The 'Fair Go' in Australia: Popular Support for Taxing and Spending
By Simon Blount
Click here for PDF version

Are Australians prepared to tolerate higher taxes in return for increased social services as welfare lobbyists often assume?

There has been a good deal of evidence collected over the last 20 years giving us an insight into the Australian publicÕs attitude towards taxing and spending. Attitudinal surveys including questions on taxation and social welfare spending have been conducted at the time of every federal election since 1987. Commercial opinion polling about taxes has also been carried out over a similar period by Morgan Gallup, McNair Anderson Associates and Newspoll.1 

The evidence reveals that, in general, respondents favour government spending on some specific programmes to reduce poverty and care for the environment. They are, however, not willing to support increases in taxation to pay for them. There are three possible reasons for these apparently contradictory responses. First, respondents are attracted equally to increases in spending and reductions in taxation, and tend to be swayed by the particular alternatives they are asked to consider. Secondly, respondents are simply irrational, demanding simultaneous increases in expenditure and decreases in revenue. Thirdly, respondents genuinely prefer reductions in taxation to increases in spending, but are reluctant to reveal that they do not support the Australian ideal of a Ôfair goÕ.

Taxing and spending

When each Australian Election Study (AES) has asked about specific spending programmes, respondents have generally tended to support increased spending. When asked, for instance, whether the government should Ôspend to reduce povertyÕ, an absolute majority of respondents consistently replied that it should (see table 1). A majority of respondents also thought that the government should Ôspend to protect the environmentÕ, even at the cost of higher taxes (see table 2). Most respondents also thought that the government should Ôredistribute wealthÕ (see table 3 on the next page). These responses seem to express an egalitarian attitude on the part of voters, consistent with the idea that they are willing to pay for increased social services.

Table 1: Attitudes to Spending to Reduce Poverty

Sources: AES 1987, 1990, 1993 (weighted by state). ÒHere are some statements about economic issues. Please say whether you strongly agree, disagree or strongly disagree with each statement... Spend to reduce povertyÓ.

Table 2: Attitudes to Spending to Protect Environment

Sources: AES 1993 (weighted by state), 1996, 1998. ÒHere are some statements about general environmental concerns. Please say whether you strongly agree, disagree or strongly disagree with each statement... Increase spending to protect environmentÓ.

Table 3: Attitudes to Redistribution of Wealth

Sources: AES 1987, 1990, 1993 (weighted by state), 1996, 1998. ÒHere are some statements about economic issues. Please say whether you strongly agree, disagree or strongly disagree with each statement... Income and wealth should be redistributed towards ordinary working peopleÓ.

Table 4: Attitudes to Taxes and Social Services

Sources: AES 1987, 1990, 1993, 1996, 1998. (1993 weighted by state). If the government had a choice between reducing taxes or spending more on social services, which do you think it should do?Ó (AES 1987, 1996, 1998). Some people think that the federal government should reduce taxes a lot and spend less on social services. Others think that the federal government should increase taxes a lot and spend much more on social services. And others have opinions somewhere in-betweenÓ....Where would you place yourself on this scale?(AES 1990, 1993).

These responses are also consistent with the results of commercial opinion polling, which reveal that Australians are reluctant to agree to any increase in taxation. Respondents were asked on three occasions throughout the 1980s whether they felt the level of taxation was ÔreasonableÕ. An absolute majority of respondents consistently felt that the overall burden of taxation was too high (see table 5).

Similarly, during the 1980s and early 1990s, respondents were asked what governments could do that would be of most benefit to them and their families. The most frequent response was invariably in favour of lowering taxes (see table 6 on opposite page).

Table 5: Attitudes to Aggregate Levels of Taxation

Source: Morgan: July/Aug 82, Sept 84, Oct 88. ÒNext about taxes of all kinds. As far as you are personally concerned do you feel the general level of taxes in Australia is... unreasonable?Ó

On this evidence, there is little support for the view that Australians would not mind paying extra taxes to support a higher level of welfare spending. The question then is why do respondents to surveys support expenditure to Ôreduce povertyÕ and the Ôredistribution of wealthÕ if they are clearly not prepared to pay for it?

There are three possibilities, as already mentioned. The first is that respondents are equally attracted to spending more on welfare and to cutting taxes, and are swayed by the alternatives outlined to them. Secondly, respondents may simply be irrational, demanding simultaneous cuts in taxation and increases in expenditure. The third possibility is that voters may genuinely prefer reducing taxes to increasing expenditure on welfare, but when asked, feel obliged to pay lip service to the Australian ideal of the Ôfair goÕ.

There is certainly evidence to support each of these conjectures. In June and July of 1987, both Newspoll and Morgan asked respondents whether they preferred reducing taxes and expenditure, or keeping them at current levels. The difference between the two polls was that Morgan explicitly outlined those programmes that would be cut if taxes were reducedÑpublic housing, roads, schools, public hospitals, unemployment benefits and social welfare. Newspoll, on the other hand, simply asked whether government expenditure and income tax should be cut. The most frequent response to the Newspoll question was an absolute majority favouring reduced taxes and services.

Table 6: Government Action of Most Benefit to Respondents and Families

The most frequent responses to the Morgan questions favoured maintaining taxes and services at their present levels, with an absolute majority favouring this option in July (see table 7). This evidence indicates that survey results are sensitive to the wording of questions, particularly in regard to the identification of policy consequences and alternatives. Questions about taxing and spending may lead to an appearance of respondents favouring one option more than the other, as a result of respondents being asked to consider a particular set of outcomes.

Of course, respondents may simply express irrational preferences by supporting simultaneous reductions in taxation and increases in welfare spending. A simple test of this idea is to cross-tabulate responses for spending to Ôreduce povertyÕ with the responses for Ôtaxation and social servicesÕ. The results reveal that for each of the years 1987, 1990 and 1993, more than a third of respondents favoured simultaneous increases in spending to reduce poverty and reductions in taxation, and that this option was the most frequent response in 1987 and 1990 (see table 8).

Table 7: Attitudes to Taxing and Spending

Newspoll: June 87a ÒWhich one of the following statements do you personally most agree withÓ? Both government expenditure and income tax should be cut-government expenditure and income tax should stay at the level which will apply from July 1Ó.

Table 8: Attitudes to Reducing Taxes and Spending to Reduce Poverty

Sources: AES: 1987 (N = 1825). 1990 (N = 2037). 1993 (N = 2388). c2 = p<.01 for all cross-tabulations.

Yet when respondents were asked in 1990 whether they supported increases in taxes to support increased spending in the areas of healthcare and education, only a minorityÑ18% and 21% respectivelyÑgave affirmative answers. These last responses are consistent with an overall pattern, that when the link between taxes and social services is spelled out, an absolute majority of respondents consistently favour lower taxes over increased spending (see table 4).

How can we explain this finding? Taking these results at face value, we could argue that respondents simply do not understand the issues upon which they are asked to express their opinions. For instance, we know that in 1993, 15% of respondents did not know the difference between the two main parties on the issue of the GST, even though it was the most talked about and divisive issue in the election.

Upon closer consideration, however, it becomes apparent that those individuals opting for lower taxes and higher spending may be advocating that taxation and government expenditure should be reduced in general, but expenditure on specific programmes, such as poverty reduction, should be increased through a reallocation of remaining revenue.

Alternatively, they may advocate that expenditure on all programmes be increased within the context of overall expenditure reductions through greater efficiency. It is also possible that when alternative sources of government revenue, such as borrowing, intergovernmental grants and user fees are taken into account, individuals may not be seen to be expressing such intransitive preferences as when the only source of revenue available to the government is assumed to be taxes.

The problem is, of course, that there is not simply a one-to-one relationship between revenue and spending. Deficit financing is one way of increasing government expenditure without raising taxes at the national level. Increased intergovernmental aid and user fees are also alternative strategies for raising money at state and local government level.

It follows from this that a demand for lower taxes and increased government spending is not necessarily paradoxical. And even assuming away these alternative strategies for raising revenue, a collectively intransitive demand to increase expenditure and decrease taxes does not necessarily translate to individually intransitive preferences, since individuals may rationally demand increased expenditure on programmes they personally favour, within an overall low tax, low spending regime.

An effective test of the irrationality hypothesis would require several additional questions within an attitudinal survey. These would cover respondentsÕ attitudes to alternative ways for different levels of government to raise money, their attitudes towards reducing the taxation burden at each level of government, and their attitudes towards reducing, maintaining or increasing expenditure on a range of specified public programmes provided by different levels of government.

Only respondents who favoured using taxes to raise money, who favoured reducing the aggregate yield of taxation, and who favoured maintaining or increasing expenditure on most or all public programmes, all at the same level of government, could truly be said to be expressing intransitive preferences.

Moral consensus

Respondents who genuinely prefer cutting taxes may also voice support for spending on social welfare because they are reluctant to admit that they do not necessarily support the Australian ideal of the Ôfair goÕ.

It is already known that respondents may tailor their responses to questions to maximise their own interests. They may, for instance, rationally understate their preferences for public spending in order to gain material benefit by free riding upon others. But the example we are concerned with in this articleÑexpressing support for increased spendingÑinvolves the overstatement of preferences. Respondents are not gaining any material benefit by doing so, but are seeking some sort of psychological comfort.

The Australian Election Studies throw up several instances where respondentsÕ self assessments seem to be entirely at odds with the responses they have given to other questions on the same topic. In the 1998 study, for example, 17% of respondents who rated themselves as Ônot prejudicedÕ on questions of race did not disagree with the statement that Ôsome breeds of people are better than othersÕ.Ê And in 1993, 26% of respondents agreed with the statement that politics was sometimes too difficult for Ôa person like me to understandÕ, yet also agreed that they had a Ôpretty good understandingÕ of the important political issues.

One can only speculate why these responses should vary. Perhaps individuals may be unwilling to express views that they feel reflect badly upon themselves. For instance, respondents who genuinely feel that some people are better bred than others may be unwilling to admit that they are racist.

Similarly, respondents who genuinely have little understanding of the issues upon which their opinions are being sought may be unwilling to reveal this. By analogy, it is possible also to suggest that respondents who genuinely prefer tax cuts to increases in social spending may nevertheless be unwilling to admit it, particularly when quizzed about potentially emotive aspects of social spending, such as poverty reduction and protection of the environment. Perhaps respondents in these cases are unwilling to reveal that they do not subscribe to the Ômoral consensusÕ on these issues that they (wrongly) imagine is shared by their fellow respondents.Ê

Conclusion

Regardless of the reasons why, it is clear that respondents support some specific programmes of social spending, but do not support increases in taxation to pay for them. It is therefore unlikely that increases in taxation can ever be justified by an appeal to popular support. However beneficial taxes may be for society in general, it appears that individuals count their personal costs higher than their collective benefits.

Endnotes

 1ÊÊ The collection of the data for the 1987, 1990, 1993, 1996 and 1998 Australian Election Studies was carried out by: Ian McAllister, Anthony Mughan, Alvaro Ascui and Roger Jones (1987), Ian McAllister, Roger Jones, Elim Papadakis and David Gow (1990), Roger Jones, Ian McAllister, David Denemark and David Gow (1993), Roger Jones, Ian McAllister and David Gow (1996), and Clive Bean, David Gow and Ian McAllister (1998). However, I am solely responsible for the analyses and conclusions presented above. I also gratefully acknowledge the assistance given to me by Professor Murray Goot of Macquarie University in making much of the commercial opinion poll data available to me. Once again, I am solely responsible for the analyses and conclusions set out above.

Roger Jones et al., Ian McAllister, Anthony Mughan, and Alvaro Ascui, Australian Election Survey [machine readable data file], (Canberra: Social Science Data Archives, The Australian National University, 1987).

Roger Jones, Ian McAllister, Elim Papadakis, and David Gow, Australian Election Study [computer file],Ê (Canberra: Social Science Data Archives, Research School of Social Sciences, The Australian National University, 1990).

Roger Jones, Ian McAllister, David Denemark, and David Gow, Australian Election Study [computer file], (Canberra: Social Science Data Archives, The Australian National University, 1993).

Roger Jones, Ian McAllister, and David Gow, Australian Election Study [computer file], (Canberra: Social Science Data Archives, The Australian National University, 1996).

Clive Bean, David Gow, and Ian McAlister, Australian Election Study [computer file], (Canberra: Social Science Data Archives, The Australian National University, 1998).

Author

Simon Blount is Research Fellow at The University of Sydney.

Policy is the quarterly review of The Centre for Independent Studies. For more information on subscribing to Policy, click HERE

If you are interested in the Centre's activities and publications, why not subscribe to e-PreCIS, our regular email update on the latest news and events.

(e-PreCIS requires html capable email facilities, such as Microsoft Outlook Express or Netscape Messenger)