III. The Distributional Objective

4.32. Even if it had been possible to provide an accurate and precise account of the distributions of income, gross and net of taxation, and even if the potentialities for changing them in any desired direction by means of the taxation system were assessable in a far more clear-cut way than they are, it would still be a problem of the utmost difficulty to decide how much should be done. It is however implied in the Committee's terms of reference and must be broached, though with all the diffidence that befits a non-political Committee offering views on problems that are essentially and acutely political.

4.33. To start with some simple generalities. If asked what the government should do about the distribution of income and property and how taxes should be used in doing it, it seems likely that nearly everyone would agree on certain vague propositions: that taxes should be related to ability to pay, that they should be used to assist the aged, the unemployed, the sick, the economically weak, and those burdened with the upkeep of large families; that while poverty exists some limits should be put upon the passage of growing accumulations of wealth from generation to generation. They would agree, on the other hand, that part at least of the extra rewards given by the market to those who work especially hard or have rare abilities should certainly stay with them. But if pressed to translate such merely qualitative statements into quantitative terms—to indicate the actual level of grants to those requiring help, to specify tax rates and so forth—plainly a welter of divergent answers would be elicited, even from intelligent respondents doing their best to give practicable figures. It is apposite to consider the principal explanations that might be discovered for this variety.

4.34. There would in the first place be the most widespread ignorance of the statistical facts of the present situation (and of the trends in it) and in consequence all kinds of inconsistent myths and legends and distorted views would be honestly believed. Secondly there would be, among most of those questioned, much ignorance also of the qualitative nature of the lives of people socially remote from themselves. Not

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many of the well-to-do know what it is to be very poor, and most of us may have strange ideas of the daily lives of the very rich. Finally, and quite separately, there would be the widest divergences in the extent to which people in fact cared very much what happened to the rest of the population, in the extent of their mutual sympathy, in the extent of their exclusive self-interest or group loyalties, in their willingness, in the last resort, to pay up for the good of others.

4.35. It is reasonably to be supposed that were the first kind of ignorance remedied there would be a reduction in the spread of opinions about distribution policy. Such too might be the consequence of remedying the less tangible ignorance that surely exists under the second head. But even then, residually, there would remain the variations in social and political attitudes last mentioned as a cause of different views on this basic issue of social justice. Such variations stem ultimately from the moral—or if you will, immoral—beliefs of individual citizens, which may indeed change over the generations but which are of a kind not amenable to alteration by the expression of ‘expert’ views. It is by reason of the inevitability of these variations that distributional policies must be decided in the political process and cannot be determined on any impartial, scientific, objective basis. But it does not follow that, were ignorance remedied, the dispersion of basic political attitudes would be so great as to make a reasonably settled policy unattainable. Some extreme views will doubtless always persist in small minorities. More importantly, whatever objective is currently being pursued, many may want more done and many less. But the differences among the moderate majority may be, quantitatively, of no great magnitude, no greater than can be accommodated by changes in tax rates, without changes in the whole structure.

4.36. Australia has a very homogeneous society, both economically and socially. It is sometimes abused for over-valuing material well-being, perhaps because it is a country with a very high standard of living, but it is predominantly tolerant and individualistic. Most Australians are self-reliant and indisposed to believe that there exists any kind of exact social scale in which they have their own precise place, still less to identify such a scale and their own place in it by reference to their own and their neighbours' income or wealth. Hence it seems to the Committee that some such near-consensus as that just suggested may exist here, behind and below, so to speak, the existing ignorances and myths and despite Australia's tradition of vigorous language in political debate. In recommending a direction of reform in the Australian tax system it is one of the Committee's tasks to attempt to define in general terms what this underlying national unity suggests for fiscal policy.

4.37. In the Committee's judgment there will be almost universal agreement that, overall, taxation should be progressive at the upper end of the scales of income and wealth, and that at the other extreme proverty and threats of poverty reflecting situations of special need should be relieved of taxation or assisted by social service payments. But it is convinced that there will neverthless long remain debate and disagreement about the exact extent to which it is economically safe, administratively feasible, and socially justifiable to push taxation at these higher levels and to assist poverty and need.

4.38. At the same time and quite consistently with this recognition of sharp disagreements about the extremes, the Committee's belief is that over the middle band of income and wealth, the band in which the great majority of them spend their lives, most Australians will accept as fair and convenient an approximately proportional taxation system. When the estimates are made as best they can, that appears to be the

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quantitative outcome of the present system, and the Committee sees no reason to depart from it.