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Playing Politics with tax doesn’t help anybody!

Why do you think that the coalition always couch their legislative program with wedges for Labor? Is it their way of having fun or can they just not resist the opportunity to play politics, even with something so fundamentally important as tax policy?

This week the coalition want to pass their package of personal income tax cuts which they are presenting as a three stage plan but they insist that it’s all or nothing, even though stage three is not scheduled to take effect until 2024-2025, six years down the track and potentially two election cycles away. What they are doing is seeking to bind future governments to tax cuts which may or may not be affordable when they finally come in but which are in line with coalition ideology :

The three-stage tax plan

  • Step 1: Low and Middle Income Tax Offset
    Taxpayers earning between $20,200 and $125,000 receive a temporary tax offset for 2018-19 to 2021-22, in addition to the Low Income Tax Offset (LITO). Up to $530 as a lump sum at tax time.
  • Step 2: Changes to tax thresholds and LITO
    In 2018-19 the top threshold of the 32.5% tax bracket moves from $87,000 to $90,000, and then to $90,000 to $120,000, in 2022-23. The low and middle-income tax offset also ends. The top threshold of the 19% tax bracket increases from $37,000 to $41,000, and the LITO increases from $445 to $645.
  • Step 3: Cutting a tax bracket
    In 2024-25 the top threshold for the 32.5% tax bracket increases to $200,000, eradicating the 37% bracket. Taxpayers earning more than $200,000 still pay 45%.

Labor are likely to go along with step one and possibly step two but they are resisting step three which they consider should only be legislated at the time it takes effect, not six years in advance.

The coalition know full well that they cannot bind a future government but they want to wedge Labor with the all or nothing ploy. Labor, on the other hand, don’t want to be seen as the party poopers and if the coalition continue to dig in and insist that the package be voted on as one bill the only option Labor have is to cave in and pass the package but make it known that they, when in office, reserve the right to reverse stage three if economic conditions are not conducive to tax cuts in 2024.

The government told journalists during the pre-budget lock-up that the plan would cost $140 billion over the “medium term” – which is 10 years – but the bill does not contain that information. The only costings it contains are for the first four years of the plan. Treasurer Morrison when asked why detailed year-by-year costings of his seven-year plan had not been included in the legislation, said the government couldn’t do so because the numbers wouldn’t be reliable.

“It is not the practice of any government to provide itemised year-by-year costs over the medium term because they’re not reliable,” he said.

So, the coalition bill on personal income tax cuts with all the rubbery figures will probably go through but they are not done with slashing revenue as they still want to cut corporate taxes to the top end of town.

The full corporate tax cuts being proposed by the Coalition are scheduled to come into effect in 2026-27 when all companies, ­regardless of turnover, are due to receive the lower 25 per cent rate. Leading economist Saul Eslake has suggested an updated 10-year costing of the Coalition’s corporate tax cuts would cost the budget in excess of $80 billion by 2029. A measure, which when combined with the personal income tax cuts, will impact government revenues into the future no matter who is in power.

What nobody is discussing in this frenzy of tax cuts is how these reduced revenues will impact on government services into the future. The coalition tell us that they are committed to small government and that means that cash-strapped governments into the future will be forced to privatise and outsource government services as they clearly will not have the revenue flows to continue to fund and grow education, healthcare, welfare, pensions and infrastructure.

So, it’s just as well that Labor’s debt and deficit disaster that the coalition warned us of is now behind us isn’t it? Only problem is that government debt, which stood at $175 billion YTD September 2013 when Labor lost government, now stands at $340 billion YTD April 2018.

You can check the figures yourself.

Reducing taxes is always popular, particularly when we are approaching an election and rarely are the consequences including reductions in government services and the need for belt-tightening discussed until after the election. But, let’s not be in any doubt, we will be told post-election that we just don’t have the money to fund essential services in this country.

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  1. John O'Callaghan

    The only thing that should be cut is the current Govt’s job and it cant come soon enough!

  2. New England Cocky

    Perhaps the optimum solution for Australian citizens is for the present Abbott Morriscum Dutton Turdball NLP misgovernment to go to elections sooner rather than later, meaning September 2018. This is unlikely because it would terminate the Parliamentary Allowances claimed by too many NLP politicians.

    There is little doubt that this NLP misgovernment is intent on stripping the Australian economy of any financial benefits for our natural resources or government services like real property transfers.

    Meanwhile the National$ continue to support adulterers while practicing hypocrisy and greed at every available opportunity.

  3. etnorb

    Agree with your thoughts John! Also agree with your article Terrance! This bloody lying, inept, flat earth, right wing mob MUST go at the election! Now that they have left a much higher debt than what they always accuse Labor of, it is now beyond time for this rag tag mob to go! We certainly do not “need” any of their proposed tax cuts if they come with a proviso & a date for implementing so far away as to be unworkable, also, they are still trying to get their bloody tax cuts to the top end of town, when a huge percentage of these do not pay any or very little tax now! WTF??

  4. Roscoe

    if private companies can run things much more efficiently as the LNP insists why are we not privatising federal government? surely the captains of industry are much more capable, come to think of it, kindergarten kids would be much more capable, but if privatisation happened and the government became a corporation and each Australian of voting age was issued with one non transferable share, the corporation would by law be required to act in the best interests of the shareholders, which would be nice to see as the government has never done that

  5. Kronomex

    As i having been saying for years, and as usual I can’t remember where I first read it. “Those who should be running the country have more than enough sense to steer clear of politics.” The current state of the LNP reminds me of the classic sketch –

    “NBN Co describes its purpose as “helping bridge the digital divide between city and country”.” We can insert a new canula into the neck of the regional and bush dwellers and drain them of more blood.

  6. wam

    There was never any doubt in the cynical mind, that it would pass because it gives the pollies and extra $4500. Don’t remember little billy or torpid tanya mentioning that?
    Labor shows they are no fools because any fool could see that if their lnp colleagues could double the debt and keep gillard’s AAA rating meant their colleague, the rabbott, was lying about her economic disaster. Still the son of a small car has claimed the AAA rating as all his own work so shakspur again rules ‘loves labor lost’??.

  7. Jack

    I take umbrage to the last sentence in this article. We certainly won’t be told that if Labour win. Looking forward to the cash splash

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