What drives tax and spend opinion?

The latest ANU Poll finds, like all such polls in recent years, that given a choice between reduced taxes and increased spending on services, most people would go for the latter. Report author Professor Ian McAllister observes:

Public opinion on government spending tends to be both secular – in that it is largely unrelated to
partisan debates and changes in government – and cyclical – in that it is responsive to broader
economic conditions. For example, on the latter point, it has often been observed that national
electorates are more likely to favour spending on social services and welfare when economic conditions
are benign, and to favour reduced taxes when economic conditions become harsh.

I agree, having argued for this interpretation in a 2004 paper. But a few years ago Professor McAllister thought that other factors were at work. In a newspaper report on the 2007 version of the tax and spend question, he was reported as saying that:

…the changing mood reflects greater support for collectivist solutions to social and economic problems.

This is due in some part to a growing cynicism towards privatisation, a view that it has gone too far, or at least far enough. The experience with tolls on roads hasn’t been particularly favourable, while state governments have increasingly drawn on public-private partnerships to rebuild major infrastructure such as schools and hospitals. Then there’s the jump in private school fees and the cost of higher education, and the rise of private health insurance, which almost half the population now has. Juxtapose this with reports of public hospital waiting lists growing and some schools across the country needing major renovations.

“What has happened is probably as far as people want to go,” McAllister says.

We can’t rule out some ideological element to opinion shifts. Particularly due to demographic factors, and increasing demands by families that the state support their lifestyle choices and aspirations, I think there has been some move to the left. But Australian public opinion has always been quite statist, and small further shifts in that direction can’t explain large shifts in views on the tax and spend trade-off.

Unfortunately the only way to test my theory, and the one that McAllister now supports, is to have a prolonged period of economic stagnation. So far we have escaped that fate.

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