I was talking with a couple of smokers the other day after a meeting and in the general conversation about life, the universe and everything, innocently I asked the ‘how much is a packet of cigarettes these days’ question. I was really happy that I don’t smoke when I was told that a packet of 30 cigarettes was around $30, or a dollar a cigarette (unless you buy the really cheap and nasty ones apparently).
On the way to the meeting we called into the office of another participant to collect him for the meeting. On the way out of his office block, all three of us bought a coffee at around $5 each. We attended the meeting and bought lunch afterwards. Despite the cool and windy conditions, we weren’t the only ones at the fish and chip shop close to the water in a ‘tropical’ North Queensland city that day. One of the other participants and I didn’t live in the town where the meeting was held, and the airport was pretty quiet when we got back to the terminal. This particular airport has a reasonably sized commercial area once you clear the security screen. While consuming yet another coffee at around $5 each, we observed that the terminal was filling up (the two major airlines have jets leaving this town for Brisbane about half an hour apart), most were either buying something from the café, the bar or going to the airline ‘lounges’ for ‘refreshments’ while waiting for the plane.
Admittedly, not everyone flies on a regular basis, however that’s not the point. According to the Australian Bureau of Statistics14.5% of adults consumed tobacco products on a daily basis in 2014/5. While we’re quoting statistics, 17.4% of adults consumed more than two standard drinks per day in 2014/5. Both datasets are showing a long-term decline. Roy Morgan Research claims that in 2014, the average Australian adult consumed 9.2 cups of coffee per week while suggesting that visitation to cafes is on the rise.
So when Treasurer Scott Morrison announced his personal taxation policy in early May that would mean the ‘average’ person received another $500 or thereabouts a year, who can blame the ‘average’ Australian for the collective yawn. Certainly a lump sum of $500 annually is of potentially greater ‘value’ than around $10 a week because $10 pays for around 10 cigarettes or two coffees. The politician in Turnbull and Morrison will believe that when the ‘average punter’ is lining up to buy the $500 appliance at JB Hi-fi or Harvey Norman with the proceeds of the 2018 tax cut sometime late in 2019, they will be thanking Turnbull’s Government for the largess. Realistically, it’s not going to happen that way.
That’s not to say that lump sums are not good economic stimulus — it worked well when the Rudd Government was attempting to prime the economy during the ‘Global Financial Crisis’ in the late 2000’s. It’s also pretty obvious that some will probably spend their ‘windfall’ on the pokies or at the TAB late in 2019. The promotors of the scheme this time are the same people that railed against the ‘ethics’ and ‘morals’ of Rudd giving people a lump sum to ‘blow on large screen TVs or at the pokies’ last time.
The difference between Rudd’s $900 cheques and Morrison’s lump sum however is the targeting of it. If Morrison’s scheme manages to survive until 2027, all taxpayers between $40,000 and $200,000 will incur the same tax rate. The appearance will be that the higher earners in that income bracket will be paying more and on a numerical basis they will, however as a percentage of earnings they won’t. To sustain your way of life, you need a certain amount of money – let’s say it is $35,000 per annum to pay the rent/mortgage, put food on the table, buy an occasional coffee and so on. If you’re on $40,000 per annum, you have $5,000 left over for the rainy day such as a newer car, a holiday or something else. If you’re on $200,000, in theory you have $165,000 left over. While the higher income earner may be paying a higher rent or mortgage as well as purchasing ‘better quality’ (certainly higher priced) food and consumer items, they will have considerably more to ‘put away for the rainy day’, conceivably $150,000. Fairfax reports under Morrison’s plan
By 2027, a couple with two children earning more than $130,000 a year will be banking up to $8000 in extra cash, the ANU’s PolicyMod microsimulation reveals.
And
“I think what it shows you quite clearly is most of the benefits [from the tax cuts] go to high-income families in the later years,” said ANU professor Ben Phillips.
“Largely because it is high income families who pay the tax, it is very much skewed towards the high end.”
The analysis goes beyond the seven-year figures provided in Tuesday’s budget, which Mr Morrison pointed to again in his post-budget speech on Wednesday when asked if the changes were fair.
Mr Morrison said workers on $160,000 would see a proportional reduction of 2.4 per cent, while those on $50,000 would see a 6.3 per cent reduction, but the figures only go up to 2024 when the largest reform – when the 37 per cent tax rate is eliminated.
The budget plans to reduce the rate to 32.5¢ in the dollar for 73 per cent of Australian workers – all those earning between $40,000 and $200,000.
It is a strange strategy to commit to tax cuts favouring the better off over a ten-year period when your opposition is mounting a fairness argument. Like the company tax cuts that are still partly held up in the Senate, the personal income tax package has been initially promoted as a ‘all or nothing’ proposition. This David Crowe article that ran in Fairfax Media mastheads soon after the budget makes the point that
The Prime Minister and Treasurer are prepared to take the entire $140 billion tax package to the brink of defeat so they can sharpen the contest with Opposition Leader Bill Shorten at the next election.
Yes, they are serious about the reform. It delivers on the Liberal Party’s low-tax message. But they also want to wedge Shorten.
However, Crowe argues
Morrison makes a strong argument that workers on higher incomes pay far more tax overall under a tax system that is progressive now and will stay that way under his reform.
A worker on $80,000 a year pays about $18,600 in tax not including any family tax benefits, while a worker on $180,000 a year pays about $58,000 in tax. Naturally, a cut in tax rates makes a bigger difference to someone already paying three times as much tax in dollar terms.
But the government will not win this argument by refusing to release its own numbers while the Grattan Institute, the Australia Institute, the Australian National University and others pick the plan apart.
One scenario is that Turnbull and Morrison refuse to split the bill, suffer a defeat in the Senate and take their plan to the people at the next election.
It looks like exactly what they want. But they will need a better argument on fairness.
If it comes down to an argument on fairness, the Coalition is on a hiding to nothing. This, and every other blog site that is even slightly to the left of centre (as well as some that aren’t), have discussed the inhumane, immoral and racist treatment of people the Australian Government holds in concentration camps off-shore, while claiming that because they are held off-shore, Australian law doesn’t apply.
Another piece of legislation held up in the Senate is the legislation around drug testing on welfare recipients (to make the tenuous connection between welfare and drug use stronger you’d imagine). According to Toby Hall on the ABC website, 52 submissions were made to the Senate inquiry formed to investigate the plan
How many submissions to the Senate inquiry were unambiguously in favour of the idea? One … from the Government’s own Department of Social Services.
And those against?
Some of Australia’s leading health and medical organisations such as St Vincent’s Health Australia, the Australian Medical Association, the Royal Australasian College of Physicians, the Public Health Association of Australia, the Kirby Institute, the Royal Australian and New Zealand College of Psychiatrists … the list goes on.
Add to that the Salvation Army, Anglicare, St Vincent de Paul, Mission Australia, Uniting among others and it’s pretty much a “who’s who” of Australia’s pre-eminent health and community service organisations.
Hall goes on to note that those opposing the plan are the organisations entrusted to treat and care for Australians experiencing addiction every day of the week. What would they know?
Toby Hall suggests fairness would be the treatment of welfare recipients with drug issues in the same manner as if you were
a footballer, an actor, someone from privilege— and you experience addiction, the public and media’s response is mainly sympathetic. The individual is, on the whole, surrounded by goodwill; it’s largely recognised that they have a health issue. People want them to get better and return to their best selves.
But come from a disadvantaged background or be on income support, and you’re a deadbeat, a bludger, deserving little or no sympathy.
The Federal Government has used this proposal to dog whistle community prejudices towards addicts, seeking to make political mileage out of it, all the while saying they’re acting in peoples’ best interests — it is nothing short of disgraceful.
If they were serious about helping people, they would have come to health and community service organisations before they announced this proposal and asked for our input.
The question remains can a political party buy enough votes by promising effectively a couple of cups of takeaway coffee, under half a packet of ciggies or a pint of beer a week to the ’mug punter’ in 2018? The answer is apparently not.
The pollsters asked a representative sample of 1200 voters: “Given the choice, would you prefer that the Government used extra revenue to provide income tax cuts or to pay off government debt?”
Fifty-seven per cent preferred that the government pay off debt. Thirty-seven per cent went for the tax cut.
Interestingly, it’s the Coalition’s own voters who feel strongest about this – 68 per cent prefer a smaller national debt than a tax cut.
But a majority of Labor voters – 52 per cent – and a plurality of Greens voters – 49 per cent – feel the same way.
This broad reaction is as Ian McAllister predicted well before the budget.
“It has a name,” explains the ANU political scientist. “Sociotropic voting.”
Sociotropic choices put the greater good of the country ahead of narrow personal self-interest, or egocentric voting.
Fairfax columnist Peter Hartcher, who wrote the words above, suggests that’s how Thatcher kept winning the Prime Ministership of the UK, she was seen as doing good for the country despite the personal sacrifices that most residents perceived they were facing. Hartcher continues by noting
When it came to last week’s budget, McAllister predicted in a conversation with me: “Personal tax cuts will only help the government if the electorate believes that they’re good for the country as a whole…
“But it won’t if it’s just a government saying I’m going to stuff $20 in your pocket.”
In the event, Morrison said he’d stuff a maximum of $10 a week in your pocket. And, lacking evidence that this would help economic growth for the country as a whole, he didn’t try to make that argument.
It was Labor that promised to stuff $20 a week into your pocket.
Why do politicians refuse to believe decades of consistent polling and research?
They usually say that they don’t believe the polling. They say that people just tell pollsters what they think sounds noble. And that, privately, we’re all just motivated by base greed.
Which is a funny response from a class of people that lives and dies by poll results.
Perhaps it tells us more about the politicians than it does about the people.
Maybe the polling and Thatcher are correct. Politicians should be daring enough to accept the truth. Tax cuts don’t really mean that much per week to the ‘average punter’ they are trying to get to vote for them, while fixing the country (whether it be reducing debt, provision of infrastructure, assisting those that are less well off or a number of other things) is. Shorten’s ‘fairness’ argument is clever, doubling down on tax cuts isn’t — after all, discretionary expenditure such as smoking a few cigarettes or buying a few cups of coffee a week doesn’t seem to be a big deal to most.
What do you think?
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This article by 2353NM was originally published on The Political Sword.
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