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Plan B

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Malcolm’s Magic Pudding

When Malcolm Turnbull looked at radical tax reform which would see states and territories collecting a portion of the nation’s income tax, he underestimated the resistance the plan would meet from most of the state premiers, writes respected TPS Extra blogger ‘2353NM‘.

Around 100 years ago, Norman Lindsay wrote what certainly has to be one of the classic Australian Children’s books ‘The Magic Pudding’. The story revolves around the owners of a pudding that automatically regenerates after a slice is cut being chased by dastardly ‘puddin thieves’ who in the end get their comeuppance. As an aside, it’s well worth a read if you have never done so.

Prime Minister Turnbull’s latest venture into the tax discussion has a similar concept. From what has been publicly released, Turnbull is suggesting that if the states and territories receive a proportion of the income tax take, they will be able to fund their hospitals and schools to a level greater than that they are currently receiving in tied grants from the federal government. So that Australian’s are not paying more tax, the federal government will reduce their own share of the pudding, collect the states’ share and pass it on without delay or deduction.

Let’s start with the politics.

Turnbull and Morrison have been faffing around preaching their contribution to the golden future of the Australian nation and all that sail in her will be taxation reform. First of all, everything was on the table, then when someone challenged the proposal for increasing the GST to 15% with a broadened base; that part was quietly taken down the dark alley and strangled. Then income tax was considered, then taken down the dark alley and strangled. Others suggested negative gearing and capital gains should be looked at. Turnbull wasn’t having any of that, and if it was possible, he was less enamoured with a suggestion to look at Company Tax.

The only arrow left in Turnbull’s bow apparently is an idea that for the past 70 years has been classed as unworkable. While that in itself is not a reason to look at it, there is a huge potential for some vague plan such as this to be suggested in the lead up to an election then changed significantly (to make it workable) over the election period. When the plan is eventually converted to a practical policy by the time the election has passed, the government has been re-elected and claim they discussed it prior to the election so they have a ‘mandate’ to implement. The problem with the ‘mandate’ is that the policy bears at best a passing resemblance to the original plan.

Then there is the logic.

If the income tax take in Australia is $100billion, it is $100billion regardless of who gets the cash. Unlike the magic pudding, if the states get 10% of the $100billion pudding, it doesn’t increase the total available for distribution; it just means that the federal government has to live with the remaining $90billion. Sooner or later the state and federal revenue requirements will rise causing income tax rates to go up (potentially by different amounts in different states) causing the flaws of a scheme Bernie Madoff would have been proud of to be realised, despite the concept being ‘withdrawn; at the COAG meeting held on April 1.

Given even government departments charge surcharges for payments by credit cards, how long do you think it would be before some bright spark in Treasury came up with the idea of introducing the inevitable ‘postage and handling fee’?

In addition it is clearly more difficult to operate a health and school network where there are smaller groups of people or they are located a greater distance apart. Coincidentally, the states and territories that face these problems are smaller in population or earn less so if the income tax is distributed according to the ratio of tax received – those states and territories have to provide more with less.

Turnbull claims that the smaller and more decentralised states will be looked after. Does this mean there will be some adjustments made to the ratio used to pay out the states proportion of income tax? If so, other states might again be held hostage by one state using the argument for special distribution of the income tax revenue – in a similar way to that attempted by Western Australia (under threat of leaving the federation) in regard to GST when the mining boom petered out.

It would seem that most of the state Premiers are not as gullible as Turnbull hoped, as they are resisting the concept plan. There is a delicious irony that Turnbull’s Coalition Government is now having to have the difficult conversations caused by Howard and Costello’s penchant for propping up middle class welfare using the proceeds of the mining boom and Abbott’s scrapping of both the Mining Tax and the Carbon Pollution Reduction strategy; both of which were capable of producing income for the federal government.

As for us – we have a choice. Do we vote for the party that increased health funding and introduced the Gonski reforms to educational funding (to create a fairer society with greater equality), or the one that has ripped $80billion from health and education over the next decade and is now proposing not to fund public schooling (but happy to continue to fund schools that charge tens of thousands a year)?

What do you think?

This article was originally published on TPS Extra.

Also by the author:

May your god go with you



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  1. keerti

    Agovernment and a new , improved PM has no policy, other than one knee jerk after another, but yet the opinion polss still put them ahead!!!????

  2. Miriam English

    For those who want to read The Magic Pudding, it is freely downloadable at Project Gutenberg:

    Read the epub format book on your smartphone, tablet computer, or laptop, or if you have a very comfortable chair, your desktop computer. The best epub reader for smartphone or tablet I know of it fbreader (free download from https://fbreader.org ).

  3. Paul Murchie


  4. Miriam English

    It is a relief that the state premiers are not swallowing it.

  5. totaram

    “As for us – we have a choice. Do we vote for the party that increased health funding and introduced the Gonski reforms to educational funding (to create a fairer society with greater equality), or the one that has ripped $80billion from health and education over the next decade and is now proposing not to fund public schooling (but happy to continue to fund schools that charge tens of thousands a year)?”

    Unfortunately, it is not that simple. The LNP argument is that Julia Gillard made “pie in the sky” promises that could never be funded and the govt. now has to deal with those, because “there is no money”, a.k.a. “how will you pay for it”.

    So the heart of all that the LNP does, rests on this great neo-liberal myth about “there is no money”. Unfortunately, every “progressive” politician has also bought this myth, so no matter who is elected, we will have the same problem. Labor might try to solve the problem by increasing taxes and cutting subsides, but in simple terms, that really won’t cut the mustard, until we get back to economic growth by BORROWING to INVEST. Health, infrastructure and education are not expenditures but investments, and every corporation borrows to invest. Why should governments not do the same? (I will not go into arguments about how govt. “borrowing” is not that at all, but something much more benign)

    The govt. fiscal deficit needs to increase, and unemployment to be brought down, in which case growth will fill govt. coffers even more. Further, there is no need for govt. to ever “deliver a surplus” as Wayne Swan foolishly tried to do. Big corporations and indeed governments of every persuasion have always carried debt on their books, contrary to the mantras being spelled out by neo-liberal economists and right-wing think-tanks, about “getting the budget back to surplus”.

  6. flohri1754

    Saved (for the moment) from following down the rabbit-hole of the morass of Federal and State income taxes as levied by entities in the U.S. …….. by the State and Territory Premiers in Australia ….

  7. Douglas Pye

    Thank you for this concise and on point summary.

    As to the matters in your final paragraph, perhaps the Coal- kitchen will settle for the ‘Common Greed Option’ ( following the Howard’s Battlers ploy) and expect to win the … ‘ We’re all in the trough together Election 2016! ‘….. most of the population cheats the ‘system’ in one way and another,so offering an extra ‘squirt from the sauce bottle ‘ ( Rudd speak .. 😉 …) could look/feel like us all getting a share!

    Some day …. some group …. will venture forth with a clean slate !….. no past favours owing ! ….. of fair for all mind !! …& .. Nation Build !!

    Someone said to me something along these lines … ” You’re the only person I’ve ever met who would (at your age) plant a fruit tree which would take about twenty years to bear, whilst looking forward to picking and tasting that fruit ” …..

    Perhaps, he could have said it in one word … Optimist ! …. 🙂 …

  8. Phil

    The Liberals have more than 75 policies with more recently added. These can found at the IPA website because the IPA is the real power behind the Liberal Party – one by one these radical IPA policies are brought out for a showing by the government. If unpalatable at first showing as with the increase and widening the GST, or with the states collecting income tax, then the policy is quickly shelved and the government moves on to the next radical IPA idea. Meanwhile the unpalatable policies sit waiting for another showing at the next opportunity.

    I don’t know if it’s just me or if others feel similarly but I seriously dislike and distrust the businesses and corporations I must deal with in my daily life. These businesses and corporates, represented variously by the likes of the BCA, Minerals Council and Chamber of Commerce, smile at me via their service counters, patronise me by email and ubiquitous marketing propaganda, always offering platitudes like ‘have a nice day’ and ‘we care about you’ etc – whilst simultaneously lobbying the politicians they believe their donations paid for, to lower wages, remove penalty rates, remove workplace safety, ban unions, remove regulations and formal oversight. I sense that business and political corruption is extremely widespread in the absence of any national investigatory entity.

  9. Steve Laing

    Keating really got it right about Turnbull. He has been one long stream of cheap, nasty fireworks – all promise, and no delivery.

    But we do soon need to develop a cohesive strategy for the coming election, ideally to ensure that we get a government of ideas and proper debate. I wish Labor and the Greens could get over their petty party squabbling and work out how they can combine to produce a workable plan to get the country moving in the right direction. We need diversity in parliament. We need those who are pro business as well as those who are pro “workers”. But we need them to be capable, qualified, and able to work together, not against each other. Unfortunately the current party-based system almost entirely precludes this, and until we recognise this and look for alternatives, it will just get worse and worse.

    The right have found a formula for gaining power and retaining it. And it works. But only for them. The recent senate reform might actually turn out to be bad for them, but the progressive left needs to find ways to help direct their supporters to vote tactically and effectively. We have the technology, and the brains, we just need a way to harness this to make it work, rather than simply talk about it.

  10. diannaart

    Likelihood, Malcolm to explain why private schools will continue to receive Federal funding, AKA our taxes?

    Probability….. 1 in 500? 1,000,000? Never?

  11. Jaquix

    So Malcolm Madoff didnt get his “concept plan” past the Labor Premiers? Thank goodness for that. Otherwise Australians would have been heading ever faster towards the LNP dream of the rich getting richer, and to hell with everyone else. I loved Annastasia for holding up a blank piece of paper and saying “This is Malcolm Turnbull’s tax plan.” That would make a great election advertisement for the Labor Party. Daniel Andrews similarly stood out for his succint, sensible comments on this farcical meeting. He looks like the kind of PM I would like to see running Australia, not this inept oddball Abbott-vlone we have at present.

  12. helvityni

    Douglas Pye, at a supermarket queue the other day an elderly gentleman showed me a lemon tree he was going to purchase. I admired the tree, and commented on the very reasonable prize. He smiled and said: I’m confident I’ll live long enough to see it bear fruit…

    Was I talking to you ?

  13. Terry2

    As far as I can see, what Turnbull was trying to do was a cheeky ‘pass the parcel’ move whereby the states could apply an income tax surcharge, state by state and the Commonwealth could say “well it wasn’t us what increased income tax, it was the states”.

    Far to cute for words and the Premiers quickly latched on to what was afoot.

    What Turnbull is refusing to acknowledge publicly is that the Commonwealth has the Constitutionally enforced power to levy the majority of taxes exclusively and what the states want is for the Commonwealth to hand over some of that exclusivity or agree to a fixed allocation in much the same way as the GST but with a more equitable basis of distribution.

  14. Kaye Lee

    Malcolm Turnbull today is saying well the states had their chance for a share of revenue – since they turned it down they have to accept we must “live within our fiscal envelope”. The federal government has the advantage of being a sovereign currency issuing entity, states are the ones who must live within their means. He does not seem to understand.

  15. Kaye Lee

    “WHEN prime minister Malcolm Fraser unveiled a proposal to return some income-taxing power to the states in 1976 he faced fierce critics, but few fiercer than Malcolm Turnbull.

    The young Turnbull wrote of Fraser’s plan: “It is nothing more than a cunning attempt to offload millions of dollars worth of government expenditure back on to the states without giving them any means, other than imposing an income tax, of raising the extra revenue needed.”

    States were not so much being sold a pup, Turnbull ­argued, as being given “a large, extremely hungry and undoubtedly treacherous hound”.

    As a correspondent for ­Nation Review, a now-defunct weekly, Turnbull had a ringside seat as Fraser tried in vain to implement a “new federalism”. He would therefore have been well aware of the political risks involved in pushing the state income tax idea.

    When Fraser floated the proposal Wran, then NSW Labor opposition leader, told Turnbull it warranted the same circumspect approach as a puff adder. But Liberal premier Sir Eric Willis embraced the puff adder and even had Fraser on the platform with him advocating the “new federalism” at the 1976 state election campaign launch.

    The plan would give the states a guaranteed and flexible source of income, Fraser told the rally, adding: “It will mean that governments will have to stand up and be counted and take responsibility for their own actions.”

    It could have been Turnbull talking this week.


  16. Möbius Ecko

    Yet another in a long line of Turnbull core beliefs he has reneged on.

    As someone stated this makes Turnbull a worse leader than Abbott. At least with Abbott you knew what he believed in, as bad as those beliefs are. With Turnbull, he reverses a long held tenet then turns on the new held one to only crab on that. Nobody, including Turnbull, has a clue what he stands for or believes in.

  17. Gangey1959

    Aaaahhhh. Mr Norman’s Magic Pudding. “Cut and Come Again”. A bit like liberal party leaders. Spin the bowl around and whistle twice and you get whatever you want. “The same but different”. “Continuity with Change”. “Bullshit Bullshit Bullshit”
    Goddam. I should run for president or something. Iv’e got the slogan part down pat. Shame I’m unemployed.
    @ Kaye Lee. Mr turdbullshitartist screwed it up then. Victoria is fine, cos we own Note Printing Australia. We’ll just keep printing all the money we need, and the rest of Australia can suffer in its underwear.
    What a joke the whole idea was. And the way turdbullshitartist put it in suggesting that if the states rejected the idea they were admitting they couldn’t govern properly anyway was just childish.
    The sooner he comes out and says that the ipa underlings who constitute the lnp government are in it for themselves and their over-monied masters both here and abroad, and that everything is fair as long as the rest of us accept that they and theirs will be treated more fairly than us and ours the better for everyone.

  18. king1394

    Where is the money coming from has been the cry of the conservatives in reaction to every progressive activity in support of health, education, social services etc. Can I ask, where has the money gone? We have had cuts to services, reductions and limitations on benefits such as old age pension, newstart etc. and sales of assets that were built up by generations. Here’s Mr Costello proposing to invest Future Fund money into the failing coal industry now, having a great track record after selling substantial parts of the gold reserves when he was treasurer. Yes, where has the money gone?

  19. Loz

    What do you think?
    I personally don’t have to think about it – I will not under any circumstances elect this so called government in the next election.

  20. Matters Not

    has a clue what he stands for or believes in

    Perhaps. But I think that now he’s completely ‘gun shy’.

    Remember he was on top of the world before Abbott rolled him re climate change and the tax on carbon. And he was rolled by Abbott. The village idiot.

    Now he just wants to be the Leader and will not take a chance. Risk averse. Gun shy. Nervous. Apprehensive. Afraid of the dark. Don’t say BOO.

  21. Douglas Pye

    ….. helvityni …

    Small world ! …Indeed . I well recall your pleasant disposition and kindly manner …. actually, after our short conversation I had second thoughts and passed on that tree. There’s a fruiting species of tree from Sth. America that I have my eye on. My brush with that tree the other day was an expression of my impatience with our Governance ( lack of ) ….. and the current bitterness worldwide … 😉 ..

    Elsewhere I write on the subject of ‘ good will ‘ with the expectation of bringing my energy to bear and help folk to feel better about themselves ….. and consequently, about their fellow beings…… accounts for my ‘ 20 years’ perspective ! … 😉 ..

    Perhaps I could have said it in one word ….. love …..( small “l” ) ….. 🙂 …..

    ….. Phil …..

    Your valid point about the decline of business ethics certainly rings the bell with me. To my mind it’s been happening over a period of time since late last century.

    With hindsight, I noticed the frustration of some politicians about the apathy of the constituency … particularly in the period when a general air of affluence & expectation prevailed ……& later, stuff such as McMansions became the trend.

    I well recall the electorate being ‘sold’ on the proposition that ‘business’ could have a wider say in governance because of it’s particular ‘expertise’ …. we then could be relieved of the ‘ worry & concerns ‘ of governing Australia !….. so, whilst we slept ….. !. the beginnings of ‘outsourcing’ took root !

    In the late 1980’s I was encouraged about putting my hat in the ring. Over a short period of time I witnessed proof of what a current Minister said to me about needing to face the potential of ‘eating’ / ‘swallowing’ stuff which conflicted with my overall ethics…. I declined !

    Perhaps in a word …. thin skinned …… 🙂 …..


  22. iggy648

    Kaye Lee, your research talents never cease to amaze. I worry about what they might be sneaking in behind the scenes while we’re all distracted by this bizarre stuff!

  23. stephengb

    Me thinks Turnbulls magic pudding has, ‘goorn offt’

    Bit of furry green stuff all over it

  24. 2353

    Thanks for the comments all.

    Kaye Lee, the conservatives don’t seem to have worked out the internet yet do they? While people do have the right to change their minds – Turnbull either forgot he called out Fraser when he tried the same trick or hoped no one would find out. Either way, some research would have been a good idea.

    helvityni and Douglas Pye – it is a small world but you wouldn’t want to paint it 🙂

    stephengb – no it hasn’t goorn off, it was never cooked properly!

  25. Gangey1959

    @ 2353 and stephengb.
    They used some of thge ingredients from the ipa’s “457V Fuk Dup Kwik Ideas for the Brainless Moron in Power ” imported range of pre-arranged crap for the already overly wealthy in their recipe instead of using traditional “Home Grown Good for All Australia” products and thought processes. What else was going to happen ? And then they cooked it in one of gerry harvey’s latest “Ill sell it for less than I didn’t pay for it cos I don’t pay my sales people real wages because a bowl of pseudo rice is better than they were ever going to ever earn wherever they came from anyway” north of the equator micro-nuclearwave-hotovens into the bargain.
    I’d go and get a job on his ranch, except that I hate horses, and Im a growing boy and I need 2 bowls a day. Bugger.
    Fake imitation gold Rolexxesses for everyone. Yay team.

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