According to Scott Morrison, he is being “honest” with the Australian people when he warns that Labor will decimate the economy with $200 billion worth of higher taxes.
Let’s examine that in a bit more detail – not Scott’s strong suit.
At a business summit in Sydney, ProMo promised that he “will maintain the continuity of the policies that have been so successful in restoring the budget.”
The Coalition are about to hand down their sixth budget and they are yet to deliver a surplus. There have been countless promises of one, but you don’t get to count a promise as a success until you deliver on it.
Despite “higher than expected revenue, lower expenses and lower net capital investments” than predicted in MYEFO, at the end of January, the underlying cash balance for the current financial year was a deficit of almost $22 billion and net debt was over $373 billion. The net debt at the end of August 2013 was $161 billion.
No gold stars there.
So how about policies?
When Peter Costello introduced a 50% discount on capital gains tax back in 1999, he skewed both the housing market and the tax system heavily in favour of landlords over first home buyers. Prior to that, negative gearing did not cost the budget anything because roughly equal numbers of people were making rental profits and losses balancing the tax situation out.
As Richard Denniss points out,
Since Costello introduced the capital gains tax discount, the “smart money” has bid up the price of houses beyond their capacity to ever generate a rental profit, in the hope that the low-tax capital gains made the whole venture eventually worthwhile. The annual cost of negative gearing has blown out from around zero to $1.6 billion. And the capital gains tax concessions on investment housing now cost a further $3.7 billion per year.
A policy that costs billions in lost revenue and makes housing unaffordable for those hoping to buy their first home is hardly something to be proud of.
Costello was also responsible for making superannuation income tax free and for allowing people to make a voluntary tax free contribution of $1 million in one year. Tax concessions for superannuation now cost the budget more than $46 billion per year, and will soon cost more than the age pension. Even the Coalition have recognised this is not sustainable.
Another of Costello’s concessions that the government is fiercely defending is the ridiculous situation where people can claim a refund on tax they haven’t paid through excess franking credits. We are constantly told that the majority of people who would be affected by Labor’s policy to stop this are poor retirees.
The Grattan Institute points out the perfidy of this line.
Take the example of a self-funded retiree couple with a $3.2 million super balance, plus their own home, and $200,000 in Australian shares held outside super. Even drawing $130,000 a year in superannuation income, and $15,000 a year in dividend income, they would report a combined taxable income of just $15,000, and pay no income tax whatsoever.
With pensioners excluded, this policy change will only affect people who already have significant assets and/or income.
Another tax avoidance measure that Labor are targeting is family trusts where income is shared between family members thus lowering their individual tax obligation. Normal PAYG employees are not able to do this. The Coalition have been quieter on this measure because they know it has been abused and recognise it probably should stop.
So back to the $200 billion.
This is the extra revenue that the Coalition estimates that Labor will raise over the next ten years but the vast majority of it comes from not proceeding with the second and third stages of the government’s proposed income tax cuts for high income earners. Judging the impact on the economy of stopping tax cuts that have not yet begun is highly theoretical and, as we know, the government tends to just make up numbers rather than doing any genuine modelling.
It also ignores Labor’s proposed income tax cuts which would see everyone who earns less than $125,000 a year – that is, most Australians – hundreds of dollars a year better off compared to what the Coalition is offering.
Coalition policies got the budget in trouble in the first place. They facilitate tax avoidance by those who can most afford to contribute at the expense of government services and payments to those who can least afford to pay.
If you call that success, then you patently care more about the wealth of the few than the well-being of the many.
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