in those in the least free quartiles.[vii]

This is all before addressing income share, this is the share of income between different sets of people. Income share of the poorest 10% is generally pretty consistent across all quartiles of nations based on economic freedom. With those in the highest quartile of economic freedom having the largest share of income at 2.64% this however isn’t reflected in the second highest quartile with the poorest 10% in those nations having the lowest income share. What this effectively shows is that the income share of the poorest isn’t highly affected by different government policies, and redistribution, but rather that it’s fairly consistent across the quartiles of economic freedom. This also shows that the poorest in society have a slightly greater share of the economic pie in economically free nations.  With the best overall result in not redistributing produced wealth, but by increasing the size of the economic pie, as it were.

Economic Freedom and the Income Share of the Poorest 10%

[viii]

Economic Freedom and Economic Growth

[ix]

Looking on this basis the only moral argument to help the poorest in society is not by centralised government control, as that harms economic growth and income levels of the poor. We should continue to strive towards market solutions, rather than centralised solutions, and increase the overall share of wealth not just redistributing the wealth that we have. While the rich may be getting richer, the poor are also getting richer and the best way to help those in the poorest is to encourage economic growth with greater economic freedom, and less government intervention.

 

Kerrod is President of the University of Sydney Economics Society, and also serves as the chairperson of Australia and New Zealand Students for Liberty.

[i] http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/6523.0Main+Features22011-12

[ii] Fraser Institute, “Economic Freedom of the World 2015 Report”

[iii] Ibid

[iv] Fraser Institute, “Economic Freedom of the World 2010 Report”

[v] Fraser Institute, “Economic Freedom of the World 2015 Report” pg 24

[vi] Ibid

[vii] Fraser Institute, “Economic Freedom of the World 2010 Report”

[viii] Fraser Institute, “Economic Freedom of the World 2015 Report” pg 24

[ix] Fraser Institute, “Economic Freedom of the World 2015 Report” pg 23

The Left’s Smear Campaign on Business Revenue is Nothing but a Dishonest Lie

Kerrod GreamKerrod Gream takes on the perception that companies should be taxed on revenue that the left have been pushing since the ATO’s Corporate Tax Transparency Report for the 2013-14 Financial Year.

Following the release of the ATO’s Corporate Tax Transparency Report for the 2013-14 Financial Year there has been a spewing of memes, and distaste from those of the left about how businesses aren’t paying their fair share. These go along the line of “This company made x amount of revenue in 2013/14 but paid almost 0% tax” ignoring that revenue does not equal profit. Their 0% tax figures comes from comparing total revenue to the tax paid, rather than comparing taxable income(aka profit) to tax paid.

The CFMEU's dishonest attack on Boral, who paid their fair share of tax on taxable income.

The CFMEU’s dishonest attack on Boral, who paid their fair share of tax on taxable income.

The unions, all of which they themselves pay no tax, have been some of the worst on the smear campaign on business. Australian Unions are calling for Spotless to pay tax on their $2.2billion of revenue despite the fact that they made an operating loss in the previous financial year and are perfectly entitled to deduct that from their total tax paid. The CFMEU has quite possibly been the worst of the spread of misinformation, providing the image above but also attacking News Corp  and Brickworks(the offending image as of writing this article has been removed) over revenue and not profit. The left wing lobby group GetUp also continued to spread the misconception. Ignoring that 0.2% of companies pay 58.2% of company tax, as reported by Commonwealth Treasury Papers.

The top 0.2% of companies pay 58.2% of company tax.

The top 0.2% of companies pay 58.2% of company tax.

This adds in to various media sources playing into this game of taxing revenue with the ABC attacking companies claiming they paid effectively zero tax on their income. The Guardian creating a calculator to determine which companies you paid more tax than despite having taxable income viewable hoping the reader will conflate revenue and profit. To add to this Buzzfeed jumped on the bandwagon of business ignorance with an outline of companies’ revenue and tax paid, with no reference to actual profit. This intellectual dishonesty either screams of an intentional smear campaign on the productive sector; that is businesses that provide jobs and investment in Australia, or just an abysmal understanding of how businesses operate.  To add into this the Twittersphere has been attacking these companies all over, and openly advocating that revenue is the important figure, and arguing that the only reason they minimise their taxes is because of offshore funnelling of profits.

Michael West

And then Ben Eltham; a reporter for the leftist rag, New Matilda; openly admits that he doesn’t understand how a business operates by not realising that income coming in doesn’t take into account the actual costs of running a business. This includes investment, staff costs, financial costs, and the day to day costs of running a business. Revenue is only useful for looking at turnover compares to previous years, and not in looking at how much money a company actually made, as different sectors have different methods of markups.

Ben Eltham

These people and organisations keep conflating revenue and profit, not seeming to understand that they are two separate things. With revenue being total amount of incomings prior to any expenses being paid. Profits however are what taxes are placed on, because had Boral in the example above paid the 20% that the CFMEU are calling for them to pay on revenue that $855million in tax would turn a $173.3million profit into a $681.7 million loss. These people have no idea how to run a business, and would send every single business bankrupt if they got their way. The best part of the irony in all this is tax exempt organisations calling for organisations that pay far more than they do in tax to be taxed more.

All these organisations and people are the same people that are opposed to a broad based consumption tax in the form of the GST. They don’t get the mental gymnastics to oppose a revenue tax(the GST) while calling for revenue to be taxed. It seems that they don’t understand that costs get passed onto the consumer, and taxing revenue after the fact is just going to destroy business. Any attempt to attack the big end of town will inevitably hit smaller businesses harder, as they don’t have the structural base to bring about easy compliance with new tax and regulation.

Those on the left calling for taxing of revenue obviously haven’t read what was contained in the ATO report. The ATO even admits that low tax in relation to taxable income and revenue doesn’t necessarily mean that the company is dodging tax in that year, and there may be deductions from previous year’s losses that haven’t been accounted for and a range of other factors not outlined in the report. Had they actually read it, they’d understand why they’re just making themselves look incredibly uneducated. The transparency list is quite possibly going to be a mistake that the left use to prey on the ignorance of the masses.

These people wanting to tax revenue instead of profit clearly have no experience running a business, and even if they do understand want to see nothing but destruction of our industries, and jobs in Australia. The only saving grace of this is all the top comments on the memes being put out are correcting the difference between profit and revenue.

 

Kerrod Gream is Chairperson of Australia and New Zealand Students for Liberty, Deputy Director for NSW of The Australian Taxpayers’ Alliance, President of the University of Sydney Economics Society, and a branch Vice President in the Liberal Party.

Why are lawyers so expensive?

Vladimir Vinokurov is a solicitor and a deputy Victorian State director of the Australian Taxpayers’ Alliance. The views expressed here are his own.

Vladimir Vinokurov is a solicitor and a deputy Victorian State director of the Australian Taxpayers’ Alliance. The views expressed here are his own.

Everyone complains about the cost of lawyers, but few look at the cause: occupational licensing laws. Occupational licensing requires anyone who intends to become lawyer to comply with a range of requirements to practice law. These including studying a law degree that is too long, formally applying for “admission” into the profession in an unnecessary ceremony, as well as meeting cumbersome training and supervision requirements that are sometimes unnecessary. These requirements cost law students years of time and tens of thousands of dollars to comply with. The more expensive it is to become a lawyer, the fewer lawyers there will be and the more they can charge. There can be no doubt that this partly explains why lawyers are expensive.

The sheer expense of hiring a lawyer undermines the individual right to obtain legal representation. It means that hiring a competent, effective lawyer can be unaffordable for poorer members of the public. Even wealthier people may find their resources drained by legal fees. The expense of becoming a lawyer also undermines the right to pursue a career of one’s choice, especially poorer students who lack the financial support to study full-time for years and comply with red tape. Lastly, these laws reduce the quality of legal services. The fact that competent would-be lawyers are being excluded from the profession means that existing lawyers have less incentive to operate competently because they have less competition.

The problem starts with the law degree, which must include 11 “core compulsory subjects” but takes three years of full-time study to complete as a result. The degree costs about $10,000 per annum with government subsidies and more without them. Many solicitors may never encounter some of those subjects in practice. Few lawyers practice in constitutional or administrative law. Some solicitors exclusively practice in criminal law or commercial law. Only some do both. It is simply not necessary to study them all in order to practice law. Students should have the choice of studying criminal law and procedure, commercial law subjects or both. Splitting up the degree will reduce costs and create new pathways to legal practice.

But the red tape doesn’t stop there. Graduates must undertake “practical legal training” before they can practice law. They must pay several thousands of dollars to learn what they otherwise should be learning as junior lawyers. If they are not, they can take the course. The problem is that everyone is forced to take it whether or not they have learnt the basics of legal practice. Even experienced overseas barristers have been forced to undertake this training. Forcing this requirement on everyone is unnecessary and wasteful.

Formal admission ceremonies further increase costs. As of 2015, Victorian admission ceremonies alone cost $926. This is a substantial hit to the savings of many graduates. The ceremonies take place monthly, but applicants must apply months in advance to become admitted—further delaying their careers. In the meantime they are simply expected to make ends in meet.

The restrictions pile on after admission. As of 2011, would-be barristers must pass a bar exam and undertake a 2 month readers course, costing thousands of dollars in total, to practice. The exam is unnecessary: barristers typically spend hours to prepare for specific cases, and thinking up answers on the spot will not get you far in the courtroom. Moreover, the exam covers material that graduates may have just covered at university. It’s no wonder practising barristers, even junior barristers, weren’t required to sit the exam: it has nothing to do with upholding standards.

Similarly, solicitors are required to practice for two years under the supervision of another lawyer before they can do so independently—unless they are overseas, or happened to open a practice before that rule was imposed. The inconsistencies in these requirements expose both their arbitrariness and their actual purpose: keeping people out of the profession.

Running a law firm is also unnecessarily cumbersome. By law, all practitioners must obtain “practising certificates” and insurance coverage from a single government-appointed insurer. A competitive insurance field would reduce costs. On top of that, barristers must buy robes and wigs. Costumes can cost thousands. Renting chambers (if practitioners choose to do so) and paying for practising certificates and insurance every year, taken together, costs thousands more.

While there is a great deal of concern about the supposed oversupply of law graduates, the simple fact of the matter is that they are legally forbidden from working without complying with these requirements. The expense of doing so means they cannot compete with established practitioners, which brings prices up.

It is also hard to argue that these regulations protect the public, given that so many current practitioners were exempt from them when they entered into the profession.

By contrast, deregulation will help society at large—especially the poor. Legal fees are just one factor at the margin that can lead to financial insecurity. Reducing costs will help those who are financially at risk.

Nor are regulations the only way to protect the public. Lawyers’ societies could still accept, reject or expel members on the basis of reputation, skill, honesty or competence just as the regulators do now. Ratings systems and online review websites  can also serve an important role in keeping the profession honest. These measures are informative and cost effective. Lastly, in serious cases incompetent lawyers can still be sued by clients for breach of contract, just as they are today.

Those concerned about upholding the standards of the profession forget that some legal work is already competently performed by non-lawyers with knowledge of the law. Tax agents and accountants, police prosecutors, patent attorneys, and industrial advocates all provide legal representation in their chosen fields right now. Indeed there are prosperous, stable nations with reliable justice systems like Sweden and Finland in which anyone can practise law without a licence. There is no reason why Australia cannot adopt a similar system for lawyers or other trades and professions, for that matter.

The case for deregulation is clear: it empowers the poor, the public as a whole and law students. Occupational licensing laws must be repealed. The law must recognise that for many lawyers, the years of study and tens of thousands of dollars spent obtaining a licence to practice is unnecessary.

Graph: Reagan’s Recovery vs. Obama’s “Recovery”

It’s almost like conservative economic policies do in fact work.

Via IJReview

reaganvsobamaConsider these three important comparisons of economic indicators, then and now:

– Unemployment was at 10.8% versus 7.7%

– Inflation (Consumer Price Index) was at 13.5% versus 2.7%

– Interest rates (prime rate) was at 21.5% versus 3.25%

In other words, Reagan inherited a bigger mess than Obama.

 

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A Free Society Does Not Mean Free Higher Education

John Slater

In a recent submission made to the Government’s review of the demand driven funding model of Australian universities, universities within Australia’s “Group of 8” have argued that they should be able to abandon the system of Commonwealth supported places. Predictably, the case for charging students full fees is an unpopular one. In our rights inflated culture, education is often framed as the most basic of entitlements. As appealing as this may sound, rights don’t exist in the abstract.

What subsidized higher education really means is transferring the cost from the individual who stands to benefit to the anonymous silent majority of tax-payers.

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Having Your Yellowcake and Eating It

global-warming2

One of the greatest concerns of policy makers, corporations, academics, and private citizens is the matter of man’s impact on the environment, increasing scarcity of resources as well as what this bodes for the future and how to address the issue without curtailing economic growth. However, the best solution to this problem has been around for more than half a century.
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Thanks to capitalism, globalisation, technology and a reduced tolerance for violence, humanity has never had it so good

Just watch all the Ecotards and
Pinko’s go berserk…

Via the
Telegraph
(read the whole article)

Quote

…We are also far less likely to die
from the side-effects of economic development and the burning of cooking and
heating fuels. In 1900, one person in 550 globally would die from air pollution
every year, an annual risk of dying of 0.18pc. Today, that risk has fallen to
0.04 pc, or one in 2,500; by 2050, it is expected to have collapsed to 0.02pc,
or one in 5,000. Many other kinds of pollution are also in decline, of course,
but this shift is the most powerful.

Besides, the
Earth really is a tough SOB
.

 

 

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