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Conservatives’ Budget puts the wealthy first. Services and Infrastructure to suffer in the End Analysis

Most of the Australian media is trumpeting the Morrison Governments’ tax cuts for “low and middle income” Australians. But does this stack up under analysis? Ross Gittins at The Age dared to buck the trend and pointed out that this is overwhelmingly a Budget for higher income Australians. He observes that the real cost of the tax cuts over ten years will skyrocket to “a staggering $302 billion”. That will inevitably lead to austerity: with a potential hit to Health, Education, Aged Care, infrastructure and so on. It will mean neglect and user pays ; and that will also hit genuine low to middle income Australians hardest. Those on $925 or less a week will receive nothing, while those on $3485 or more a week will receive $75/week. These people (the wealthy) are less likely to spend, also, as compared with lower income Australians. That could also be bad for the economy. (‘The Age’, 3/4/19, p 7).

The biggest culprit, here, is the tax cut for the $45,000 to $200,000 bracket from 32.5% to 30%. (‘The Age’, 3/4/19, p 2). The fact of the matter here is that the tax scales have been unfairly flattened. There should be a stronger rate for those on higher incomes.

To further illustrate the point, the Herald-Sun observed that those individuals on $200,000/year will receive tax cuts amounting to over $11,000/year, while individuals on $30,000 will receive $255/year. Meanwhile, hypothetically a dual income family with both partners on $200,000/year will receive over $23,000/year ; compared with $510/year for a dual income family with both partners on $30,000/year. (Herald-Sun, 3/4/19, p 2).

On the other hand, there’s $724 million for the elderly “over five years”. (Herald-Sun 3/4/19, p 13).

It sounds like a lot. But it won’t go anywhere near addressing waiting lists for ‘at home’ services ; or improvements in residential services: such as subsidising the sector to pay for aged care worker ratios and a registered nurse on-site 24/7. There’s mandatory reporting for neglect leading to starvation (which is common). But that cannot be policed without extra aged care workers. And aged care workers need better pay and conditions as an incentive to remain in the sector. There’s also a need to emphasise ‘quality of life’ for those at home or in care – with programs to keep people socially and mentally engaged. Something more than being sat in common rooms all day in front of a television.

There’s a projected surplus of $7.1 billion over the next financial year. (‘The Age’, 3/4/19, p 2). At least $1 billion of this could have been redirected into Aged Care – where it is desperately needed.

Ian Yates of the Council of the Ageing argued that: “Up to 125,000 older Australians are waiting up to two years for home care, [leaving] many dying while they wait.”

The blunt fact of the matter is that the Coalition is trying to buy votes with tax cuts: but the consequence will inevitably mean a hit to the social wage and welfare state ; and probably more privatised infrastructure.

While Labor does not oppose all tax cuts per se, Chris Bowen rebuked the Government, arguing the emphasis should have been on those on “less than $40,000.”

That said, there are some sensible measures: such as $3 billion of investments in “suburban rail station car parks” in an attempt to bust urban traffic congestion. As well as an emphasis on transport infrastructure in outer suburban Victoria. (‘The Age’, 3/4/19).

There’s also money supporting apprenticeships and supporting scholarships to rural universities, and close on half a billion for pre-school education. Hundreds of millions on mental health and Medicare sound significant: but they’re staggered over several years ; disguising a reality of neglect: which will become clearer as the shrinking revenue base leads to austerity.

The bottom line is that there are a host of priorities demanding our attention: but we end up with neglect in order to conform to small government Ideology ; and to prioritise the higher income Liberal core base.

There’s a need to ‘fix Medicare’ and further expand into dental. An extra billion a year could easily go into providing more mental health capacity and cutting hospital waiting lists. As already observed: there’s a drastic need for more resources in Aged Care. Again: nothing short of several billions would ‘make a scratch’ on these problems.

A $75/week increase to Newstart is very much overdue: such that people are left homeless, or without the resources to effectively search for work in the first place.

Pensioners could do with a minimum $25/week boost (fully indexed) – which means a great deal for someone living in poverty. Disability Pensioners could also do with more flexibility in supplementing their income with casual work. Students could also do with more financial support. Taking on part time work can provide experience ; but it can also make it impossible to keep up with studies. That’s bad for students ; but also for the government which is contributing to the investment in the event that people end up ‘dropping out’.

It’s also true that State Governments are running out of assets to privatise. For a long time this was treated like some ‘magic pudding’ to fund newer infrastructure. ‘Asset Recycling’. But that cannot go on forever. And there are associated costs. For instance the privatisation of the Port of Melbourne will see greater cost structures ‘flowing through’ all through the economy. This (lack of funds for infrastructure) can only be rectified with higher taxes overall (preferably progressive) ; or through regressive user pays which hurts citizens more in the end than higher taxes. Still: state governments’ tax options are limited ; and those privatisations should never have happened in the first place.

Many of Labor’s projected tax reforms are very welcome. Negative gearing cuts which exclude new properties will lead to more home construction and more jobs. It could also end with better housing affordability. Meanwhile ; cracking down on concessions for excess dividend imputation credits will overwhelmingly hit the wealthy. It is not ‘a new tax’ ; but rather Labor is closing a costly loophole ; one which could soon cost as much as “$11.4 billion over the forward estimates from 2018-19, and removing it could improve the budget bottom line by $59 billion over the medium term.” Bowen argues that: “More than 92 per cent of taxpayers do not receive a cash refund for excess imputation credits, and won’t be affected at all by this change.”

He concludes that:

Under Labor’s plan:

o No one will pay a single cent more tax
o No one will lose a single cent from their super contributions
o No one will lose a single cent from their pension
o No one will lose a single cent from their share dividends.

Labor’s recalibration of the tax system will benefit a lot of Australian families, citizens and workers. Its press for ‘a living wage’ could also make a huge difference for the working poor: though we have to hope that Shorten will heed the ACTU’s call for a “10.7% increase – or $72.80 per week.” Which is what is really necessary.

But at the end of the day refusing to consider raising other taxes limits Labor’s room to move.

To fix Aged Care, Health, Infrastructure, Welfare, Education: a very significant amount of money is needed. Australia’s GDP is now in the vicinity of $1.7 Trillion/year. Even a modest 1 per cent increase – aimed largely at those on upper incomes – would mean $17 billion/year to invest in services, infrastructure and social security. This should be the bare minimum for a Labor Government aspiring to improve the social wage and welfare state ; and provide infrastructure. (from fixing NBN, to paying for roads and public transport to bust congestion)

Over the long term (several terms of government) Labor should be aiming to raise the tax rate by 5 per cent of GDP ; or $85 billion a year in the context of a $1.7 billion economy. (that will have to be adjusted for growth, inflation etc also). The wealthy should pay their fair share. And corporate tax evasion needs vigorous, tough action. But ‘ordinary taxpayers’ benefit from ‘collective consumption’ and ‘social insurance’ as well. Labor just needs to be brave and articulate, ‘cutting through to the electorate’. Labor’s come a long way ; but there’s also a long way to go.

As for the Coalition Government: Labor needs to hammer home the line that this is not a Budget for low to middle income earners. It disproportionately assists the wealthy ; and those on lower incomes will pay through the austerity and inevitable user pays that follows in its wake.

Originally published on ALP Socialist Left Forum.

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18 comments

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  1. Brad Golding

    It’s all about keeping the poor poor and enslaved to the banks They should have left tax rates where they are and increased the non-taxable income to around $30,000. That extra money, in the hands of low paid workers, would go straight back into the economy whereas the wealthy will not spend it anywhere near the same manner.

  2. Keitha Granville

    Raise the tax free threshold to 30,000. Anyone on a salary over $200,000 gets no tax free threshold. They pay their 30% on all of it.

    Simple.

  3. Alan Nosworthy

    Very good point regarding raising the Tax Free threshold Brad.
    Universally applicable to nullify the usual Torie cries of “unfair, “they” get free money and I don’t ”
    I can identify with the articles call for greater flexibility for pensioners as shortly after my wife began casual part time work my pension was cut to below $100 a week. Not a recipe for marital harmony.

  4. New England Cocky

    “But at the end of the day refusing to consider raising other taxes limits Labor’s room to move.”

    So perhaps the solution is to remove the about $150 BILLION PER YEAR in government free, gratis and for nothing charity gifts to the undeserving wealthy and corporates presently paid out by successive governments of both persuasions in the form of tax rebates, investment rebates, middle class welfare, corporate allowances and other ways of legally avoiding taxation on income.

    @Brad Golding: Your analysis is correct. Remember that only about 12 Ferraris are imported into Australia each year at a cost of about $500,000 to pay an additional $50,000 in GST. Meanwhile, GST on food as a proportion of gross income is greater for low income families, but at present we do not have GST on most unprocessed food items.

    @ Keitha Granville: I agree that raising the tax threshold is the fairest and most appropriate method for increasing turnover through retail spending

  5. Henry Rodrigues

    Please everyone, remember that this ‘budget’ was formulated, constructed and polished under the beaming gaze of that wonderful clever Liberal genius, gutless wasteful Peter Costello.Enough said. Young Josh was very quick to state as soon a he was rewarded with the treasury, that he would be seeking the ‘benevolent and wise’ counsel of that eminent failure from Howard’s era. The media almost to a man/woman, have been singing their praises ever since. No surprises there, when one considers who owns the media, but even the bloody ABC and SBS have been rounded up to join into the propaganda offensive. Is it any surprise that La Trioli is back in harness on ABC breakfast ? For a couple of months the lovely Emma Griffiths was filling in admirably, until la Trioli returned, after recharging her batteries with bile and and bullshit.

  6. Alcibiades

    NWE,
    The $150 Billion per year in gratis handouts is the least of it. In only the last financial year, in only the oil & gas(LNG) export sector, this mob via the ATO granted cumulative Tax Credits of ~$384 Billion. Since the total true value of our LNG exports alone will be ~$30Bn over a decade, we will in essence give it away for nothing. Yet, our resources were squandered & the rent seeking foreign owned multi-national corporations made very real actual profits. Transferred overseas. Bonus, with no domestic gas reservation, households & businesses have had over time effective natural gas(Ours) price increases of up to of 400%. We pay more for our natural gas domestically than the Japanese pay for after being compressed and shipped 10,000Km away.

    Now add to that the tax credits in other sectors of the economy. Let alone only 1/3 of corporations pay any tax at all, year after year. And none pay anything close to 30% tax. Whilst year after year 48 then 62 then 67 multi-millionaires manage their affairs to pay zero tax not even the MediCare Levy, year after year, by spending up to $2M (tax deductible) to ‘structure their affairs’ to do so.

    Murdochs Limited News managed to pay for a decade and then scoffed a ~$800M tax refund. Followed by a ‘gift’ of $30M with zero documentation. None.

    Then there’s the Trusts that Six in seven people have no knowledge of. Which 1 in 7 use to structure their affairs to falsely minimise their taxable income, aiming for an assessable of $80,000 or less (See: Multiple properties negative geared). Then there are routinely phoenixed faux tax free charities used in a similar manner. On & on …

    Vampyres.

  7. David Stakes

    I would like to see a change to the pension rule, as my wife is below pension age at 58, I receive on my pension $684 a fortnight. How they work that out is anybodys guess. As the actual couples pension is around $200 a fortnight more. Surely they dont expect her to work. Never worked in her life, and not likely to now. Its only our 3 children who keep us afloat and we all live together, even if they are all in their twenties. None of them working fulltime.????

  8. Frances

    David Stakes : I have friends whose husbands went on aged pension and wives not pensionable age, who never worked were told to either work or volunteer 7.5/15 hr. a week; for the latter they qualify for Newstart payments.

  9. Lambert Simpleton

    Sorry, Alcibiades. Am having trouble getting my head around this $384 billion number.

    Are you saying this is going offshore along with the rest of the loot?

    I did read your post about half an hour and am having trouble conjuring with it, unless I have misunderstood your phraseology. Can you cite a couple of sources, written in comprehensible English, not jargonese.

  10. Jon Chesterson

    FAKE BUDGET DRESSED UP TO LOOK LIKE IT IS FOR LOWER AND MIDDLE INCOME FAMILIES AND SMALL BUSINESS WHEN IN FACT IT IS YET ANOTHER GIVE AWAY TO THE WEALTHY 10% – HOW MANY ORDINARY AUSTRALIANS EARN $200,000 PER ANNUM? WAKE UP AUSTRALIA ARE YOU GOING TO FALL FOR THIS DISTRACTION TOO!

    ‘The blunt fact of the matter is that the Coalition is trying to buy votes with tax cuts: but the consequence will inevitably mean a hit to the social wage and welfare state; and probably more privatised infrastructure’.

    ‘This is not a Budget for low to middle income earners. It disproportionately assists the wealthy; and those on lower incomes will pay through the austerity and inevitable user pays that follows in its wake’.

    It is tokenism where those who earn less than $45,000 per annum get nothing but a tokenistic one off payment at the end of the year when they complete their tax return, those who are even less well off will get an energy bill supplement enough to keep a light bulb on at night, and the Liberals were not going to even give that to someone stuck oN Newstart, until it was pointed that they would stand to lose a lot of votes.

    Throughout the budget announcements, this dress up by a disingenuous, deceitful and delusional treasurer in Parliament last night, the Liberals and Nationals could not stop congratulating themselves, ‘hear hear’ with their smug smirks, nods and smiles and arrogant tones, as they yet again do another snow job on the people of Australia – Not even pretending to care but lying through their teeth, when all the infrastructure spending promises will likely be rescinded or handed to private corporations for more raping and pillaging of the public purse and your taxes.

    And what were the media reporting, as usual the same excited sycophant triumphal uncritical voice and mouthpiece of government as they scrambled and stampeded to get their highlights out first before anyone else – Including the ABC!

    VOTE THESE PATRONISING LYING BASTARDS OUT BEFORE THERE IS NO AUSTRALIA LEFT TO VOTE FOR.

  11. Alan Nosworthy

    Even if there is no chance of work you are encouraged to become a “client” of a job search agency which is supposedly good for the Economy http://unemployedworkersunion.com/whats-job-agency-making-off/
    or at least the bottom line for the job agency.
    If you have the stomach for it search the site for stories of real pain from clients.
    Another moneyspinner for the “lifters” of legend, who are “having a go”

  12. Lambert Simpleton

    RE Alcibiades, the pieces keep falling into place.

    So, perhaps thousands of people; indigenes and unemployed and others, have been driven to suicide through Robodebt, breaching etc, because of a so-called a bogus financial emergency, while politicians and TNC’s collude to not only avoid the relative pittance $trillion dollar oil and coal corporations pay now as to royalties and tax, not only avoiding this now, but for light years into the future?

    I recall many docos over time about Darwin, the North West Coast and the Timor gap in particular, with political figures from both parties colluding, this century, although the thing that comes to mind is the ripping off poverty-stricken Timor L’Este.

    Do they do corruption on this scale in the USA?

  13. Alcibiades

    BG,
    Fully concur.

    Lambert, typo, am only human (NotaBot)
    Australia’s suicide rate is out of control, climbing year on year. In 2017 it was ‘conservatively’ ~3128 deaths an increase on 2016 at 2866 suicides.The latest data from the Australian Bureau of Statistics(ABS) last September showed suicide deaths had risen by 9 per cent in just the last year, with older Australians, especially men, more likely to take their own lives than young people. And one can guarantee those numbers are ‘low-ball’. They exclude veteran suicides which go unrecorded, just for starters.

    How many do we lose in the national road toll each year ? How much money & resources is spent on trying to keep it down ?

    These scum, neoliberals, take lives, not by their own hand, but by their deeds, their policies, such as they are. Happy clap, Quaff some wine, retire, and sleep soundly in their partners residence whilst claiming an accommodation allowance per night that exceeds what Newstart provides in a week.

    COALition, neoliberal, ‘Tough Love’.

    There is no MediCare equivalent, nor any real social welfare system of note in the US. Acquire one of the few jobs where your employer provides medical insurance, to one degree or another, or User Pays at the Clinic or Hospital. In many cases, prove you can pay, or be thrown back out on the street. Oh, and guess how much leverage your employer has over you if you or a family member really needs that medical insurance.

    The number one cause of bankruptcies in the good ‘ol US of A is medical expenses. Rising year on year.

    If you thought the Indue Cashless Welfare Card for ‘party’ rorts was bad … say hello to food stamps. Community groups & charities are completely overwhelmed, as they futilely attempt to stem the rising tide as best they can.

  14. Lambert Simpleton

    Woke up and the shock waves keep permeating through me. What a monstrous event has occurred, way too large for ordinary folk to even begin to comprehend.

    I’ve known for a long time Democracy and Australia are being dismembered…I read IPA’S agenda also. I understand the idea of the “two speed economy” and this is verified through Corman and Reynolds as to a “designed” society and economy for the oiks where the big witchhunt is to do with the diversionary policing of welfare “immorality” and downgrading of ethnic and class “inferiors”..how barbaric can they get?

    The real rip-offs also occur through the ministrations of the financial sector, defence spending, the immense wastage on surveillance and policing, including with boat people, aborigines and welfare recipients; this misappropriation of the common wealth by offshore vultures and their local allies.

    The Nauru-isation of Australia is well underway and soon Australians will wake from their Dream time to find the rug has been torn from under them.

  15. Dr Tristan Ewins

    A new letter to the Herald-Sun ; On Shorten’s Budget Reply. Maybe this time?

    “Bill Shorten has made a strong Budget Reply ; critiquing the largesse the Coalition is providing for high income Australians through tax cuts. And providing little for the working poor and the most vulnerable. Shorten promises a ‘living wage’ ; and perhaps most significantly to provide billions to assist Australians struggling with cancer: to get them the help they need without falling into poverty. On the other hand, Chris Bowen has promised taxes will not rise. Instead the focus is on closing loopholes and eliminating unfair rebates. But for several elections now neither side of politics has paid sufficient attention to Aged Care and Mental Health. While many seniors wait in the vicinity of a year for ‘stay at home packages’, those in residential care face chronic neglect. There must be a registered nurse available at all times, and there’s a need for quotas when it comes to aged care staff. Even if Shorten raised progressive tax by one per cent of GDP ($17 billion) that would provide very substantial room to move. Tax pays for ‘collective consumption’ and ‘social insurance’ that’s in everyone’s interests. For instance, the Pharmaceutical Benefits Scheme. Or (hypothetically) Medicare Dental. Nonetheless truly cracking down on corporate tax avoidance could reap billions too. Bill Shorten: please have the courage to harness the resources to ensure the most neglected are neglected no longer.”

  16. paul walter

    But still nothing on the dole.

    You expect no better from the sick sado economists of the IPA and LNP, but shouldnt we expect better from Labor?

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