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Tag Archives: GST

Confusion in the Turnbull Government

Much about the Turnbull Government confuses me. Either I don’t know what they’re talking about, or they themselves have no idea what they’re talking about.

I’m convinced it’s the latter.

They say one thing while clearly meaning something else. I could write a book about the subject, but for the sake of a talking point I’ll limit it to the few examples below:

Shortly after being installed as our new you-beaut Treasurer, Scott Morrison says “we had a spending problem, not a revenue problem, and that he wanted to cut taxes further”. Yet his boss Malcolm Turnbull wants to raise the GST by five percentage points (effectively raising it 50 per cent). Malcolm Turnbull also wants to raise the revenue the government needed to provide services but it in a manner that “backs Australians rather than holds them back”.

One of them has no idea what they’re talking about. One of them is lying.

But of course we have an unfair tax system. That’s why Malcolm Turnbull has money invested in the Cayman Islands, where companies and individuals pay no direct tax.

If only our tax system was fair. No wonder he wants a tax reform that “backs Australians rather than holds them back“. Don’t hold back, Malcolm.

Speaking of Malcolm, and speaking of investments, it was he who was the most vocal critic of Labor’s fibre to the home NBN yet “it was revealed … that Mr Turnbull owns shares in France Telecom, which plans to connect 60 per cent of French households to fibre by 2020”. Yet he still tells us that Labor got it wrong. So he destroyed it. Fortunately the French have a good NBN.

We are told ad-nausem by the proud and boastful government that they have stopped the boats. So why has Transfield – who operate the Manus Island and Nauru detention centres – had their contract renewed for another five years? One would expect that if the boats had stopped then all of the detainees would shortly be either settled in Australia (unlikely) or sent to some miserable hell-hole elsewhere in the world. (Oh, I know, if Labor wins the next election then all the boats will start again. Good forward-thinking by the government).
And of course there’s the obvious: if the boats have stopped then why have detention centres!

Confusion reigns supreme in the Turnbull Government, and the Turnbull Government confuses me.

Skip the work and save part and go straight to invest, you’ll be better off

Today Australian Industry Group chief executive Innes Willox is giving a speech in which he will assert that broadening the base of the GST and raising the rate must play a “central role in a [tax] reform package”.

Mr Willox, whilst saying tax reform should not be about “individual self-interest”, advocates the company tax rate be cut to “no more than 25 per cent” in the next couple of years, a reduction in the overall number of taxes, a reduction in personal income taxes that “reduce the incentive to work” and broadening the land tax base to reduce duties on residential properties.

If that’s not individual self-interest I don’t know what is. Mr Willox is paid a lot of money to represent the interests of big business and any pretence otherwise is laughable.

“Tax reform cannot simply be about taking the burden off the rich and placing it on others. But neither should it be about shifting all responsibilities for paying tax to the wealthy,” he will say.

The absolute chutzpah of these people, in the face of the mountain of evidence of tax avoidance by the wealthy and by companies, is astonishing.

Whilst it is true that the top 10% of Australian earners pay about 50% of the total income tax take, they also take home an astonishing 30% of all income with about a quarter of it coming from sources other than wages, salaries and pensions.  The share taken by the top groups has been climbing since the early 80s.

As for reducing company tax, almost a third of Australia’s largest companies are paying less than 10¢ in the dollar in corporate tax as is.  It is also worth noting that the corporate tax rate in the US is 35% as compared to our 30%.

Between 2004 and 2013 some $80 billion was lost through ‘legal’ corporate tax avoidance through the use of subsidiaries in tax havens and so-called “thin capitalisation”, where local entities are saddled with huge debts to reduce tax liabilities in Australia. An overseas arm of the company borrows money at very low interest rates and then lends it to the Australian arm of the company at exorbitant rates.

Almost 60 per cent of the ASX 200 declare subsidiaries in tax havens.

Data suggests that if all ASX 200 companies paid the full 30 per cent rate of company tax, the budget would gain around $8.4 billion more revenue a year.

Turnbull’s three word slogan, “work save invest”, is poor advice. As our taxation system stands, you are far better off to skip the work part, forget saving – just borrow the money, then invest it and sit back.  Your ‘hard work’ and willingness to ‘take a risk’ will be rewarded.  And if things go bad, declare yourself bankrupt so your creditors wear the loss and start fresh with some new risk funded by other people’s savings.

 

Labor’s Scare Campaign . . .

“This morning, we’ll be talking to prominent Coalition supporter, Mr Con Server-Tiff. Good morning.”

“Now, if I can just correct you, I’m not a Coalition supporter, I’m an independent commentator.”

“Yes, but you have been supporting Coalition policies, haven’t you? I mean it would be accurate to describe you as Right wing, wouldn’t it?”

“No, that’s the sort of bigotry that you people on the ABC indulge in!”

“But this isn’t the ABC!”

“Well, it might as well be if you’re going to attack people and suggest that they’re political views are irrelevant just because you don’t agree with them.”

“I wasn’t actually attacking your political views, I was just attempting to describe them.”

“This is the sort of stuff that the Christian Right have to put up with all the time! People describing them as the Christian Right, you don’t have the left wing described like that.”

“What about references to the ‘loony left’?”

“What about them?”

“Well, isn’t that an attack on them?”

“Go on, defend your left wing mates!”

“Can we get back to the purpose of this interview – the proposed rise in the GST?”

“An excellent idea.”

“But isn’t the Liberal Party supposed to be opposed to raising taxes, I mean, don’t they always spruik themselves as the party of lower tax?”

“Well, the important thing here is to ignore Labor’s scare campaign. This won’t be increasing taxes because the overall tax take will be the same. We have Scott Morrison’s word on that and if you can’t trust the word of a Liberal minister then they might as well be Julia Gillard who promised us that there’d be no carbon tax!”

“If you’re not increasing the overall tax take, then why is it necessary to make any changes at all?”

“To make it fairer, of course!”

“And how will raising the GST make the system fairer?”

“Well, for one thing, the government will be able to do what the Business Council asked last week and use the money to reduce company tax.”

“How is that fairer?”

“Companies will be paying less tax. You don’t get much fairer than that.”

“Yes, but how does that benefit the man in the street?”

“Well, nothing can really be done to help the homeless. If people want to sleep in the street, that’s their choice.”

“I meant the average family man. How does increasing the GST help the average family man?”

“Well, it won’t be just companies that pay lower taxes, I’m sure that Mr Morrison can find an extra billion or so to cut everyone’s tax.”

“What about the unemployed?”

“They’ll have an incentive to get a job now.”

“But if they don’t get a job, won’t the increase in the GST hit them harder than anyone?”

“Yes, but if they don’t get a job its their own fault. I mean it’s easy to get a job. Even a dud like Amanda Vanstone found work writing a column for Fairfax. And Joe’s going to be ambassador to the US. You just have to look.”

“With respect, I don’t think that the average unemployed person would find it as easy as those two to get that sort of job.”

“I was just using them as examples. Obviously not everyone can become an ambassador but there are plenty of jobs about. Why just the other day I saw a help wanted in a shop window.”

“You said something before about a scare campaign, but didn’t your side of politics run a scare campaign about the carbon tax and how Whyalla would be wiped off the map and lamb roasts would be $100 each?”

“That wasn’t a scare campaign, that was just a series of possible scenarios under the GST.”

“Rather far-fetched ones I might suggest.”

“Hey, are you here to ask questions or commentate?”

“Do you concede that those were rather far-fetched?”

“Not at all. The Liberal Party had already started printing maps with no mention of Whyalla and sooner or later lamb roasts would have got to $100.”

“Yes, how is it reasonable for you to say that the carbon tax was a great big tax on everything and not to expect that Labor would try the same tactic with the GST?”

“There’s a fundamental difference there!”

“Yes, what is it?”

“Well, Labor started running a scare campaign before the last election suggesting that if we got in we’d raise the GST.”

“But you are planning to raise the GST!”

“No, we’ve simply put it on the table. We need to have a clear, level-headed discussion without the hysterical commentary from the opposition saying that when it was first introduced Howard promised that it could never go up. That was last century and as if ‘never’ refers to a new century.”

“I think you’ll find that ‘never’ means ‘not ever’, in much the same way that ‘no’ means ‘none’ when someone says ‘no cuts’ to things.”

“If you’re refering to the so-called “no cuts to pensions, health and education” comments that Tony Abbott was alleged to have made.”

“There is film of him saying it right before the election.”

“Allegedly.”

“Are you denying that there’s film of it?”

“Look we can get bogged down by what people did or didn’t say and whether the film’s clear, but I think that it’s more important to look to the future rather than argue about a leader who’s long gone.”

“It’s only been two months!”

“Allegedly.”

“Are you saying that you don’t believe that Mr Turnbull only became PM two months ago?”

“No, I’m saying that Tony Abbott was gone a long time ago. After that Prince Sir Duke thing, nobody let him make any decisions.But let’s not talk about Mr Abbott he did some excellent things while he was PM and I’m sure that history will judge him much more kindly than many other leaders.”

“What are his achievements?”

“Well … um, he stopped the boats, and … um, he introduced knights and dames and even though, that’s been thrown out, there are a number of people who wouldn’t be knights or dames if it wasn’t for him… and… ah, he got rid of the mining and carbon taxes … and he … um, he stood up to Putin and told him that we were really cross … and did I mention stopping the boats?”

“But he didn’t get the ‘budget emergency’ under control!”

“Ah, yes, he produced a chart showing us that by 2050 Labor’s debt would be twice that of Liberal’s debt!”

“That’s all we have time for. Thank you.”

“Typical! Cut me off just when I start to talk about this government’s achievements!”

 

Let’s have some truth

If we are going to have a conversation about taxation reform it would be useful if our Treasurer told the truth.

When asked about using the GST to fund tax cuts, Scott Morrison said “When you have the average wage earner in this country about to move into the second-highest tax bracket at $80,000 next year, you’ve got a problem with the incentives in your tax system.”

The most obvious reaction to this statement is wouldn’t it be easier to just change the bracket thresholds?

But beyond that, Morrison’s statement is misleading for several reasons.

Moving into the next tax bracket means you only pay the higher rate for the portion of your income over the threshold so if you if you are just above the limit it will make very little difference to the amount of tax you pay.

Moving into the second top tax bracket means you would pay an extra 4.5c for each dollar over $80,000. Because of the generous tax free threshold, the effective tax rate for this bracket ranges between 21.9 – 30.3%.  This is never taken into account when making international comparisons.

Annual income of $80,000 gives weekly earnings of $1538. According to the ABS, in August 2014, the mean weekly earnings of employees and owner managers of incorporated enterprises in all jobs was $1,189 compared to $1,156 in 2013, nowhere near the $80,000 limit and unlikely to get there any time soon.

What’s more, there is a glaring gender disparity. For males the mean weekly earnings in all jobs was $1,410 and for females it was $948.

It is not until we take the specific subset of ‘males working full-time’ that Morrison’s statement comes close to being true. Mean weekly earnings for full-time workers in all jobs was $1,448 ($1,592 for males and $1,264 for females).

But is using the average even valid?

As any high school maths student can tell you, when you have a skewed distribution, as is the case with income, the median (middle score) is a far more reliable measure of central tendency.

The median weekly earnings in all jobs in 2014 was $1,000 ($1,185 for males and $838 for females) ie 50% of employees earned less than $52,000 a year.

Part-time workers represent 32% of the workforce and understandably, their earnings are lower. Median weekly earnings for full-time workers was $1,200 compared to $467 for part-time workers.

The difference between the mean and the median demonstrates the asymmetric distribution of earnings, where a relatively small number of employees and OMIEs have comparatively very high earnings with some 400,000 earning over $3000 per week.

At August 2014, 10% of people had weekly earnings in main job below $300, while the top 10% had weekly earnings in main job over $2,143.

earnings

Income tax has become less progressive in recent times, due mainly to the succession of income tax cuts during the Howard boom years. According to The Australia Institute’s Matt Grudnoff, only 3 per cent of taxpayers are in the top tax bracket now, compared to 13 per cent 10 years ago, so any bracket creep is just redressing the profligacy of Howard’s vote buying.

Whilst progressive taxation goes some way to addressing income inequality, the rapidly rising wealth inequality in Australia is taxed very lightly.

On the latest figures available, the median net worth of Australian households – that is, their assets minus their liabilities – was $1.59 million for the top 20 per cent and $29,600 for the bottom 20 per cent in 2011-12.

The capital gain on the family home is not taxed at all, while that on other assets is taxed at half the rate of savings such as bank interest. Superannuation is taxed at a concessional rate that provides the largest benefit to higher income earners. The combination of the 50 per cent capital gains tax and negative gearing makes investment housing an attractive option for many, particularly higher income earners, while lower income earners are increasingly shut out of the market.

Unlike other developed countries, Australia has no wealth tax, inheritance tax or gift duties, although they potentially provide the most direct means of curbing rising wealth inequality

Most capital investment or entrepreneurship faces a substantially lower rate than the personal marginal rate – either through the CGT 50 per cent discount, or the company tax rate of 30 per cent or 28.5 per cent for small companies. If you sit at home and make $50,000 on trading shares you will be substantially better off than someone who works hard all year to earn the same amount.

The Coalition like to point to New Zealand whose top marginal rate is only 33% (ours is currently 45%+2% medicare levy+2% temporary surcharge) but what they fail to point out is that there is no tax free threshold in NZ – you pay tax on every dollar earned – and the top rate kicks in at $70,000 instead of $180,000.

NZ has a 15% GST, another fact Morrison like to point to, but they have no general capital gains tax (although it can apply to some specific investments), no local or state taxes apart from property rates levied by local councils and authorities, no payroll tax, and a 1.45% levy for New Zealand’s accident compensation injury insurance scheme. They have chosen a higher GST rate to fund government services.

Modelling from the Parliamentary Budget Office has shown that increasing the GST to 12.5% or broadening its base would raise the same amount as a carbon price of $28/tonne but cost households about three times as much hence requiring much greater compensation for low income households.

The solutions seem so obvious but conservative ideology will blind this government to what must be done and once again, those least able to afford it will bear the brunt of the Liberals ‘lower taxes’ mantra.

 

Tax And The Bleeding Obvious!

Ok, most of the focus on discussions about the GST has been about how it’s a regressive tax and how it affects the poor more than the rich.

But there’s one other thing in this debate that hasn’t been prominent in discussions or commentary. If the GST is widened to include items currently exempt, how will that affect Health spending?

Given that a large chunk of health spending is paid for by the various governments, will they just be charging themselves more, or will the rebates stay the same and it’ll be up to the patient to make up the difference. In other words, will it be a “price signal” by stealth?

Even if the government does the right thing and increases its share by the increase in the GST, this will obviously lead to a blowout in Health costs which, of course, will have politicians arguing that it’s just not sustainable. (Interesting that the blowout in the costs of offshore detention never leads to screeches of how this spending isn’t sustainable. On a state level, one never hears that the massive increase in the cost of running prisons doesn’t mean that the “tough on crime” policy isn’t sustainable!)

Either way, it fits in well with the Liberals’ plan to destroy Medicare. Why they want to do this is a mystery to me, but it’s always been their policy either explicitly or part of their hidden agenda since Gough first introduced it.

Of course, the likely scenario is that widening the GST base will be discussed, but dismissed on the grounds that it would make it unfair on those struggling with their grocery bills, health costs or school fees. And when, Malcolm magnanimously rejects broadening the base, then a mere extra five percent will seem the reasonable alternative – in much the same way that removing Abbott led to the big poll bounce. “Gee, Malcolm answered that question by talking on something vaguely related to the actual subject and he didn’t way anything about stopping the boats. He’s so much better!”

Of course, the Liberals do some very strange things. I’ve never been able to fathom why they stop any increases in the superannuation guarantee every time they get into government. Howard froze it when he got in, and Abbott did the same. Given their rhetoric about people needing to plan for their retirement and the government not supporting them, one would have thought that increasing everyone’s super would be something they’d be right behind.

When it comes to superannuation, I’ve always wondered why it’s subject to a flat tax of fifteen percent. I’ve always thought that it would be better if there was a threshold before it was taxed. For example, imagine the first five thousand dollars was exempt from tax and the rest was taxed at twenty percent. This would be a big boost to the lower income earners and people would need to be on an income of more than $100,000 before they were paying more. The tax on super earnings could also work on a similar arrangement.

But I don’t expect we’ll hear much about changing the taxes on superannuation. It’s about as likely as the government using the phrase “a great big tax on everything” when refering to the GST.

 

Morrison’s Approaching Waterloo

It may be early days but Joe Hockey’s second and final attempt to bring down a credible budget appears to be unravelling already. Even on the night of his budget speech in May it was clear that his growth projections were far too optimistic.

It makes one wonder if the whole budget process was one started first by establishing a bottom line and then working backwards, fudging the figures necessary to substantiate it.

Is that how they eventually arrived at a growth estimate of 2.75%? Perhaps it was a case that if it sounded unattainable, to hell with it, that’s what it was going to be.

And then they made it 3.50% all the way out to 2019/20?

rbaThe Reserve Bank announced on Friday it was downgrading its growth estimate to 2.25% for the current fiscal year. Surprise, surprise! If correct, that has the potential to blow out the deficit by a further $11 billion.

Not that we should be concerned about deficits. It’s the ability to manage them that should have us concerned; particularly when our current treasurer thinks we only have a spending problem.

The fact is, deficit spending is what we need right now, but it has to be targeted. It has to be value adding, creating employment and making a positive contribution to our GDP.

The current deficit projections cannot be attributed to anything positive because they are essentially caused by over-optimistic estimates, not excessive spending. While revenue for the first three months of the May budget is on track, giving Scott Morrison some breathing space, it is based on reduced earnings that are likely to continue declining.

Peter Martin in ‘The Age’ says, “The charts in the budget that predict a return to surplus by 2019-20 were built around an assumption of fast economic growth of 3.5 per cent in the five years to 2021-22.

That growth estimate is simply unreasonable and based more on hope than insight. That means revenue projections over that same period cannot be achieved without significant tax increases. Realistically, a surplus is not on the horizon any time soon.

How long Morrison will continue to kid himself about his perceived revenue/spending problem remains to be seen but sooner or later he will have to face the reality of a slower China and a population not growing as fast as expected.

gstHe has also stated that any increase in the GST would not be used to boost the overall tax intake. How could it not, unless it is all given away in compensation. If that’s the case, why bother increasing it?

Thus far, Morrison has given no indication that he understands how to manage a national economy any better than Joe Hockey. I have no doubt Malcolm Turnbull has a better idea but he is hamstrung by a neo-classical mindset that suffocates his extreme right wing colleagues.

This situation, therefore, foreshadows a difficult time for both men. Sooner or later, unless some Chinese miracle occurs, there’s going to be a clash of ideologies, a seismic shift that will see one of them emerge triumphant, while the other goes the way of Joe Hockey.

If it’s Morrison that survives, the economy and by extension, the Australian people, will be the big losers. However, the spin merchants within the Liberal Party will camouflage it such that it is not likely to be apparent until after the next election.

tppWithout a radical change in strategies along the lines that Italy and Canada are starting to entertain, we will continue in decline for some time yet.

And we should not expect Andrew Robb’s Trans Pacific Partnership (TTP) to come to the rescue either. The news from Hilary Clinton is not good. It is unlikely that, in its present form, it will achieve the 85% GDP target of member nations it needs, for approval.

I suspect Scott Morrison is about to meet his Waterloo.

 

The Great Hoax, Climate Change or the GST?

Personally, I think that maths is overvalued in schools. Now I’m not talking numeracy, I’m talking trigonometry, surds, quadratic equations and a whole range of things that most people won’t use past school. Fine for those who are going on to particular fields but a large number of students would be better off if they’d never had to struggle through them.

Of course, if you disagree with me, it’s not because you have a different perspective. It’s not because you think that maybe it’s a good idea to expose all people to maths because it’s good for them to be challenged. No, it’s because you’re gullible and a victim of the gigantic hoax that the maths teachers have invented. For a start, numbers aren’t even real. As for Pythagoras, not only did  he believe that beans were souls migrating from one life to the next, he and his followers believed that numbers had magical powers. So, if you want to disagree with me, don’t cite a maths teacher or anyone who believes in maths teaching, don’t trust academics, they’re all part of the conspiracy. The best people to trust are your friends and family.

Yep, I sound ridiculous. While there is an argument to be had about how maths should be taught and whether it needs to be compulsory past a certain level, the idea that it’s a “hoax” and that you can rely on information from your friends and family makes me sound well, at least a little unbalanced.

Yet, this seems to be what the CSIRO’s survey on climate change revealed. People who didn’t believe in climate change found their friends and family their most trusted source. While I can support a degree of sceptism about what experts tell us, it strikes me that there are certain areas where the average person won’t have the necessary skills to be able to make an informed decision. Nobody says that they took their X-ray home and after everyone they know had a look at it, they decided that the doctor’s interpretation was wrong. In the case of climate change, many are arguing that they don’t even need to see the X-ray.

OK, there are “experts” on both sides of the climate change debate and it’s interesting to see how the media presents them. It was fine when Cardinal Pell gave his opinion, but Pope Francis should stick to religion. Anyone with a science degree or a couple of years at university hanging around the cafe is presented as an expert on climate change without much sceptism by the media and there’s no attempt to evaluate their credentials. . We have the absurd scenario where we’re asked to believe that a group of scientists decided that they’d find it easier to get funding to investigate something invented, and that rather than make actuall discoveries, they’d rather just take this funding and spend their time making stuff up. However, thanks to some intrepid physicists and geologists – often funded by fossil fuel companies – this hoax is being exposed.

Now, I’m not saying that the prevailing wisdom on climate change couldn’t be wrong. I’m simply saying that when one suggests that scientists have dishonest motives, one should be prepared to have one’s own motives scrutinised. Why climate scientists are supposedly part of a “hoax” and not just simply wrong is what gets me. For years, the cause of ulcers was misunderstood, but we don’t suggest that was because of some conspiracy to stop people stressing or eating spicy foods.

But speaking of hoaxes, how do you like this GST?

Remember when it came in?

No, I’m not talking about how “never ever” simply meant not until after the next election – although I suppose if that’s the case, then the assurances by Howard and Costello that it could never go up because, well, all the states had to agree and could you ever see a time when all the governments would agree to receiving more revenue, lasted a lot longer than we could have expected. That was “never” and not “never ever”, so I’m surprised that it’s taken so long before someone put it on the table.

Mm, I guess it’s easy to see why people don’t trust the “experts” and would rather listen to Uncle Frank and the guy next door.

Now, ignoring the politics, I can see an argument for putting up the GST. While the converntional argument is that it’s regressive and hurts the poor more than the rich, this needn’t be the case.

In the first instance, the poor have a limited amount to spend and so any increase in the GST won’t hit them in total terms as much as someone who spends more. If someone only spends twenty five thousand in a year, then a five percent increase can’t cost them more than $1250, whereas someone spending $100,000 could be hit for $5000. If the current exemptions on fresh food, education and health are included then it’s even less than the $1250. If you raise pensions and allowances by enough, as well as increasing the tax free threshold, you can compensate those who the five percent increase will affect.

Secondly, while income tax can be minimised by various accounting tricks to minimise one’s income, the GST is more difficult to avoid. I may have used the Cayman Islands to avoid the tax on my business, but when I buy my Jaguar, I’ll be hit for an extra five percent.

And finally, the extra revenue should enable the states to continue to provide services from which should benefit those who don’t have private health insurance or go to Xavier where they learn to be grateful that they don’t go to some “povo” school in Pakenham. (Hey, I know it was just one individual and private schools don’t really encourage that sort of class warfare thing. They just constantly tell you what a great education you’re getting and how their school is the best in the world. Why a student would think that government schools are “povo” is a mystery to them …).

So, I can see that a rise in the GST could be a good thing all round  – even if it is the Liberal Party proposing it.

But then, I’m also gullible enough to fall for the climate change hoax.

 

Day to Day with John Lord: the GST

Wednesday 4 November

1 Debate on an increase or expansion to the GST continues.

An observation:

The GST burdens those with the least capacity to pay. It discriminates against the poor and the pensioners who are living a hand-to-mouth existence and spending the bulk of their income on the necessities of life—food, clothing, rent, heating, power etc”.

They talk about compensation for pensioners if an increase to the GST goes ahead. For example, when they recently changed the method of calculating periodic rises resulting in the average pensioner losing $3000 dollars over the next few years. Seriously, pensioners would be just catching up, not compensated. You don’t have to have a university degree to see that pensioners will be hurt with a GST rise.

2 It was only a matter of time before the permanent and in-disposable Deputy Liberal leader Julie Bishop effectively endorsed same-sex marriage. She falls in behind every leader.

Or as one Facebook user said.

The brazen bare-faced hypocrisy of this self-aggrandizing old piece of mutton dressed up as lamb is just breath taking … does she seriously think we really don’t notice her blatant bullshit?

… really???

vote3 Fairfax is reporting that Tony Abbott was intending a double dissolution election early in 2016 before he was replaced. It’s probably correct because another budget might have seen any hope he had of winning completely hit for six.

4 But if the PM announces an election date he will have to produce a budget in May shaped around an election in September/October next year. A difficult task given the state of the economy. There won’t be room for any good news. However there is still the issue of the present to attend to. Those on the extremities of his party, the nutter fringes, still have their eyes wide open looking for signs of the Malcolm who wanted to do something about climate change.

Republican Malcolm with the wider world view. The one who doesn’t fit the narrow minded Liberal/National heartland of the Joyce’s, Bernardy’s and the Abbott Christian fundamentalists. Since taking over as leader he has been more talk than action, mostly atmospherics, but one has to concede that he has made progress including dumping the hardline university deregulation package (although Labor says it is only parked); scrapping the lid-doffing folly of knights and dames; proposing federal money for mass urban transit rather than for roads exclusively; inviting a genuine tax debate, including an increase to the GST in exchange for other employment-creating cuts; supporting a debate about an expanded ground-to-ground nuclear industry; preparing a more extensive and centrally influential innovation statement; and generally fostering an atmosphere of sensible argument. His approach so far has been to try to please everyone, put everything on the table.

The problem with that is that you can leave a lot to clean up afterwards. That’s when the rubber gloves hit the hot water and there’s a fight about who wants to dry. Or the dish washer can’t cope with an over full load. So far he has eliminated from the menu the university reforms, and compromised on proposed welfare cuts and of course the knights and dames were always disposable napkins. There’s a lot to serve up to an electorate starved of good policy from Government that has made a meal of governance for over two years.

 MY THOUGHT FOR THE DAY:

 “What is the difference between the purpose of life and the reason for it?”

 Read some views here.

 

Why would anybody want to re-elect this government?

Voters must have an intense dislike of asylum seekers.

The latest Morgan Poll is great for the government, which sees them leading the opposition 56.5/43.5.

Taking away personalities (ie, disregarding that many people obviously like Malcolm Turnbull), it really is hard to see what the government has going for them.

If re-elected, they will make life harder or more miserable for near on all of the population. “Yes we can” says the poster. And yes they will. For example, if re-elected they:

  • will be doing nothing to address climate change
  • will possibly increase the GST, costing each family about $4,000 a year
  • will continue to ignore science of any description
  • will be doing nothing about housing affordability
  • will be doing nothing about the high unemployment levels
  • will be providing us with internet speeds that are the worst in the world
  • will continue to tighten the screws for people on welfare or income support
  • will still be giving billions to the mining companies
  • they will do nothing about the huge gap in wealth inequality (quite the opposite, they will continue to pander to the rich)
  • will do nothing to help the disadvantaged in our society (they will probably cut funding even further)
  • will continue to beat around the bush as far as same-sex marriage goes
  • have intentions of changing the media ownership laws which will give Murdoch even more control of our media (and they’ll probably cut funding to the ABC even further)
  • will continue to demonise innocent people (Gillian Triggs is a good example)
  • will make it more costly to see a doctor or a specialist
  • if economists are correct, the government will lead us into a recession
  • will keep ripping coal out of our beautiful country – coal that nobody wants
  • will make tertiary education unaffordable
  • will strip away our citizenship if (as a dual citizen) we do as much as destroy a government owned coffee table
  • will spy on our every movement
  • will jail anybody who dares report on atrocities committed by the government
  • . . . and on and on the list goes

But . . . they will keep telling us that they’ve stopped the boats and we’re safe from all those murderous would-be terrorists that did sneak through because they’re all locked up now on Nauru or Manus Island and with any luck they will either rot to death or be sent to a country with an unpronounceable name where they can perish without our knowledge.

And no matter how much misery this Coalition government casts over our own lives we will vote for them because of their asylum seekers policies.

And it’s got me beat.

 

Poor people have it. Rich people need it. If you eat it you die. What is it?

As the snake oil salesman and his happy clapper gear up to sell us on their compensation for a higher GST, it is worth remembering how much we have already given up in the last couple of years.

When Joe Hockey decided to forego $6.5 billion revenue from the mining tax, workers paid a heavy price through his decision to freeze the superannuation guarantee at 9.5% until 2021. Labor had scheduled incremental increases reaching 12% by 2019.  This will now happen 6 years later.

The cost of this for someone on $50,000 a year is $7,500 less deposited into their superannuation over the next decade which would compound over a lifetime of work to a significant amount.

The income support bonus and schoolkids bonus will both cease at the end of next year and the low income superannuation co-contribution the year after that.

The low income superannuation contribution gives up to $500 a year to help those earning $37,000 or less save for their retirement.

The schoolkids bonus is a $430 boost to family tax payments for primary school students, and $856 for families with children at high school.

The income support bonus is a payment of $221.20 if you are single, $184.20 if you are partnered, to people who are on benefits.

The Mature Age Worker, Dependent Spouse, and Net Medical Expenses tax offsets have all been phased out.

The proposed increase of the tax free threshold to $19,400 has been canned, costing us an extra $228 in taxation, and the income thresholds used to calculate Medicare levy surcharge and Private health insurance rebate will not be adjusted for three years.

From 1 July 2015, the primary earner income limit for Family Tax Benefit Part B is $100,000 instead of $150,000.

New mothers who receive parental leave benefits from their employers will no longer be able to also collect the government scheme from July 2016

Unemployed under 25-year-olds have to wait four weeks to get the dole.

Add to this the cuts to health and education, fuel levy indexation, proposed changes to university fees, working till we are 70, stagnant wages, and the loss of FttP NBN, and we are a long way behind where we were a couple of years ago.

Getting rid of the carbon tax was supposed to ease our cost of living but all it has done is rob us of about $7 billion a year in revenue.

And now we look like having an extra 5% added to every bill we pay (with the possible exception of fresh food), and 15% added to health and education costs. It kinda makes the GP co-payment look good.

Oh but low income earners are to be compensated.

I wonder how close that compensation will go to making up for all that has been taken from us in the last two years let alone the estimated $2500 (or $4000 according to Curtin University) an increased GST will cost the average family every year.

It’s all very well to suggest that businesses need tax breaks but if their customers have no money to spend, what’s the point?

Instead of trying to squeeze blood from a stone, how about tapping into the rivers of gold flowing to offshore tax havens.

Poor people have it. Rich people need it.  If you eat it you die.  What is it?

Nothing.

 

Day to Day with John Lord 2/11

Monday November 2

1 Curtin University has estimated that an increase to the GST will cost the average family $4000 dollars a year. My view is that the Coalition will take a host of revised taxation policies to the next election. Everything Turnbull utters is done so in a manner framed in “everything is up for consideration.” That’s fine but it does illustrate just how little policy reform will have been done in the Coalitions first term. A wasted three years.

2 Bill Shorten should insist that the investigation into Labor Party branch stacking is honest and truly independent. The latest scandal has again humiliated the party and exposed it to public ignominy and disrepute.

race

Party stalwart Race Matthews lays into the establishment in this article:

“There may never be a better opportunity to clean up once and for all the morass that has been exposed. The party must not let this opportunity be lost”.

3 Two years ago I conducted a focus group with some final year school students. The purpose was to ascertain just what they knew of our political system. Overwhelmingly I found that they knew little of Political Ideology but were very well informed about the issues. Whilst I support lowering the voting age to 16 it would have to go hand in hand with a curriculum that enhanced their knowledge of our democracy and how it works.

4 A reminder not to miss the four part series beginning November 8 on the dismissal of Gough Whitlam.

5 At first the announcement that Australia wants to co-chair the Paris Climate talks might bring forth ridicule, even cynical laughter but here is another way of looking at it. The fact that Australia is putting in a bid to co-chair is itself a strong sign of positive engagement and as a co-chair, any country has a strong obligation to support the process in a positive manner. That is what other countries will be expecting.

6 If you haven’t read it already, I recommend Kaye Lee’s piece; Malcolm and Scott’s great big new tax on everything.

MY THOUGHT FOR THE DAY

“Question everything. What you see, what you feel, what you hear and what you are told until you understand the truth of it. Faith is the residue of things not understood and can never be a substitute for fact”.

 

Malcolm and Scott’s great big new tax on everything

According to the Liberal Party newsletter, aka the Telegraph, the party who never raises taxes, the party who screamed blue murder about the carbon and mining taxes, the party who supposedly saved us $550 a year by ‘axing the tax’, is set to cost us thousands by raising the GST to 15%.

Today’s article seems to be a fishing expedition to see how much they can get away with. The preferred option is an increase to 15% with fresh food remaining exempt. The National Centre for Social and Economic Modelling estimates the average household would face extra costs of $2915 a year under a 15% GST.

So much for Greg Hunt’s hand wringing over the price of electricity – it’s about to go up by 5% along with everything else but it won’t be the polluters picking up the tab.

To hide the pain, Scott Morrison is talking about income tax cuts.

“When you have the average wage earner in this country about to move into the second-highest tax bracket at $80,000 next year, you’ve got a problem with the incentives in your tax system,” he said.

One wonders why Scott hasn’t considered changing the threshold or would that be too easy.

Thankfully the miners and big banks will continue on their merry way with their superprofits intact while pensioners and single parents pick up the slack on budget repair.

Looks like the joke’s on us.

 

Vote for Tony

By opposing same sex marriage, Tony Abbott has reinforced the notion that homosexuality is “queer” – that members of the LGBTI community are a threat to our society.

By indefinitely incarcerating asylum seekers in offshore detention camps he has reinforced the idea that refugees are not victims but criminals who pose another threat to our society.

By labelling us as lifters or leaners he has reinforced the perception that those on welfare are bludgers, scamming the system because they are too lazy to get a well-paying job.

By calling women who receive maternity leave from their employer “double-dippers” who are committing fraud, he has failed to appreciate the disadvantage women face in the workplace and denied them their workplace entitlements.

By saying he wants Sydney house prices to go up – if people are buying them they must be affordable – he shows an unbelievable ignorance of the housing affordability crisis.

By his perpetual dog-whistling about imminent terror threats from an apocalyptic death cult, as well as brief flirtations with banning cultural dress, he has alienated the Muslim community and made them the target of suspicion and abuse.

By ignoring all scientific evidence about climate change and the dangers of burning more coal, he has destroyed the renewable energy industry and damaged the global effort to avoid catastrophic weather events.

By proposing the deregulation of university fees, despite receiving the benefits of a free education and several of his ministers campaigning against fees when student politicians, he is potentially saddling our children with a huge debt before they even begin their working lives thus precluding large numbers from even considering a tertiary education.

By dismantling FttP NBN, he has made Australia an information backwater, ranked 44th and falling for internet speed. While the rest of the world moves to fibre, we are paying a fortune for Telstra’s copper network.

By stripping people of their citizenship, he is breaking up Australian families and leaving people homeless.

By demonising unions he has robbed workers of their collective voice in preparation for the resurrection of workchoices and the demise of penalty rates.

By slashing over $500 million from Indigenous funding, combined with intemperate comments about uninhabited Australia and lifestyle choices, he has shown a blatant disregard for our First People, their culture, the crisis of Aboriginal incarceration, and our failure in closing the gap.

By defunding NGOs, charities and community groups, he has caused the closure of refuges, crime prevention and mentoring programs, and domestic violence support groups.

By introducing metadata retention and criminal charges for disclosure, he has sanctioned spying on all citizens and overridden the public’s right to know what is done in our name.

By refusing to release government advice and modelling, he is robbing us of the chance to make informed decisions.

By slashing funding to the States he is making it basically inevitable that the GST will go up, greatly increasing the cost of living.

By freezing the indexation on Medicare payments, he will force doctors to make up the lost revenue – a co-payment by stealth. He has also almost entirely dismantled Australia’s national preventive health system.

By slashing funding to the CSIRO and other research bodies, he has caused many promising programs to be abandoned and we are losing our brightest researchers to other more enlightened countries who understand the value of their work.

By being unwilling to undertake economic reform, he has overseen a deterioration in all economic parameters with no upturn in sight.

By insisting on captain’s picks, usually advising his colleagues via the Murdoch press, he has alienated his Cabinet, his party room, the Parliament and the people.

By abrogating our global responsibilities towards asylum seekers and credible action on climate change, combined with gaffes too numerous to mention, he has trashed our international reputation.

But hey, he gave up billions in revenue from the carbon and mining taxes and stopped talking about the boats. And IS haven’t invaded us yet. Surely that’s enough reason to want him as our leader?

First speaker in the mature debate

imageDear Mr Abbott,

I welcome your call for a mature debate on taxation. I too deplored the “screaming match” that surrounded the introduction of carbon pricing and am pleased you realise how counterproductive that sort of approach is to constructive governance.

As a concerned citizen I would like to make a few suggestions to get the ball rolling.

Your opening gambit is to increase the GST. This is a regressive tax which will, once again, disproportionately hit lower income earners.  Treasury modelling done for the previous government showed that even a modest increase in the rate to 12.5 per cent – along with removal of exempted items such as food, health, childcare, and school fees – could hit a two income two-child family by as much as $205 per fortnight.

Perhaps there is a better way.  For example:

Fossil fuel subsidies.

The Australian Government is set to spend over $40 billion in the form of tax rebates and concessions, foregone revenue and expedited write downs of assets per year from 2013/14 to 2016/17. This assessment only includes tax measures, and does not include direct grants or State Government measures, which could add billions more to the annual totals.

The proposed replacement climate policy, the Emissions Reduction Fund, relies on paying companies as an incentive to reduce their emissions. A fundamental contradiction exists between such a policy and the continuation of a range of existing fossil fuel subsidies. Many subsidies significantly reduce the economic signal for companies to identify efficiency opportunities.

Polluter handouts are also highly inequitable. For instance, the mining industry receives a 32c per litre discount on fuels such as petrol and diesel for off‐road use. So while most Australians are paying full price for their fuel at the bowser, their taxes also cover the cost of a huge discount to the mining industry. In all, this handout costs Australian taxpayers $2 billion each year.

Australia, along with all other G20 nations, committed in 2009 to phase out inefficient fossil fuel subsidies over the medium term. In his recent State of the Union address, US President Barack Obama reiterated the need to phase out tax‐based fossil fuel subsidies. Other organisations like the International Monetary Fund, the World Bank, the United Nations and the International Energy Agency are also calling for nations to end fossil fuel subsidies.

In 2009, the Commonwealth Treasury identified $8 billion in annual savings that could be made if Australia fulfilled this commitment. This money could be used to fund a wide range of nation‐building projects, yet to date we continue to use these funds to line the pockets of polluting, and in many cases highly profitable, industries.

Prime Minister Abbott has said that there is to be an end to corporate welfare. Statements by Treasurer Joe Hockey have warned that “the age of entitlement is over,” and that “everyone in Australia must do the heavy lifting now.” It is critical that this rhetoric, if applied, is applied consistently.

Superannuation tax concessions

A study by the Australia Institute found the rate of growth of super tax concessions is greater than that of the pension despite the ageing population, meaning the cost of the tax concession will soon overtake the pension to become ”the single largest area of government expenditure,” by 2016-17.

”’The age pension currently costs $39 billion and superannuation tax concessions will cost the budget around $35 billion in 2013-14,” the study found.

It notes that the Commonwealth bill for these concessions is projected to rise at a staggering 12 per cent annually to be $50.7 billion in 2016-17.

”The overwhelming majority of this assistance flows to high-income earners,” the report finds.

”Low-income earners receive virtually no benefit. The combined cost of these two policies will be $74 billion in 2014 alone.”

Negative gearing

The Grattan Institute’s report, Balancing budgets: tough choices we need, included a section on abolishing negative gearing, which it claims would save the Budget around $4 billion per year initially, falling to a saving of around $2 billion per year over the longer term.

Grattan highlights a number of non-budget (social) benefits from reforming negative gearing, namely:

1.increasing home ownership rates by reducing returns at the margin for landlords relative to first homebuyers; and

2.increasing investment in other more productive assets.

The report also debunks claims that reforming negative gearing would raise rents, since “for every landlord that sells, there would be a renter that buys and becomes a home-owner. The supply of rental properties would fall at the same rate as the number of renters”. It also does not believe that the construction of dwellings would be materially affected, since “almost all of investment property loans are now for existing dwellings”.

Tax avoidance

A report by the Tax Justice Network – an international group focused on investigating tax avoidance – and the United Voice union says almost a third of companies listed on the ASX 200 pay 10 per cent or less in corporate tax.

This is substantially less than the statutory 30 per cent corporate tax rate.

Some companies, such as James Hardie and Westfield Retail Trust, pay zero tax.

Rupert Murdoch’s 21st Century Fox pays 1 per cent tax and casino group Echo Entertainment pays 5 per cent tax.

The report says the government is losing out on at least $8.4 billion in tax each year, which is substantial but may be the tip of the iceberg.

According to the research, 57 per cent of all ASX 200 companies have subsidiaries in tax havens.

Several big-name companies, such as 21st Century Fox, Westfield, Toll Holdings and Telstra, have more than 40 entities in well-known tax havens such as the Cayman Islands, Luxembourg, the British Virgin Islands and Bermuda.

Fourteen in the 20 top companies, including two of the country’s big banks, also hold entities in these locations, according to the report.

“Secrecy jurisdictions play a key role in multinational tax dodging and undermine the ability of democratically elected governments to levy taxes in a just and fair way,” the report’s authors say. “Corporate tax avoidance must be addressed.”

Financial transaction tax

Introduce a Financial Transactions Tax on various categories of financial transactions including: stocks, bonds and currency. If implemented on a global basis, its projected revenue could be as much as US$400 billion a year, depending on the size of the levy imposed, the size of the reduction in trading (if any), and the number of implementing countries/jurisdictions. In the US alone it has been estimated that annually, between US$177 and $353 billion could be raised.

A flat rate of 0.05% has been proposed on all financial market transactions, many experts actually advise vary rates (of between 0.01 and 0.5%) depending on the transaction (stocks, bonds, currency, commodities, swaps, derivatives, etc). The UK stock exchange, one of the largest in the world, already has a 0.5% tax on share transactions.

(1) An FTT will reduce the instability in the global financial system by reducing the volume of trading in financial markets, especially the sort of trading that increases market instability and has led to the turbulence in the financial markets over the last decade.

(2) An FTT will provide an effective way of raising revenues for both domestic purposes, such as assisting governments help pay for the costs of post-financial crisis bailouts, as well as for spending for international public goods, such as the funds needed for climate change adaptation, and to assist countries in meeting the Millennium Development Goals.

The tax is specifically designed to target high frequency traders, especially of securities, where the average holding period is often minutes or seconds. High-frequency traders currently account for 70% of US equity market trading and 30-40% of the volume of trading on the London Stock Exchange.

The tax will only affect financial institutions and funds to the extent that they are involved in this type of high-frequency trading.

Australia is a leading player in global finance in its own right: the Australian Securities Exchange (ASX) is the ninth largest stock exchange in the world. Australian support of the FTT would be a significant boost to the cause of the global campaign. Moreover, Australia is a G20 country and plays a significant role in the group whose endorsement would effectively make the FTT a reality.

 

You could always keep the mining tax and close the rorting of FBT car leases and…dare I say, bring back the carbon tax…if you are mature enough to admit when you are wrong.

So let’s have some mature debate on these issues Mr Abbott before we jump to charging pensioners more for their bread and single parents more for childcare and sick people more for their medicine.

Over to you……

A plea to the Pups: Do not repeal the Clean Energy Act

Original image by The Telegraph.uk

Original image by The Telegraph.uk

After reading a few similar posts I thought I’d jump on the bandwagon and try something in the open-letter style, in the vain hope that it might make its way to its intended recipients via the magic of the interwebs. Since I don’t have time to provide statistical analysis what follows is very much a matter of opinion. You can either take my conclusions on trust, or do your own research.

Dear Senators Lambie, Lazarus, and Wang,

Congratulations to you all on your appointments.

I write to express my concern about the repeal of the Clean Energy Act which is currently before the Senate. I cannot emphasize enough the significance of this legislation, and the importance of the task before you. As an Australian who plans on living at least until 70, I feel I have a vested interest in this debate, and so I would like to be sure that you are fully apprised of the facts and consequences before you vote to repeal carbon pricing.

Abolishing the carbon tax will not save families $550 a year. In the last 10 years we have seen energy prices double, but only about 3-4% of this increase is due to the carbon tax. The rest is due to over-investment in poles and wires subsidised by taxpayers and paid for by consumers. Demand for electricity has actually fallen by about 13% over the last 5 years. This may be in part due to an increase in rooftop solar PV, in part due to rising prices. My point is that carbon pricing has not been the driving force behind high energy prices. Overall the impact of carbon pricing has contributed an estimated 0.7% increase to cost of living. Compared to a 2.5% hike for the GST, this is negligible.

No doubt you have become accustomed to our Prime Minister’s underhanded tactics, allowing interest groups to dictate policy and appointing climate sceptics to key advisory positions. As much as Abbott would deny it, the time for arguing the point is over. The science has been around since the 1970s. If CO2 levels rise to 450 particles per million then the planet can be expected to warm by two degrees, posing significant risk to life on earth. CO2 levels are already at 400 ppm and the frequency and severity of extreme weather events such as typhoons, floods, droughts and bush fires has increased more rapidly in the last five years than at any time in recorded history. Only those with their heads in the sand have not seen this coming.

It would be foolish to think that our shared desire for the survival of the species would somehow be enough to shake the global economy from its dependence on fossil fuels. On the other hand, a sudden rise in input cost might do just the trick. With crude oil now soaring above $100 a barrel and the Middle East in the grip of war, it looks like we may be seeing the end of an era. As long as demand for energy remains high and shale gas cheap the US may ride out the prospect of a double dip recession for a decade or so, but new sources of energy are desperately needed to drive a new economy. You need only look toward Beijing and Washington to see the reality of this. The fossil fuel industry’s days are numbered, and in what has already been dubbed the Third Industrial Revolution, most significant new investment is in renewables.

What does this mean for Australia? We can only continue to burn coal for as long as it is cost effective to produce it. Once global accords on climate change are reached, coal will face resistance in the market and we will start to see diminishing returns. The future is already looking bleak for the industry, and any amount of foresight would have us steer clear of stranded assets, not to mention the opportunity cost of not investing in renewables sooner.

In spite of Abbott’s best attempts to thwart it, Australia already has a mechanism in place to reduce emissions and provide significant investment capital for renewables. With attendant compensations to taxpayers such as raising the tax free threshold, family tax benefits and other measures, many poorer Australians, including pensioners, are actually better off under the current scheme. In spite of what Abbott would have us believe, the Clean Energy Act is not a toxic tax. Rather it is a well crafted package of reforms which has already lowered emissions by 7% and provides a means to steer our economy out of the cul-de-sac of the resource boom and onto the autobahn of technology and innovation. Who can tell how many new jobs will be created along the way?

With all respect to environmentalists, the legislation currently in place was not designed by a bunch of climate scientists who all got together and decided that preserving things like clean air and water for future generations was a really cool idea, but by shrewd economists who foresaw the need to future proof our economy against global trends. Dismantling this legislation without thinking through the consequences would amount to an act of economic vandalism, or deliberate sabotage, take your pick.

While preserving the planet for future generations is undoubtedly a noble cause, there is a far more cynical truth to consider. Our economic future very much depends on making the transition to clean energy as quickly and smoothly as possible. So while I admire the spirit of the amendments proposed by the Palmer United Party, I would suggest that in the best interest of all Australians the Clean Energy Act should be preserved in its current form. I urge you all to consider this carefully before casting your votes.

Kind Regards

Sean Stinson

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