Opinion & Commentary
Cautious route on a poll-driven tax bandwagon
If opinion polls are to be believed, most voters are now willing to reject tax cuts or accept tax increases, so that the Government can spend more money on health and education.
Majorities range from 57 per cent, if more tax is the price of more health and education expenditure, to 88 per cent, if more spending comes out of a surplus and is combined with small tax cuts.
These are poll results, however, that politicians are not rushing to follow. Instead, the Coalition announced tax cuts in the May Budget, and the Labor Party quickly agreed to pass them. The tax cuts turned up in pay packets this month.
This is not the behaviour of poll-driven politicians. Or is it? Could these poll results be misleading?
While I believe that the polls do overstate support for more tax, something real triggered the original trend toward more taxing and spending-sustained economic growth. A strong economy created large Budget surpluses, and the public, like the Government, finds it easy to spend out of a surplus.
The polls show that rejecting tax cuts is more popular, usually by about 20 percentage points, than accepting tax increases.
Economic growth also makes taxes more affordable. History shows that when real wages are stagnant or growing slowly, taxpayers want lower tax to help pay household bills. But with robust and real wage growth, people want to spend more, including on services such as health and education financed by government.
That was the pattern in the prosperous late 1960s when we last saw high support for taxing and spending, and it has repeated itself over the past couple of years.
Once a trend to supporting more taxing and spending starts, it can take on a life of its own. A bandwagon effect occurs when people adopt a view not because it is one they hold strongly, but because that's the view that other people seem to have.
In the real world, bandwagon effects are hard to measure precisely. But, in experiments, political scientists show that even on controversial issues, such as abortion, opinion can vary, depending on what people are told is the majority view.
With several well-publicised polls over the past couple of years informing us that other people support more taxing and spending, we have the basis for a bandwagon effect.
Followers of bandwagons aren't telling untruths, but their half-hearted views make them a weak political foundation for major policy change.
Apparent majority support in polls can lead to further artificial increases. Some people respond to differences between public opinion and their private views by giving a socially or politically acceptable answer, rather than a true preference. This is a halo effect. Thanks to the Morgan Poll of most important issues, we have a hint that the halo effect may partly explain recent pro-tax opinion.
Over many years, the Morgan Poll has asked voters which are the most important issues for Australia, and what the Federal Government could do that would most benefit the poll respondent and his or her family.
From 1982 until recently, opinion on the importance of tax as an issue usually "trended" in the same direction as a national issue and as a personal and family issue.
But in 2003, when other polls showed more willingness to pay tax, the two trend lines diverged. Lower tax increased sharply as a personal and family issue, while decreasing as a national issue.
Respondents to these polls acquired their halo with a first question about national issues, not letting on that they thought lower tax was an important issue, but then revealed their true preference when asked directly what the Federal Government could do that would help them.
Other voters may support more taxation because they think other, wealthier, people will pay. This is the freeloader effect. The difficulty here is that many people don't realise that they are in fact among the top income earners. Distracted by a handful of very rich people, they believe that their income is lower, in relative terms, than is really the case.
In a late 1990s survey just one in 10 of the top 20 per cent of income-earners realised how well-off they were. Freeloaders' support for tax increases could quickly vanish when a new, larger tax bill arrives.
We can't tell exactly what proportion of supporters of more tax do so for reasons that are shallow, insincere or cynical. But we can see why politicians are wary of pro-tax polls. It's easy for voters to tell pollsters that they want more tax, but also easy to give a very different answer in the privacy of the polling booth on election day.
Both major political parties are taking the cautious route, maintaining large public-spending programs but also offering tax relief.
Andrew Norton is a research fellow at the Centre for Independent Studies. His full study of these issues, Will You Still Vote for Me in the Morning? Why Politicians Aren't Rushing to Increase Taxes, is available from www.cis.org.au
