Latest news with #AndrewLeigh
The Advertiser
5 days ago
- Business
- The Advertiser
We have a bunching problem and it's probably taking money out of your wallet
The death rate in American hospitals skyrocketed by more than 50 per cent in January 2000. What could account for such a big increase in deaths? A pandemic? A terrorist attack? A natural disaster? A terrible accident? Turns out, it was none of these things. The cause was simple: people who were dying (and the families authorising treatment) wanted to see-in the new millennium before they died. They hung on and continued to receive medical treatment so that their death certificate ended with 2000 rather than 1999. Regardless of whether you think this is weird or wonderful, it got economists wondering: if death rates are responsive to milestones like the new millennium, are they responsive to other things, like tax policies? This is where it gets a bit grim (if it wasn't already), because the answer appears to be: yes. Economists Joshua Gans and Andrew Leigh looked at what happened to death rates in Australia when it abolished its inheritance tax in 1979. The logic is simple: if your family is going to have to pay a bunch more tax if you die before the tax is abolished than if you (conveniently) die after the tax is abolished, you've got a big incentive to hang on (or, if you're the family, not pull the plug). Gans and Leigh found that not only did the death rate change when the inheritance tax was abolished, but it changed remarkably. They found that more than half of the people who would have been subject to the tax miraculously died in the week after the tax was abolished rather than in the week before. The result could be explained by bad record keeping - either deliberate or accidental - except that we've seen the same thing elsewhere. Dubbed the "tax-death elasticity" (which has to be the worst euphemism in economics), studies in the US found the same result: abolishing the inheritance tax saw a delay in the number of deaths. Luckily, there's little evidence of it happening in the other direction: we don't see an increase in deaths before an inheritance tax is introduced (which is a relief) but there is a long history of taxes changing life-and-death decisions. The baby bonus in Australia saw a big fall in births before it was introduced and a big increase in births after it was introduced, as births were pushed back. Taxes in the US that increase or decrease depending on whether you're married led to a convenient change in divorce rates. Taxes have seen cakes be renamed as biscuits, windows be bricked up, dogs be registered as cows, pizza be defined as a vegetable, and backseats removed from SUVs. The punchline is this: having sharp changes in government policy can result in what economists call "bunching". And it's a growing problem for Australia. Just like the bunching of deaths after the inheritance tax was abolished and the bunching of births after the baby bonus came into effect, we are seeing bunching occurring across the economy, and much of it is the result of politicians being obsessed with giving preferential treatment to some businesses or people over others. Take small businesses as an example. Politicians love small businesses. As a result, they give them lots of tax breaks, subsidies, and more lax regulations. READ MORE ADAM TRIGGS: The problem is that this creates bunching: businesses deliberately remain small, hurting the economy. This isn't just a theory. It's been documented in specific industries, in specific states, and across the whole economy. Australia's spirits industry (think: gin) is characterised by only a few large businesses and hundreds of small businesses, which are all bunched around the $350,000 annual revenue mark. Why? It's because as soon as distillers exceed $350,000 in annual revenue, they start paying excise tax. We see a similar thing in the wine industry (where the Wine Equalisation Tax penalises firms that get too big) and in many other industries that have special taxes and special arrangements. At the state level, research by the e61 Institute's Dan Andrews, Jack Buckley and Rachel Lee found that state-level payroll taxes (which kick in at particular thresholds of annual turnover) also result in businesses staying small. At the national level, the introduction of the Fair Work Act in 2009 (in which firms with fewer than 15 workers were largely exempt) saw a bunching effect where small firms either hired more casual workers or used more capital (machines, computers) instead of workers. Research from Shane Johnson, Bob Breunig, Miguel Olivo-Villabrille and Arezou Zaresani found the same thing for personal income: people's taxable incomes would bunch around tax-bracket kink points. In sum: policies that cause bunching are problematic. They stop firms from growing, they stop businesses from hiring, and they stop people from seeking higher incomes and better jobs. And we keep doing it. The latest IR reforms (Same Job, Same Pay) only kick in when a business hires its 20th worker. The Productivity Commission's proposed new cashflow tax only impacts firms when they pass a revenue threshold. If we want to grow businesses, grow incomes, grow the economy and grow jobs, here's an idea: let's stop penalising growth. The death rate in American hospitals skyrocketed by more than 50 per cent in January 2000. What could account for such a big increase in deaths? A pandemic? A terrorist attack? A natural disaster? A terrible accident? Turns out, it was none of these things. The cause was simple: people who were dying (and the families authorising treatment) wanted to see-in the new millennium before they died. They hung on and continued to receive medical treatment so that their death certificate ended with 2000 rather than 1999. Regardless of whether you think this is weird or wonderful, it got economists wondering: if death rates are responsive to milestones like the new millennium, are they responsive to other things, like tax policies? This is where it gets a bit grim (if it wasn't already), because the answer appears to be: yes. Economists Joshua Gans and Andrew Leigh looked at what happened to death rates in Australia when it abolished its inheritance tax in 1979. The logic is simple: if your family is going to have to pay a bunch more tax if you die before the tax is abolished than if you (conveniently) die after the tax is abolished, you've got a big incentive to hang on (or, if you're the family, not pull the plug). Gans and Leigh found that not only did the death rate change when the inheritance tax was abolished, but it changed remarkably. They found that more than half of the people who would have been subject to the tax miraculously died in the week after the tax was abolished rather than in the week before. The result could be explained by bad record keeping - either deliberate or accidental - except that we've seen the same thing elsewhere. Dubbed the "tax-death elasticity" (which has to be the worst euphemism in economics), studies in the US found the same result: abolishing the inheritance tax saw a delay in the number of deaths. Luckily, there's little evidence of it happening in the other direction: we don't see an increase in deaths before an inheritance tax is introduced (which is a relief) but there is a long history of taxes changing life-and-death decisions. The baby bonus in Australia saw a big fall in births before it was introduced and a big increase in births after it was introduced, as births were pushed back. Taxes in the US that increase or decrease depending on whether you're married led to a convenient change in divorce rates. Taxes have seen cakes be renamed as biscuits, windows be bricked up, dogs be registered as cows, pizza be defined as a vegetable, and backseats removed from SUVs. The punchline is this: having sharp changes in government policy can result in what economists call "bunching". And it's a growing problem for Australia. Just like the bunching of deaths after the inheritance tax was abolished and the bunching of births after the baby bonus came into effect, we are seeing bunching occurring across the economy, and much of it is the result of politicians being obsessed with giving preferential treatment to some businesses or people over others. Take small businesses as an example. Politicians love small businesses. As a result, they give them lots of tax breaks, subsidies, and more lax regulations. READ MORE ADAM TRIGGS: The problem is that this creates bunching: businesses deliberately remain small, hurting the economy. This isn't just a theory. It's been documented in specific industries, in specific states, and across the whole economy. Australia's spirits industry (think: gin) is characterised by only a few large businesses and hundreds of small businesses, which are all bunched around the $350,000 annual revenue mark. Why? It's because as soon as distillers exceed $350,000 in annual revenue, they start paying excise tax. We see a similar thing in the wine industry (where the Wine Equalisation Tax penalises firms that get too big) and in many other industries that have special taxes and special arrangements. At the state level, research by the e61 Institute's Dan Andrews, Jack Buckley and Rachel Lee found that state-level payroll taxes (which kick in at particular thresholds of annual turnover) also result in businesses staying small. At the national level, the introduction of the Fair Work Act in 2009 (in which firms with fewer than 15 workers were largely exempt) saw a bunching effect where small firms either hired more casual workers or used more capital (machines, computers) instead of workers. Research from Shane Johnson, Bob Breunig, Miguel Olivo-Villabrille and Arezou Zaresani found the same thing for personal income: people's taxable incomes would bunch around tax-bracket kink points. In sum: policies that cause bunching are problematic. They stop firms from growing, they stop businesses from hiring, and they stop people from seeking higher incomes and better jobs. And we keep doing it. The latest IR reforms (Same Job, Same Pay) only kick in when a business hires its 20th worker. The Productivity Commission's proposed new cashflow tax only impacts firms when they pass a revenue threshold. If we want to grow businesses, grow incomes, grow the economy and grow jobs, here's an idea: let's stop penalising growth. The death rate in American hospitals skyrocketed by more than 50 per cent in January 2000. What could account for such a big increase in deaths? A pandemic? A terrorist attack? A natural disaster? A terrible accident? Turns out, it was none of these things. The cause was simple: people who were dying (and the families authorising treatment) wanted to see-in the new millennium before they died. They hung on and continued to receive medical treatment so that their death certificate ended with 2000 rather than 1999. Regardless of whether you think this is weird or wonderful, it got economists wondering: if death rates are responsive to milestones like the new millennium, are they responsive to other things, like tax policies? This is where it gets a bit grim (if it wasn't already), because the answer appears to be: yes. Economists Joshua Gans and Andrew Leigh looked at what happened to death rates in Australia when it abolished its inheritance tax in 1979. The logic is simple: if your family is going to have to pay a bunch more tax if you die before the tax is abolished than if you (conveniently) die after the tax is abolished, you've got a big incentive to hang on (or, if you're the family, not pull the plug). Gans and Leigh found that not only did the death rate change when the inheritance tax was abolished, but it changed remarkably. They found that more than half of the people who would have been subject to the tax miraculously died in the week after the tax was abolished rather than in the week before. The result could be explained by bad record keeping - either deliberate or accidental - except that we've seen the same thing elsewhere. Dubbed the "tax-death elasticity" (which has to be the worst euphemism in economics), studies in the US found the same result: abolishing the inheritance tax saw a delay in the number of deaths. Luckily, there's little evidence of it happening in the other direction: we don't see an increase in deaths before an inheritance tax is introduced (which is a relief) but there is a long history of taxes changing life-and-death decisions. The baby bonus in Australia saw a big fall in births before it was introduced and a big increase in births after it was introduced, as births were pushed back. Taxes in the US that increase or decrease depending on whether you're married led to a convenient change in divorce rates. Taxes have seen cakes be renamed as biscuits, windows be bricked up, dogs be registered as cows, pizza be defined as a vegetable, and backseats removed from SUVs. The punchline is this: having sharp changes in government policy can result in what economists call "bunching". And it's a growing problem for Australia. Just like the bunching of deaths after the inheritance tax was abolished and the bunching of births after the baby bonus came into effect, we are seeing bunching occurring across the economy, and much of it is the result of politicians being obsessed with giving preferential treatment to some businesses or people over others. Take small businesses as an example. Politicians love small businesses. As a result, they give them lots of tax breaks, subsidies, and more lax regulations. READ MORE ADAM TRIGGS: The problem is that this creates bunching: businesses deliberately remain small, hurting the economy. This isn't just a theory. It's been documented in specific industries, in specific states, and across the whole economy. Australia's spirits industry (think: gin) is characterised by only a few large businesses and hundreds of small businesses, which are all bunched around the $350,000 annual revenue mark. Why? It's because as soon as distillers exceed $350,000 in annual revenue, they start paying excise tax. We see a similar thing in the wine industry (where the Wine Equalisation Tax penalises firms that get too big) and in many other industries that have special taxes and special arrangements. At the state level, research by the e61 Institute's Dan Andrews, Jack Buckley and Rachel Lee found that state-level payroll taxes (which kick in at particular thresholds of annual turnover) also result in businesses staying small. At the national level, the introduction of the Fair Work Act in 2009 (in which firms with fewer than 15 workers were largely exempt) saw a bunching effect where small firms either hired more casual workers or used more capital (machines, computers) instead of workers. Research from Shane Johnson, Bob Breunig, Miguel Olivo-Villabrille and Arezou Zaresani found the same thing for personal income: people's taxable incomes would bunch around tax-bracket kink points. In sum: policies that cause bunching are problematic. They stop firms from growing, they stop businesses from hiring, and they stop people from seeking higher incomes and better jobs. And we keep doing it. The latest IR reforms (Same Job, Same Pay) only kick in when a business hires its 20th worker. The Productivity Commission's proposed new cashflow tax only impacts firms when they pass a revenue threshold. If we want to grow businesses, grow incomes, grow the economy and grow jobs, here's an idea: let's stop penalising growth. The death rate in American hospitals skyrocketed by more than 50 per cent in January 2000. What could account for such a big increase in deaths? A pandemic? A terrorist attack? A natural disaster? A terrible accident? Turns out, it was none of these things. The cause was simple: people who were dying (and the families authorising treatment) wanted to see-in the new millennium before they died. They hung on and continued to receive medical treatment so that their death certificate ended with 2000 rather than 1999. Regardless of whether you think this is weird or wonderful, it got economists wondering: if death rates are responsive to milestones like the new millennium, are they responsive to other things, like tax policies? This is where it gets a bit grim (if it wasn't already), because the answer appears to be: yes. Economists Joshua Gans and Andrew Leigh looked at what happened to death rates in Australia when it abolished its inheritance tax in 1979. The logic is simple: if your family is going to have to pay a bunch more tax if you die before the tax is abolished than if you (conveniently) die after the tax is abolished, you've got a big incentive to hang on (or, if you're the family, not pull the plug). Gans and Leigh found that not only did the death rate change when the inheritance tax was abolished, but it changed remarkably. They found that more than half of the people who would have been subject to the tax miraculously died in the week after the tax was abolished rather than in the week before. The result could be explained by bad record keeping - either deliberate or accidental - except that we've seen the same thing elsewhere. Dubbed the "tax-death elasticity" (which has to be the worst euphemism in economics), studies in the US found the same result: abolishing the inheritance tax saw a delay in the number of deaths. Luckily, there's little evidence of it happening in the other direction: we don't see an increase in deaths before an inheritance tax is introduced (which is a relief) but there is a long history of taxes changing life-and-death decisions. The baby bonus in Australia saw a big fall in births before it was introduced and a big increase in births after it was introduced, as births were pushed back. Taxes in the US that increase or decrease depending on whether you're married led to a convenient change in divorce rates. Taxes have seen cakes be renamed as biscuits, windows be bricked up, dogs be registered as cows, pizza be defined as a vegetable, and backseats removed from SUVs. The punchline is this: having sharp changes in government policy can result in what economists call "bunching". And it's a growing problem for Australia. Just like the bunching of deaths after the inheritance tax was abolished and the bunching of births after the baby bonus came into effect, we are seeing bunching occurring across the economy, and much of it is the result of politicians being obsessed with giving preferential treatment to some businesses or people over others. Take small businesses as an example. Politicians love small businesses. As a result, they give them lots of tax breaks, subsidies, and more lax regulations. READ MORE ADAM TRIGGS: The problem is that this creates bunching: businesses deliberately remain small, hurting the economy. This isn't just a theory. It's been documented in specific industries, in specific states, and across the whole economy. Australia's spirits industry (think: gin) is characterised by only a few large businesses and hundreds of small businesses, which are all bunched around the $350,000 annual revenue mark. Why? It's because as soon as distillers exceed $350,000 in annual revenue, they start paying excise tax. We see a similar thing in the wine industry (where the Wine Equalisation Tax penalises firms that get too big) and in many other industries that have special taxes and special arrangements. At the state level, research by the e61 Institute's Dan Andrews, Jack Buckley and Rachel Lee found that state-level payroll taxes (which kick in at particular thresholds of annual turnover) also result in businesses staying small. At the national level, the introduction of the Fair Work Act in 2009 (in which firms with fewer than 15 workers were largely exempt) saw a bunching effect where small firms either hired more casual workers or used more capital (machines, computers) instead of workers. Research from Shane Johnson, Bob Breunig, Miguel Olivo-Villabrille and Arezou Zaresani found the same thing for personal income: people's taxable incomes would bunch around tax-bracket kink points. In sum: policies that cause bunching are problematic. They stop firms from growing, they stop businesses from hiring, and they stop people from seeking higher incomes and better jobs. And we keep doing it. The latest IR reforms (Same Job, Same Pay) only kick in when a business hires its 20th worker. The Productivity Commission's proposed new cashflow tax only impacts firms when they pass a revenue threshold. If we want to grow businesses, grow incomes, grow the economy and grow jobs, here's an idea: let's stop penalising growth.
AU Financial Review
6 days ago
- Business
- AU Financial Review
The PEXA monopoly's stand-in CFO
The monopoly that PEXA enjoys in the e-conveyancing space is near total. Almost everyone who buys and sells real estate in this country pays something like $140 to the ASX-listed, Commonwealth Bank-backed company that sits between banks when the sale goes through. The $340 million in annual fees it collects is, naturally, a red rag to policymakers like ACCC chair Gina Cass-Gottlieb and Assistant Minister for Competition Andrew Leigh. The latter gets so fired up about its singular dominance he starts giving history lessons about Adam Smith.
Wall Street Journal
04-08-2025
- Business
- Wall Street Journal
Asking $22 Million: A Cape Cod-Inspired Home on the Beach in Malibu
A Cape Cod-inspired house on the beach in Malibu, Calif., is asking $22 million. Located in the exclusive enclave of Broad Beach, the home is owned by apparel-manufacturing executive Andrew Leigh and his wife, Barbara Leigh.
Sydney Morning Herald
26-06-2025
- Business
- Sydney Morning Herald
We like to hate big businesses but they get one thing right
In the US it was household names such as Apple, Amazon and United Airlines. More than three-quarters of productivity growth could be traced back to just 5 per cent of the American businesses they looked at. Loading These were businesses that made bold moves and were able to dramatically grow the number of customers they were serving and amount of money they were bringing in – without footing as much of a jump in the costs they were paying. In doing so, they triggered chain reactions – prodding other businesses to respond and lift their game. The growth of digital firms and discounters in the UK retail sector, for example, meant not only did those businesses bring productivity gains, they also pushed other businesses, such as Tesco, to start boosting its online presence. Big businesses often get big precisely because they've found ways to be the most productive. Now, looking at Australian big businesses, though, you might be scratching your head. Have Qantas and Virgin really been helping productivity growth to take off? And how innovative have Woolworths and Coles been in improving our weekly grocery shopping? While the McKinsey researchers didn't look at Australia, we know larger firms do tend to be more productive here as well. But there are a few important points to note. First, we know Australian industries tend to be more dominated by a handful of firms than industries in the US or UK. Coles and Woolworths, for example, make up about three-quarters of the supermarket sector, while Qantas and Virgin control about 70 per cent of the aviation industry. While that's not totally a bad thing, it gives these companies disproportionate power and can lead to weaker competition, which we know is key to keeping companies on their toes and looking for ways to improve. Big firms lead a lot of productivity gains but we also have to remember many of the behemoths started off as small firms themselves. In order to kick-start the productivity growth of our existing big businesses, and also usher in young, innovative and groundbreaking firms, we need to do frequent health checks on the level of competition in our economy. Loading We also know that labour mobility – the ability for workers to move around to better-suited jobs – has been weaker in Australia than it has been in the US. As former economics professor and Assistant Minister for Productivity Dr Andrew Leigh points out, not all firms are equally productive, and one way of getting productivity growth is by having the most productive firms grow faster than those that are lagging. In the US, for example, half of the productivity growth identified in McKinsey's research came from the most productive firms expanding and unproductive firms closing or rethinking their business. How do we make this happen more in Australia? By making sure it's easy for people to move to the jobs that best match their skills, and to companies that are best at doing what they do. That's a big part of the reason, Leigh says, that the government this year promised to get rid of non-compete clauses – the fine print in many job contracts that make it difficult or impossible to move jobs – for low- and middle-income earners. Knocking down hurdles for people to move to the jobs where their time and skills are most effectively used is key to driving productivity growth. And it's not just about sneaky clauses in job contracts. Another issue – one that stares us right in the face, most days – is housing affordability and the incentives in place for us to stay put, even if our home isn't the best fit for us. Loading Our major cities are where many of our best job opportunities are. But with a continued surge in residential property prices across most of our major cities – and less in the way of wage growth – it has become increasingly difficult for people to move to the jobs that are the best fit for them. That means businesses are missing out on some of their best talent, and people's skills are not being used in the most productive way they could. Stamp duty – a tax paid when purchasing a property – also makes this problem worse because it discourages people from moving, even if they have outgrown a place, want to downsize or move closer to their work. It should instead be replaced with a broad-based tax on the value of the land. While we like to hate big businesses, they do get some things right, especially when it comes to productivity growth. The big challenge is keeping our heavyweights in boot camp by making sure they don't muscle out newer, nimbler firms. Loading As I blearily yanked myself out of bed and to the airport this morning, I pondered the productivity costs of our aviation industry. Probably profound, I concluded between yawns. A new, more reliable airline – and one that texts me at reasonable hours – would be a most welcome competitor.
The Age
26-06-2025
- Business
- The Age
We like to hate big businesses but they get one thing right
In the US it was household names such as Apple, Amazon and United Airlines. More than three-quarters of productivity growth could be traced back to just 5 per cent of the American businesses they looked at. Loading These were businesses that made bold moves and were able to dramatically grow the number of customers they were serving and amount of money they were bringing in – without footing as much of a jump in the costs they were paying. In doing so, they triggered chain reactions – prodding other businesses to respond and lift their game. The growth of digital firms and discounters in the UK retail sector, for example, meant not only did those businesses bring productivity gains, they also pushed other businesses, such as Tesco, to start boosting its online presence. Big businesses often get big precisely because they've found ways to be the most productive. Now, looking at Australian big businesses, though, you might be scratching your head. Have Qantas and Virgin really been helping productivity growth to take off? And how innovative have Woolworths and Coles been in improving our weekly grocery shopping? While the McKinsey researchers didn't look at Australia, we know larger firms do tend to be more productive here as well. But there are a few important points to note. First, we know Australian industries tend to be more dominated by a handful of firms than industries in the US or UK. Coles and Woolworths, for example, make up about three-quarters of the supermarket sector, while Qantas and Virgin control about 70 per cent of the aviation industry. While that's not totally a bad thing, it gives these companies disproportionate power and can lead to weaker competition, which we know is key to keeping companies on their toes and looking for ways to improve. Big firms lead a lot of productivity gains but we also have to remember many of the behemoths started off as small firms themselves. In order to kick-start the productivity growth of our existing big businesses, and also usher in young, innovative and groundbreaking firms, we need to do frequent health checks on the level of competition in our economy. Loading We also know that labour mobility – the ability for workers to move around to better-suited jobs – has been weaker in Australia than it has been in the US. As former economics professor and Assistant Minister for Productivity Dr Andrew Leigh points out, not all firms are equally productive, and one way of getting productivity growth is by having the most productive firms grow faster than those that are lagging. In the US, for example, half of the productivity growth identified in McKinsey's research came from the most productive firms expanding and unproductive firms closing or rethinking their business. How do we make this happen more in Australia? By making sure it's easy for people to move to the jobs that best match their skills, and to companies that are best at doing what they do. That's a big part of the reason, Leigh says, that the government this year promised to get rid of non-compete clauses – the fine print in many job contracts that make it difficult or impossible to move jobs – for low- and middle-income earners. Knocking down hurdles for people to move to the jobs where their time and skills are most effectively used is key to driving productivity growth. And it's not just about sneaky clauses in job contracts. Another issue – one that stares us right in the face, most days – is housing affordability and the incentives in place for us to stay put, even if our home isn't the best fit for us. Loading Our major cities are where many of our best job opportunities are. But with a continued surge in residential property prices across most of our major cities – and less in the way of wage growth – it has become increasingly difficult for people to move to the jobs that are the best fit for them. That means businesses are missing out on some of their best talent, and people's skills are not being used in the most productive way they could. Stamp duty – a tax paid when purchasing a property – also makes this problem worse because it discourages people from moving, even if they have outgrown a place, want to downsize or move closer to their work. It should instead be replaced with a broad-based tax on the value of the land. While we like to hate big businesses, they do get some things right, especially when it comes to productivity growth. The big challenge is keeping our heavyweights in boot camp by making sure they don't muscle out newer, nimbler firms. Loading As I blearily yanked myself out of bed and to the airport this morning, I pondered the productivity costs of our aviation industry. Probably profound, I concluded between yawns. A new, more reliable airline – and one that texts me at reasonable hours – would be a most welcome competitor.
