Saul Eslake responds to Peter Strong: “Assertions, but no evidence”

Peter Strong would seem to have a surprisingly thin skin (especially for such a seasoned and effective lobbyist) if he truly believes my questioning of the justification for, and the effectiveness of, the preferential treatment he’s been able to extract for his members from governments over many years is “offensive”.

And he has an odd way of constructing an argument when he begins by asserting that my paper “fails to disclose the assumptions used in the analysis”, despite the fact that (as anyone who follows the hyperlink to the article originally published by the ANU can verify), the very first paragraph of my article states, quite clearly, that the definition of “small businesses” which I use is the long-standing ABS definition, namely, those having fewer than 20 employees.

Contrary to Strong’s unfounded assertion, I did not adopt that definition “to advance a prejudiced position”. I adopted it because it is the definition used by the agency that publishes almost all of the data which I used in the article. If the ABS definition of a small business had been any entity employing less than 50, or 100, employees, I would have “adopted” it. Maybe Strong likes to make up his own definitions in order to suit whatever case he is pleading, but I don’t.

Likewise, when I cited data produced by the Australian Taxation Office, I used the definition of a “small business” used by the ATO (which is in turned based on legislation passed by Parliament), not in order to advance a pre-determined argument, but because it is the definition used by the agency which publishes the data.

Similarly, contrary to Strong’s unfounded assertion that I’m a stereotypical, ivory-tower-bound, ‘laissez-faire’ economist, I have actually run a small business myself for the past six-and-a-half years. I have an ABN; I collect, and pay, GST; I arrange my own insurances; I do many of the things that other small business proprietors do (albeit, I confess, I don’t sponsor a nearby netball team). However, unlike Strong, I don’t believe that makes me morally superior to people who work for larger businesses, or government agencies: nor do I think it entitles me to pay less tax on a given amount of income than people who work for larger businesses, or government agencies.

Strong makes absolutely no attempt to challenge the data I present in my paper (other than the aforementioned utterly spurious quibbling about definitions). He presents assertions, but no evidence, about the “public good” of small business.

I don’t doubt for a moment that small business proprietors do many “good things” in their communities — whether it’s sponsoring local sports teams or other good works. But when they do provide financial support in that way, it’s a tax deduction for them just as it is for larger businesses.

It is of course typical of lobbyists seeking to extract preferential treatment for those who pay their salaries (preferential treatment, which is ultimately paid for by those who end up paying higher taxes, or having less public money spent on them, in order to offset the cost of that preferential treatment) to say that the “good” which those whom they are representing do isn’t captured by data — and that anyone who can’t see that is blind, heartless, prejudiced, stupid, or some combination of those and other shortcomings — in the hope that making those assertions will relieve them of the burden of actually having to prove their case.

And often, it works. As it has done for those who have sought preferential treatment for small businesses.

But the real clincher is in Strong’s final sentence — which acknowledges that the main reason for the preferential tax and other treatment which he’s been able to extract from governments over the years is that he’s drawn to politicians’ attention the fact there are many more people running small businesses than there are running large ones; and that they tend to live in marginal electorates (as opposed to people who run large ones, who tend disproportionately to live in safe Liberal electorates).

That’s much the same reason as to why, for all the crocodile tears that politicians of all political persuasions shed about the difficulties faced by would-be home buyers trying to get on to the first rung of the property market ladder, they never actually do anything to help those would-be home buyer: because they also know that, in any given year, there are only a few hundred thousand of them, as opposed to the 11 million voters who own at least one property (and the 2 million who own two or more), and the last thing those 11 million voters want any government to do is anything that might make housing more affordable (as John Howard more than once candidly acknowledged).

Good politicians know how to count votes. So do good lobbyists.