Whose Side Are You On?

As politics has moved to the centre (in this country and others), ideologies seems to have grown a bit muddy. The political ideologies of "left" and "right" are both seeking to answer the question of how to land on the most economically productive use of society's rescources. the division of ideologies used to be quite clean cut:

On the right, you believed that markets were very good at solving problems and should be left to their own devices.

On the left, you believe that governments should intervene to improve areas where markets aren't very efficient.

Ideologically, the right believes in low taxes and low government sending to incentivise individuals to strive to obtain the things they want. The left believes that sometimes people end up in difficult situations through no fault of their own and that public services can be used to avoid these inequalities from becoming entrenched. Neither side is right or wrong; they're just different ways of looking at the world and at people. For my own part I find I switch between them in different situations.

As far as political parties go, the problem with having distinctions like this is that it can shut down good political ideas that don't conform to the party ideology. The advantage, though, is that you know what you're voting for when you go to the polls.

Over the last couple of years, we've had a Labor government pushing for an emissions trading scheme, while across the floor the Liberal opposition was pushing to introduce a carbon tax instead. For those expecting their Liberals to behave like it, this has been a particularly weird situation. We now have the Liberal shadow treasurer trying to out-do a Labor government on bank regulation.

Stranger still, however, is Tony Abbott's new "flat tax" proposal. Tony has suggested that a more equitable tax scheme than the current tiered system would be to have a tax free threshold for all households earning less than $25,000 per year, then a flat tax rate of 35% for incomes between $25,000 and $180,000. For income earners on above $180,000 both schemes propose a tax rate of 45%.

Here's what the proposal looks like:

What this shows is low income households (less than $46,000pa) paying a lot less tax, middle income households ($46,000 to $165,000) paying a lot more and high income households being largely unaffected. To summarise:

- the majority of people pay more tax;

- middle income earners subsidise low income earners (relative to their current levels); and

- the fastest way to increase the proportion of tax you pay is to to earn about an average income and get a raise.

There's nothing wrong with this, per se, it would just make more sense if it was coming from the other side of politics. if it was, I'm sure the Liberal would be talking about another "Great Big New Tax".