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The Coalition’s tax plan is bollocks

The media seems to have decided that Labor must agree to the Coalition’s tax plans.

Bollocks.

If they want to stimulate the economy, it would be much better to increase the tax-free threshold than fiddling around with low and middle income tax offsets.

If they increased it to $25,000, that would give everyone who earns more than that an extra $1,292 a year. No envy in sight. They all get the same.

It would also save all those people who earn between $18,200 and $25,000 from having to submit a tax return and it would save the tax department from having to process them.

Combine that with an increase to Newstart and pensions and it might make an actual difference. Promised tax cuts in five years time are just silly.

We hear a lot about bracket creep. Whilst it does make a difference to the budget bottom line, it actually makes very little difference to individual “aspirationals”.

For example, if you were on the threshold of $90,000 pa and got a 2% pay rise ($1,800), had you not crossed into the next bracket, you would take home an additional $23.37 a week. As the thresholds stand now, you would take home an extra $21.81 a week. The difference is hardly a game-changer.

And if you are so worried about bracket creep, why not adjust the thresholds every few years to reflect wage growth?

The cost of the third tranche of tax cuts is about $95 billion of which an estimated $33 billion would go to people currently earning over $180,000.

The opportunity cost of handing out about $11,000 to everyone earning over $180,000 is huge. High income earners will most likely put that money towards more shares or investment properties or private school fees. If that money went to increasing Newstart and pensions and the tax-free threshold, it would be spent on goods and services.

Labor is taking their time to think about things. Why do they have to either agree with the Coalition’s plan or be wedged? Why not come back with a better plan?

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20 comments

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  1. Yvonne Robertson

    As with everything else Liberal, what you’re looking at is bound not to be the main game. Apart from the convenient wedge to keep up appearances of ‘robust debate’ and “Labor, Labor, Labor” to the poor stupid masses, the media will comply and like soma, we’ll all fall asleep. Meanwhile behind the scenes the main game will continue. Angus and Josh will attempt to weaken some other environmental laws keeping them from decimating large tracks of wilderness or of environmental verges necessary to the survival of some species or another. This will allow them to continue to line their pockets while providing less money in terms of hand out for social services while claiming it’s the biggest ever budget expenditure in history, like they’ve been doing over Health and Education these last 6 years. People’s memories are short. Soon they will forget there was ever such a thing as Legal Aid or Medicare rebates, worth more than a few shekels.

  2. Carol Taylor

    There is also the point, and I am quoting the esteemed Paul Barrett, that it is unconscionable to commit any future government to Stage 3 of the tax cuts when the LNP may not (hopefully) be in government. Bracket creep is a furphy; wages have been flat for years. Stage 1 is the lure as it goes predominantly to low and middle income earners. It’s Stage 3 that Morrison really wants as it’s when someone earning $180,000 will be receiving EIGHT times MORE than someone on $60,000. Basically, Morrison is holding poorer people to ransom in order to get his Stage 3 through. If it were otherwise, then he’d agree to split the Bill.

  3. pierre wilkinson

    an absolute no-brainer = not likely to happen under this ‘government’

  4. Mr Shevill Mathers

    The posted caption image says it all, LNP ‘plan’ they don’t even know the meaning of the word.

  5. Jack Russell

    I sincerely hope Labor have a plan. They have a lot of very clever people, and they know their enemy, but can they take their gloves off, get down and dirty, and go for the throat? They tried decent and almost made it, but Australia needs warriors now, or democracy’s done.

  6. Matters Not

    Re:

    an increase to Newstart and pensions … If that money went to increasing Newstart and pensions and the tax-free threshold …

    It’s been said that winning elections is all about simple arithmetic with the emphasis on additions to voter support while minimising any subtractions. In the last election, possible political additions were downplayed – deferred until a deep and meaningful review was undertaken. In contrast, the political subtractions were costed to the last dollar. The emphasis rested with the downside – what would be lost – while the potential upside remained an unknown. Labor can hardly claim giving help to those who really need it at this post-election stage.

    Must admit this finding surprised me:

    revealing a significant difference in the two-party vote between those who cast pre-poll votes and those who voted on the day. The margin by which pre-poll voters favoured the Coalition was possibly as high as five percent, possibly explaining why exit polls strongly favoured Labor.

    SATURDAY’s GOOD READING AND LISTENING FOR THE WEEKEND

  7. Kaye Lee

    Interesting link MN

    “the most important reason for the Coalition’s upset victory was that Morrison was both liked and trusted by lower-educated voters”.

    “We should forget a minor tax break for lower incomes if it means that the higher income earners do get a revenue-depleting tax break such that the government’s long-term capacity to educate and provide health to everyone is eroded”.

  8. Paul Davis

    Hello Kaye Lee. Once again you have written something that smacks not only of fiscal soundness and commonsense but also addresses decency, fairness and dare i use the words ‘social justice.’ However unless Prime Minstrel HolyMo or Ducat Counter Joke Schadenfreude come up with these ideas then they will never be considered because no one has better policy than them and the LNP are better economic managers, ask Rupert.

    You pose this question: “Labor is taking their time to think about things. Why do they have to either agree with the Coalition’s plan or be wedged? Why not come back with a better plan?” I was going to suggest that perhaps you already know the answer and make a smartarsed comment about not just the party’s feet being clay but apparently the whole body…. However, just a month after the election and parliament yet to resume, there is time to develop and set out a decent plan for Straya’s future. My three rules for opposition would be 1) speak only of the future ‘new deal’ you offer for the good of all and propose legislation in line with this 2) refuse to vote for any government shitfluckery let alone debate their agenda and nonsense in either house 3) no heckling, no insults, no mockery, no shouting, just polite conversation and use question time to politely address only the PM seeking his opinion on your proposed new deal ideas….. think Ghandi….

  9. Florence Howarth

    Why does Labor have to do anything at all? They are not in government. All that should concern Labor is doing what they think is best for the people & the nation. IMO they can vote for or against. They can also abstain. Not vote at all.

  10. Ken

    Yes the COALition’s tax plan is just a con

  11. James Cook

    Kaye, Ross Gittins in Saturday’s SMH outlines arguments similar to yours, with statistical support. Gittins [and the AIMN] should be compulsory reading for Labor strategists [if they have any!] . Labor must insist on splitting the Coalition’s bill if they decide not to oppose it. At the very least they should be privately discussing the different arguments/lies the Libs will fabricate in order to wedge the Opposition and develop their own attack policy around those anticipated fabrications. It should not be difficult to foresee what these pricks will do.

  12. RomeoCharlie29

    Kaye Lee, another thoughtful, nay insightful offering but far too equitable for the rabble now running the show. Their every utterance and offering indicates where their interests lie and it’s not with those who appear to have voted them back. I like your proposal because it seems to be fair, and it would benefit me personally as I would fall below your new threshold. I would agree with Paul Davis on the way Labor should act, with restraint, but unfortunately that would not be recognised by the voting populace, would be ridiculed by the MSM and would just encourage the rabble to run riot. I want the Opposition to dig deep and expose the lies loudly and hold these bastards to account every one of the next 1000-odd days.

  13. Henry Rodrigues

    Romeo..Your views and solution are just what I think is the way to go. Credit to Paul Davis for his plan but niceness is not what is needed, sheer bastardry is the call of the game now.

    If Labor is reading this, you know what is needed , so get your strategy in place and get stuck into these fools, for all our sakes. You know who your opponents are, its never going to be easy, but giving up is not a solution either.

  14. terence mills

    The problem is all about stage 3 of the tax cuts, due to come into effect in 2024. To agree to that tax cut in 2019 makes no sense as it fails to take into account or have any caveat on our ability as a nation to fund those cuts in five years time.

    The next federal election is due in 2022 so logically, prudently and ethically the government elected at that time should introduce the tax cuts at that time. But that’s too sensible and ignores the wedge that the coalition want to shaft home to Labor.

    If Labor oppose the legislation they will largely become even more irrelevant considering the way the new parliament is now structured : it appears that the coalition will have a majority in both Houses.

    Labor know that they can’t go to the next election with the promise to repeal the tax cuts as too many vested interests will oppose them and they will just be pissing into the wind.

    The best course of action for Labor is to agree in principle to the tax cuts in 2024 but insist on the condition that the cuts only go into effect if the budget is in surplus and government net debt has been reduced, at the very minimum, to the levels of debt as they were when Labor left office in 2013. This would effectively mean that the coalition would have to bring net government debt back to $175 billion (currently $372 billion). In this way, Labor can demonstrate that they are being prudent and not just obstructionist as the coalition wish them to appear.

  15. Phil Pryor

    The ALP in opposition, with silent negotiation involving at least the Greens, should always put up an alternative, try to propose it as a bill, ride through defeat, and then solidly and loudly and one sidedly oppose everything the government tries, with scathing and insulting comment in a barrage. Constant opposition, relentless, with an alternative claim of a better way is the only way. Loud, strong, never ceasing opposition, but with an alternative…

  16. Stephengb

    “If Labor is reading this”

    Labor has thrown in the towel !

  17. Peter Stevenson

    The Liberal party took this tax cut policy to the electorate as a sweetener knowing all to well that the country couldn’t afford it. The Liberals are hoping that Labor with the help of the cross bench oppose the cuts so that when the figures deteriorate further they can blame Labor.The cuts should be passed by Labor and let the Liberals fall on their own sword .

  18. Keitha Granville

    Yes, absolutely. The tax free threshold increase is so obvious. As well as that, income splitting for those in minimum wage households with only one earner, which would put them both under the threshold and with a fee extra dollars a week to actually have a go.

    But no, at the moment, if you HAVE you will GET.

    If you have nothing, you’re not trying hard enough apparently.

  19. wam

    Good one, Kaye, words that fit the times. Labor had a plan that shorten should have been putting into action.
    However, is it not significant that had labor split Qld, they would be in government?
    How pathetic was jim chalmers this morning, grinning his way through Qld trip talking about shorten’s not explaining the policies, palmer’s cash etc?
    Silly boy that was why the rest of Australia barely elected labor but it is irrelevant as to why labor got smashed in the state where it all began!
    If you cannot be honest to yourself, chalmers????

    ps well done, kaye, you didn’t mention the boys.

  20. New England Cocky

    KL, you have far too much financial common sense for any unthinking happy clapper. But how can you maintain a financial elite without pandering to their financial interests and misinformation like “trickle down economics”?

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