“The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function.”
F. Scott Fitzgerald
I’ve often thought about that Fitzgerald quote when I hear the Coalition talk about Bill Shorten. On the one hand, he’s a captive of the unions and he’ll just do their bidding once he becomes PM; on the other, the election of his government will lead to more industrial unrest. And then there’s the fact that he’s a social climber who’s trying to suck up to billionaires, while simulataneously waging classwarfare.
Yes, holding two opposing ideas and still being able to function is the result of a first-rate intelligence. This, of course, explains the recent disfunction in the Liberal and National Parties.
Watching Josh Frydenberg’s video about negative gearing, I was amazed by two things:
- He’s trying to emulate Scott Morrison’s recent habit of walking and talking at the same time. I’m not sure the reason for this. Perhaps, it’s to suggest that politicians are too busy to sit or stand. Perhaps, it’s the idea that movement will distract from what they’re saying and lull us hypnotically into repeating, “Scott has always been our leader, these are not the drones you are looking for, move on!” Whatever, it reminds me of the home movies where my Nanna used to sit posed for a photo while telling me that it was a movie so it was ok to speak. Perhaps I should add that these were silent movies so all one saw was the lips moving but the meaning was lost… Exactly like Josh and Scottie.
- They seem to be persisting with the suggestion that the change to negative gearing not only will push prices down, but also up. While Josh doesn’t suggest that they’ll be lower for sellers, but higher for buyers – which they seemed to be saying when the policy was first announced – but he does suggest that while prices will be lower, rents will be higher. Now, you don’t need a PH.D in Economics to work out that if prices are lower and rents are higher, then it’s a great time to buy whether you’re a first-home buyer or an investor. While not all first home buyers would be able to get finance, investors should find it easy, because if I can buy a property for repayments of $2000 a month and I’m getting a rent of $2200 a month, there’s no limit to the number of properties I can buy. And believe me, if prices went down and rents went up, that’s exactly where we’d be. (Of course, if I did that I’d be stuffed if interest rates went up significantly, but that’s not going to happen according to the Liberals because Shorten’s policy will put a dampener on the whole economy!)
Whatever, the fundamental trick that they seem to be trying to pull is the old, “Look over there, nothing to see here!” Frydenberg is making much of the fact that a large number of negative-gearers earn less than $80,000. This is no surprise. The whole strategy behind negative gearing is to reduce your taxable income, so when Peter of Point Piper complains that he only earns $36,000 a year, one not only wonders why he doesn’t sell one of his 96 investment properties, but how he manages the school fees for his three children which far exceed his entire income. Using Josh’s logic, the next thing will be that some of our largest and most profitable companies won’t be paying any tax just because they’ve found ways of reducing their income so that… Oh wait, I may need to think about this before I go on.
Anyway, when I read about about Labor’s attacks on low income earners and poor retirees, I get the feeling that the reporting lacks any sort of analysis. Yesterday, for example, I read about a poor retired couple who were going to lose $17,000 in franking credits.
Now while I do understand that for people who’ve made their retirement decisions based on getting a healthy kick along from these franking credits, there may need to be a bit of an adjustment. We may need to look at how people who are likely to suffer a hit they can’t afford can be compensated.
If the couple were receiving $17,000 a year in franking credits, that means they are receiving over $60,000 a year in dividend income. Using a generous average of a 4% return on the share portfolio, then they own at least $1,500,000 in shares alone. Any money they’ve tied up in superannuation or property would be separate to this.
Franking credits were introduced so that income wasn’t being taxed twice. Once, when the company paid the tax and again, as part of your income, when you received a dividend. When Howard introduced the idea that people who didn’t have an “income” should receive the money in the form of a payment, he was actually creating a situation where the money wasn’t even taxed once, because the people not paying income tax aren’t being taxed on it twice, they’re receiving the tax paid on it by the company because they don’t pay any tax to offset this against.
Yes, I know it’s very complicated, and very boring. And..
Hey, look over there, is that an embassy being moved or is it a potential terrorist attack?