‘Enough is enough,’ Greens Leader Adam Bandt declared to the National Press Club in Canberra last Wednesday. ‘It’s time to make the big corporations and billionaires pay their fair share of tax.’ As well as seeking to close ‘loopholes’ in the existing petroleum resource rent tax, his party is proposing a ‘supertax’ – a 40 per cent tax – on the profits of coal and gas corporations and, more broadly, on any annual corporate profits of more than $100 million. The Greens expect the additional tax revenue thus raised to amount to $514 billion over ten years and hope to see it spent on measures to reduce the cost of living for ‘everyday people’, such as having dental treatment covered under Medicare. The proposed supertax, moreover, is just the first in a suite of Greens ‘Robin Hood Reforms’ to be unveiled in the lead-up to the next federal election.
Bandt’s announcement was met with immediate, bipartisan derision. The Federal Treasurer, Jim Chalmers, dismissed the proposal and the Resources Minister, Madeleine King, branded it ‘absolute rubbish’. The shadow treasurer, Angus Taylor, predicted that, given the opportunity, the Greens would ‘wreak havoc’. The Chief Executive of the Australian Chamber of Business and Commerce, Andrew McKellar, described the proposal as ‘irresponsible’ and a specimen of ‘cheapskate politics’. The Chamber of Commerce and Industry WA chief economist Aaron Morey went further, describing it as a proposal ‘to tax our mining industry into oblivion’ and warning that, given the vital importance of the mining industry to the nation, the proposal’s implementation ‘would destroy Australia’s economy and threaten the prosperity and way of life we all enjoy’. In a similar vein, Phillip Coorey of the Australian Financial Review wrote that its implementation ‘would risk crippling the economy’. However, if the outcome of next year’s federal election is a hung parliament, as seems increasingly likely, the Greens may well stand a good chance of forcing Labor to adopt at least some of the Robin Hood reforms.
The reforms have their supporters. Matt Grudnoff, senior economist at the Australia Institute, opined that taxes on ‘super profits’ are ‘actually a really good form of tax because they don’t change behaviour at all’. According to Grudnoff, then, if the share of ‘super profits’ confiscated by a government were instead left in the hands of the corporation, CEO, shareholder or other beneficiary, it would sit idle, being neither reinvested, spent on consumption, or even just given away; nor would it even indirectly affect its owner’s subsequent economic decisions!
The name that the Greens have chosen for their reform package is remarkable. In most versions of the Robin Hood story, including the one now most familiar to us thanks to the 1938 Warner Brothers epic starring Errol Flynn, Robin is the champion of oppressed subjects groaning under exorbitant taxation. (The irony of naming a ‘supertax’ after such a man is no doubt lost on Bandt and his colleagues.) Moreover, in every version of the story Robin is an outlaw, a rebel against lawful, if corrupt, authority. That a political party with real hopes of influencing government policy should proudly christen its reform proposals with an outlaw’s name is incongruous (though it is perhaps fitting in the case of the Greens, whose anti-capitalist and anti-humanist principles are implicitly revolutionary).
It is of course Robin Hood’s robbing the rich to give to the poor that the package’s name is meant to call to mind. And it is this, above all, that makes the Greens’ choice of name remarkable. They are in effect endorsing the sentiment, so often associated with the Robin Hood legend, that the rich have no right to their riches, hence that robbing them to give to the poor is morally permissible or perhaps is not really ‘robbery’. (The polite contemporary term would be ‘redistribution’.) Tellingly, critics of the proposed tax have not quarrelled with this sentiment. Amidst all the outcry about ‘irresponsibility’, ‘economic sabotage’, and the like, I have yet to find a single commentator who objects in principle to the Greens’ almost open avowal that the rich may rightly be robbed for the benefit of the (relatively) poor.
Bandt’s view seems to be that the rich themselves have become rich through robbery. ‘Big corporations across the economy,’ he proclaimed, ‘have squeezed hundreds of billions of dollars out of the public since the end of the pandemic.’ He might then contend that to expropriate hundreds of billions of dollars from these corporations and give them to ‘the public’ in the form of free dental care and other welfare measures is simply to return stolen goods to their rightful owners. His picture of the market process is a travesty, but it is shared, sadly, by many of the ‘everyday people’ whose interests he claims to defend, including some who would never vote for the Greens.
A private corporation with no state-endowed monopolistic privileges cannot ‘squeeze’ money out of anyone. If it charges more than consumers are willing to pay, they will go elsewhere or do without. Bandt, in company with too many others, has accused corporations like Coles and Woolworths of ‘price gouging’, an all but meaningless phrase that should be expunged from our political vocabulary. The ACCC defines ‘price gouging’ as setting prices that ‘people think are too high’ – as if the mere fact that (some) people ‘think’ a price too high (for what?) suffices to convict the price-setter of moral turpitude. If ‘price gouging’ means anything more than setting prices higher than someone, somewhere would like them to be – and what consumer wouldn’t prefer the prices of consumer goods to be lower? – then it means charging significantly more than enough to cover one’s costs of production. But what is supposed to be wrong with this? Once again, a corporation cannot force anyone to buy its goods at any prices it chooses to set. If Coles groceries are too expensive for me, I can go to Woolworths instead – or to Aldi, if Woolworths’ prices are comparably high. If both Coles and Woolworths can remain in business while charging prices that some are unwilling to pay, this can only be because others are willing to pay them.
What, in any case, is a ‘significant’ gap between costs of production and product price? How much is it ‘reasonable’ to charge over and above the minimum needed to cover one’s costs? In other words, what is a ‘reasonable’ rate of profit? It might be urged that a reasonable rate of profit is a normal or average rate of profit. If, e.g., Coles and Woolworths profit at a rate higher than most businesses, does this not show that they are making ‘unreasonable’ or, as Bandt puts it, ‘excessive’ profits? No, it does not. In a free market, entrepreneurs are constantly seeking to make higher than average profits. One who succeeds thereby alerts others to the possibility of making higher than average profits in a certain line of production – and as more and more people invest in this line, the increased supply will tend to drive down the price of the product and the increased demand for relevant factors will tend to bid up the costs of production. The rate of profit in this line will therefore tend to decline to something like the ‘normal’ (average) rate. Absent government intervention, there can be no possible reason for lasting, glaring discrepancies between the rates of profit in different sectors of the economy.
All of this should not need explaining to men and women with serious aspirations to political power. Essentially, it boils down to the most elementary lesson of economics: market prices are in the long run set by the ‘impersonal’ forces of supply and demand, not by the rapacity of sellers. Or rather, this is what happens to the extent that government regulations and privileges do not hamper the operation of market forces. (A strong case can be made that, e.g., the big banks – also among the targets of the Robin Hood Reforms – are undeserving beneficiaries of massive government interference in the market process.)
Economic illiteracy partly explains the Greens’ easy conscience about robbing the rich to give to the poor. However, it is hard not to suspect that there is also a simpler and uglier motive at work: envy of the rich, irrespective of how they have become rich. Be that as it may, those who oppose the Robin Hood Reforms must do more than warn of the calamitous consequences of their implementation. They must expose the muddle-headed economic thinking that can seem to justify hostility towards the rich simply for being rich. Even more, they must defend the right of an individual who has made billions by serving consumers better than her competitors to keep her riches.
