Analysing the Morrison Federal Election Budget, and Considering the Shorten Labor response

above:  Treasurer, Scott Morrison's pitch on 'Jobs and Growth' is more of a Slogan than a 'Plan' or a reality

Some are interpreting the Morrison Federal Budget as 'modest' and 'non-controversial' ; A closer look reveals that much of the Hockey austerity agenda remains

Tristan Ewins

The first (and possibly last) Scott Morrison Federal Budget is being widely misinterpreted as modest and non-controversial – playing to the theme of ‘living within our means’.  Effectively token personal income tax cuts for those on high incomes are suggestive of Liberal Party priorities in the context where other income tax-payers experience no relief. 

Further; increases in tax on tobacco may seem like a ‘safe bet’; but neither side of politics appears concerned at the distributive ramifications. 

In the ‘big picture’, though, there are still big cutbacks implicit in this Budget that may escape voters’ eyes at a casual glance.  Cuts in Medicare and Higher Education will undeniably lead to an intensification of user pays and privatisation over the course of a re-elected Turnbull LNP Government.   The LNP is hoping to evade scrutiny by adopting some distributively-fair policies.  But a thorough analysis reveals a Budget which retains too-much from the disastrous 2015-16 Hockey austerity Budget.

And yet there are some aspects which are mildly encouraging.

Under the reforms foreshadowed by Treasurer, Scott Morrison, Wealthy superannuants would no longer be able to “draw tax-free earnings from balances over $1.6 million.”   The Government is also "planning to introduce a $500,000 lifetime cap on the amount of after-tax contributions a person can make, backdated to 2007."  Labor has criticised the “retrospective” nature of the policy, but the measure will still only bring in $2.9 billion over four years.   Meanwhile high income workers will also be hit with a lowering of the threshold at which the concessional rate of 30 per cent applies for payments into superannuation accounts.  That is: lowered from a $300,000/year  threshold currently to a threshold of $250,000.    Other superannuation measures will subsidise low-income workers, and support the ‘topping up’ of low-income spouse’s accounts by a partner.  Those measures are a move  in the right direction. 

But Sally Rose of ‘The Age’ also observes that without a crack-down on negative gearing these policies could simply drive more investors into property – contributing to an intensification of a housing bubble which already locks so many young families out of the market.

‘The Age’ also proclaims that Scott Morrison is ‘taking aim at the multinationals’, hiring 700 tax professionals to lead a crack-down on corporate tax-avoidance.   Tax avoiders will face significant penalties.  But the projected savings of $3.9 billion are highly optimistic at best, despite the projection that corporate tax evasion is costing over $30 billion a year.   

What is more, while the Coalition’s ‘Youth Jobs’ initiative is a significant improvement on existing Work for the Dole programs, nonetheless it amounts to another form of labour conscription and exploitation.  The good news is that the program links into the skills which may actually lead to work later down the track.  The unacceptable side of the equation is that young workers will be paid a pitiful $100/week extra for working a 25 hour week.  ‘The Age’ fears the policy may create “a conveniently revolving door for cheap labour.”   The question is whether or not the opportunity for skills development will ‘break the cycle of unemployment’, or whether competition will simply increase for a limited pool of jobs.  (where there is only one job for every five job-seekers) This raises the question of whether government needs to intervene more directly with an industry policy that links skills with additional new jobs over the long-term.

There will be some additional money for schools and hospitals – but significant pain as well.

Medicare rebates will be frozen at $37 for six years, driving  the erosion of the public health system, and heralding the introduction of steadily increasing co-payments. Prescription medicines will also increase in cost by $5 , and a user-charge will be added to Pathology services (eg: blood tests) adding up very substantially for those with chronic conditions for which medication and blood tests are non-negotiable.  

The ‘Herald-Sun’ projects “$1.2 billon” in aged care cuts.  ‘Pain management’ for residents in Aged Care will be cut-back on account of what is described as an “unsustainable” growth in expenses.  (What price the amelioration of an elderly person's suffering?)  A crack-down on ‘false claims’ by Aged Care facilities is anticipated to bring in almost $500 million ; but there is no recognition of the fact little can be done about quality of life and oppressively unfair user-pays without a very significant injection of new funds.   By ‘quality of life’ I refer to a host of problems – from underpayment and under-staffing which impact on basic questions such as when residents are turned in their beds to avoid bedsores, or whether aged care workers can be certain residents are actually eating, or whether or not there is poor morale and a revolving door for skilled staff..  It also refers to the lack of things for residents to do ; of the terrible boredom, the lack of meaning, the lack of pleasant surrounds, and the lack of privacy.  Finally it includes the need for a registered nurse on the premises 24/7 in the case of an emergency.

University fee-deregulation has been dumped for the time being ; but big cuts remain in place – still begging the question of how the sector will cope.  Likely options include further reductions in HECS (Higher Education Contribution Scheme) repayment thresholds to well below Average Weekly Earnings. (AWE)  Liberal arguments, here, that government and students need to spread the cost of degrees ’50/50’ deserve to be treated with healthy scepticism. Not only does business benefit from the skills acquired by students ; but also the most equitable way of spreading the burden is through a progressively structured tax system.  If repayments are to be geared to the actual financial benefit gained, then there is no better way to go. On the other hand, higher repayment rates for those on over $100,000/year could have a ‘progressive aspect’, and should not be considered in the same light as reductions in repayment thresholds and increases in repayment rates elsewhere.

Arguably students will be hit hard with debt in order to pay for big Corporate Tax Cuts. True to its mantra of ‘small government’, essentially the government is arguing it will ‘do more with less’. IN reality, though, this adds up to ‘no new programs without cuts elsewhere’. Linking the National Disability Insurance Scheme to welfare-cuts, there will be cutbacks in pensions for new recipients amounting to $15/fortnight, and a push to reassess the pension eligibility of some 90,000 Disability Pensioners. For those already living in poverty this can impact with malnutrition, or exposure to the elements as the costs of heating and cooling become unsustainable.

The Government anticipates an economic transformation ‘beyond the mining boom’, yet while it is subsidising Defence jobs in the construction of subs and other hardware (inefficiently creating 3,600 jobs at a cost of about $50 billion), the death of Australia’s auto industry undeniably occurred under the Liberal Party’s watch, with perhaps 50,000 jobs lost directly and indirectly.  

The goal of raising Defence expenditure to 2 per cent of GDP  by 2020-21 remains : but if the Liberals want bipartisanship with Labor, here, they must ensure this is not at the expense of other important programs.  If bi-partisanship is ‘in the nation’s interest’ the Liberals must disregard Ideological qualms and accept a small increase in ‘the size of government’ to lock in Defence commitments.  And Australia’s military assets should always be reserved for the actual defence of Australia and its allies, and not in adventures and wars of aggression overseas.  (as with the Gulf War of Bush, Blair and Howard)

More generally the Budget is light on infrastructure construction.  Hence the need to make tough decisions to ‘increase the size of government’ or make further painful and damaging cuts is ‘postponed’.  Given infrastructure demands in transport, communications, energy and so on, it is a situation which cannot be sustained over the longer term.  

‘The Age’ reports that Shorten Labor has responded with “$71 billion Budget Savings” of its own. This includes opposition to Turnbull’s tax cuts for corporations which will see the Company Tax rate reduced from 30% to 25% over ten years.   Some analysts are anticipating an utterly unsustainable cost to the Budget of over $50 billion over ten years should this Turnbull policy be adopted.  This should not be surprising given the Liberals’ track record of tax cuts for the wealthy and upper middle class  (unsustainable because in the context of the mining boom) –  and ultimately funded by austerity elsewhere, impacting upon those on middle and lower incomes, as well as those mired in poverty.

Here,. The Turnbull mantra of ‘Jobs and Growth’ has no substance.  While low Company Tax rates may attract some investors, the other side of this decision could be neglect of services and infrastructure necessary to sustain economic activity.That might mean less ‘jobs and growth’ and not more.  And while a small proportion of the cuts will flow through to workers, most of the tax cuts will simply be pocketed by business.  Under this scenario, If essential infrastructure and services are not to be neglected the only alternatives include privatisation and user pays, or for taxpayers to ‘pick up the tab’ elsewhere. 

None of those options are desirable or fair.  But this scenario also raises other problems such as reduced workers’ consumption power, and the inferior cost structures involved in the private finance and operation of profit-geared services and infrastructure. The Liberal obsession with ‘small- government’ with ‘no exceptions’ betrays an impractical posture where good sense is sacrificed for Ideology.

 In light of what it once called a ‘debt and deficit disaster’ the Liberals’ projected Company Tax cuts are being dismissed as fiscally irresponsible by Shadow Treasurer Chris Bowen. 

Somewhat disappointingly, though, Shorten has argued Labor will oppose the Liberals’ $1.6 million cap’ on superannuation savings which attract the concessionary tax rate.  Again: The argument is that the policy would have ‘retrospective’ elements, and hence is opposed ‘on principle’.  Some corners of the media are speculating that the idea may be to ‘wedge’ the Liberals on their own core constituencies.  (ie: the wealthy and upper middle class)    Nonetheless Labor’s own policy seeks to remove superannuation concessions from retirees already living on superannuation-streamed incomes of $75,000/year and over.   Labor expects this will impact upon 60,000 superannuation account holders with accounts valued at over $1.5 million.   But Labor is also reducing the threshold for the ‘high income super charge’ (HISC) from $300,000 to $250,000, affecting  110,000 people, and diluting their concessional tax rate on their contributions by a flat 15%. (ie: a 15% concession down from 30 per cent)

In April 2016 Shorten and Chris Bowen had argued that this, and measures on corporate tax evasion would save $20 billion over a decade.    Again: that is in the context of superannuation tax concessions soon costing as much as $50 billion EVERY YEAR, and Corporate Tax evasion costing over $30 billion EVERY YEAR . (according to Labor Senator, Sam Dastyari)

It is clear now that no-one is willing to truly ‘get serious’ on the reform of superannuation concessions and tax.  On Superannuation Concessions alone Labor needs to target a ‘broader base’ ; hitting the upper middle class as well.  While the upper middle class may not be as privileged as the ‘top 1 per cent’, nonetheless it is not fair for the remainder of society, including low and middle income workers, to subsidise their lifestyles.  A better policy here could free tens of billions for investment elsewhere in services, infrastructure, and welfare.

But despite this there remain very-encouraging Labor policies as well ; which will still see Labor outstripping the Liberals on distributive justice and the public interest. 

The Gonski education reforms will be implemented, as will the National Disability Insurance Scheme (NDIS), and the construction of the National Broadband Network with superior Fibre-to-the-Home technology.

Exploitation of students (and taxpayers) by dodgy private vocational education outfits will be cracked-down upon with an $8000/cap per student, and a re-emphasis on TAFE.   This is estimated as saving $6 billion over a decade. 

Shorten Labor’s reforms limiting access to Negative Gearing to new investments, as well as restricting Capital Gains Tax concessions could save over $7 billion a year.  And a Deficit Levy on high income earners will be made permanent, saving $16 billion over a decade.   The Negative Gearing policy especially should lead to more-affordable housing and more new housing.  So while there is ‘room to improve’, this is a step in the right direction. 

BY leading the debate Shorten has forced Turnbull and Morrison to adopt some ‘Labor-esque’ Budgetary policies.  To the extent to which Labor is setting the tone for the election this has to be welcomed.  

On the other hand while Labor is condemning the far-from equitable cuts that Morrison has projected elsewhere in the Budget, Shadow Treasurer Chris Bowen also points to the maintenance of “higher taxes” under the LNP than any time during which Labor was in Government. 

This can partly be traced to priorities.  For example the $50 billion Defence contract to build 12 new subs ; and the decision to raise overall Defence expenditure to 2% of GDP.   But at the same time: eventually Labor needs to confront the fact that it cannot afford its social agenda without raising tax significantly on those who can really afford it. 

As considered earlier, Aged Care requires many billions new expenditure annually to wind back regressive user pays structures, and improve the quality of care and infrastructure. 

And Mental Health spending needs to rise absolutely and proportionately with billions new funding as well.  There is a truly shameful National Emergency whereby the mentally ill are on average dying 16 years earlier than the general population, and those with Schizophrenia (maybe 300,000  Australians) are dying 25 years earlier than the general population average.   Catherine Armitage of ‘The Age’(‘A kind of creeping euthanasia’, 11/4/16)  has pointed out  that 9000 Australians with a serious mental illness are dying prematurely as a consequence of this situation every year. This far outstrips the road toll and suicide rate combined several times over.  Both Labor and the  Liberals need to support fully-funded government programs to ‘Close the Gap’ on life expectancy for the mentally ill, much as there are programs to ‘Close the Gap’ for Indigenous Australia. 

Again: The Liberal obsession with ‘small- government’ with ‘no exceptions’ betrays an impractical posture where good sense is sacrificed for Ideology.  Labor needs to decisively reject this Ideology and embrace reforms which reject ‘small government’, and instead promote social solidarity, collective consumption, social insurance, truly progressive taxation and so on.  The Nordics already demonstrate what is possible. But to be serious even a ‘gradualist’ posture by Labor – aiming to emulate the Nordics over the course of two or three decades -  should see social expenditure and investment rise by tens of billions under Shorten Labor. 

Labor is providing a clear choice in this election: on Gonski, tax reform, NBN and NDIS.  But we need to do better.   In Australia we should no longer ‘take small government for granted’.  With the end of the mining boom, we need to reform tax just to ‘stand still’ on social services, infrastructure and welfare.   Tax reform is ‘the price we pay for civilisation’.  And a progressive policy trajectory necessarily entails ongoing, serious and cumulative  reforms on this front.

Other sources:  

Herald-Sun:  4/5/16,  6/5/16,  7/5/16 , 9/5/16

The Age:  4/5/15 ;  6/5/16

Conservative Misconceptions on Tax , The Aftermath of 'Senate Reform', and More

above:  Greens leader Richard Di Natale argues reforms to the Senate will make Parliamentary elections more democratic ; But is he mistaken?  Could the Liberals soon control the Senate in their own right?  

 

This week I'm publishing six more letters looking at important issues in Australian and international politics...  These were originally sent to The Age, the Herald-Sun and The Australian ; Mostly they were unpublished.

 

Also this week we 're considering:  

• 'mental health and life-expectancy',
• 'Conservative misconceptions on Tax', 
• 'Superannuation reforms 'not a new Tax''
• 'Integration and Assimilation not the same thing!' and
• 'Was Bernie Sanders wrong on Clinton?'....

Dr Tristan Ewins

A Bigger Threat to those with a Mental Illness than Suicide – Close the Gap Now…

“Neil Cole (Reducing the Suicide Rate 9/3) raises the connection between Schizophrenia and suicide ; and by inference that we should tackle this just as seriously as we do the road toll for instance.  Yet one issue that none of the major parties are dealing with is that of reduced life expectancy for people with mental illness, and especially those with schizophrenia.  Here looking at suicide is only just ‘scratching the surface’.  For those so afflicted  (approximately 300,000 Australians with schizophrenia)  there is a reduced life expectancy of 25 years.   What is required is a ‘close the gap’ program similar to that pursued for indigenous peoples.  Not only to reduce suicide rates, but to promote fitness, health, good eating and the like, and also to further ameliorate poverty, provide flexible work, reduce social isolation etc.  ‘The Age’ has briefly considered this issue last year, but what is needed is an ongoing media campaign  demanding this be put this on all the major parties’ policy radar ahead of the coming election.  Some corners of the media could also do to stop treating Disability Pensioners like criminals.”

Conservatives misguided on Tax

The Herald-Sun (9/3) alludes to the corporate sector urging Turnbull to ‘be bold on tax’ and make sweeping cuts to the Company Tax rate.  Superannuation Concessions are mentioned, and indeed according to Richard Denniss of the Australia Institute those concessions (mainly for the wealthy) will soon cost taxpayers as much as $50 billion a year!  But are Company Tax cuts better for the rest of us, and do they really improve the economy?   Company Tax cuts mean that business is increasingly excused from contributing to paying for the services and infrastructure it benefits from. (eg: education,  communications, transport)  So either those services and infrastructure are neglected (hurting the economy) or the rest of us are called upon to ‘pick up the tab’.  This is what some people are calling ‘corporate welfare’.  It amounts to a ‘race to the bottom’ and effective ‘corporate blackmail’.  But ironically an economy with low corporate tax rates may end up being a LESS attractive destination for investment exactly because of the neglect of infrastructure, services and human capital.

Reforming Superannuation Concessions is not ‘A new Tax’

Mark Kenny (14/3) argues that voters are “sticking with the Coalition’ because of “Labor’s plans to lift taxes on superannuation and investment properties.”  This statement is profoundly misleading.  Labor is not bringing in new taxes, here, or even raising any existing taxes. Instead Labor is proposing that a series of concessions and subsidies be wound back.   Subsidies and concessions overwhelmingly favouring  the well-off.   Indeed these could be credibly interpreted as areas of government expenditure.   So a simple ‘reframing’ of the question could radically alter the terms of the debate.  Superannuation Concessions and Negative Gearing provisions could be seen as rorts for the well-off which cost average and low income tax payers.  Indeed Richard Denniss of the Australia Institute has estimated that superannuation concessions alone will soon cost taxpayers over $50 billion a year.  The sheer scope of the cost to the public purse is phenomenal.  It’s enough on its own to pay for an entire National Broadband Network (NBN) every year!  Incidentally Labor’s proposed  measures on superannuation concessions are at best modest.   If anything Labor needs a stronger policy. But they will be ‘spooked’ by the way ‘The Age’ and other publications are approaching this issue.

Integration and Assimilation not the Same Thing!

Frank Basile (HS Letters, 19/3) argues that ‘integration is the only way’ and that we should adopt a policy of “assimilation”.  But Integration and Assimilation are not the same thing.   Assimilation demands that people abandon their own culture to adopt the host culture.  That is, that they give up their cultural distinctiveness.  But Integration has a different aim.  Integration aims to establish enough ‘shared ground’ to facilitate interaction, communication,  intermingling and inclusion.  That might also include a commitment to liberty, democracy and social fairness.  In this way Integration aspires to achieve social harmony.   But under Integration this ‘shared ground’ does NOT mean immigrants must abandon their cultural identity and distinctiveness.  Integration is the way of bringing distinct cultures into relation with each other on the basis of ‘common ground’. In such a way cultures overlap and interpenetrate rather than 'one cancelling the other out’.  Integration is well and fine but let’s be clear what it really means.

What Senate Reform Possibly Means

(19/3/16)  The Greens have combined with the Liberals to implement Senate Reforms  which will probably wipe out the so-called  ‘micro parties’.  Here we speak not only of the ‘Sex Party’ and so-called ‘Liberal Democrats’ but also of the Carers’ Alliance and the Women’s Electoral Lobby.    In short voters will no longer be able to vote  for a Party ticket with the preferences being distributed according to those parties’ wishes.  The Greens will argue that takes the power away from the parties, and puts that power in the hands of  voters. On the one hand it may do away with the questionable scenario of micro-party candidates being elected on automatically distributed preferences with only a tiny primary vote of their own.   On the other hand it might do away with the prospects of micro-parties  frustrating the Coalition’s social and economic agendas.   Joe Hockey’s brutal Budget would have passed without opposition in the Senate.  Anthony Albanese has rightly asserted that a system of ‘quotas’ – ie: imposing a minimum primary vote necessary for election - could also have rectified the system without the same ramifications.  Another option would be for the preference directions of all candidates be made public ahead of any election.   We can only hope these reforms do not deliver the Coalition absolute power through control of both Houses of Parliament.

Was Bernie Sanders Wrong on Clinton?

(A letter sent to ‘The Age’ a while back)    Some people are criticising Bernie Sanders for not allowing Hillary Clinton to interrupt and speak over him. Who was in the right? Is 'what's good for the goose good for the gander', or do different rules apply to women and men? Generally speaking on the broad left we should not talk over or interrupt one another. We should have enough mutual respect or consideration to let arguments take their course, and allow people to arrive at their judgements. And in the past men's voices were always dominant - and that had to be corrected. But if a woman can interrupt or speak over a man, but a man cannot interrupt or speak over a woman (or even try and reassert himself as Sanders did when he was interrupted) - is it fair? And could this incident really hurt Sanders' campaign? And would that be fair also?

Critique of Labor and The Greens on ‘Policy Compromise’

 

above: Labor and the Greens can work together; But need to be conscious of each others' electoral imperatives ; Carbon Tax was good policy ; but a 'political death warrant' for Labor

Dr Tristan Ewins

Recently the Australian Greens negotiated a compromise with the Liberal Federal Government in Australia on the question of pursuing tax evasion by “Australia’s wealthiest private companies”. ‘The Age’ reported that as part of the compromise “Up to 300 of Australia's wealthiest private companies will be forced to disclose their annual tax bill for the first time.”   But that the legislation also will “shield up to 600 more companies that would have been brought under new transparency requirements.” 

Labor has branded the deal “a sellout”.  They had pressed for all companies with revenues of over $100 million to be affected by the reform – whereas the Greens negotiated a compromise with a threshold of of $200 million. Labor argued a compromise was not necessary – on the assumption the Government itself would have been forced to compromise before the end of the sitting of Parliament.

(Read more: http://www.smh.com.au/federal-politics/political-news/greens-deal-with-scott-morrison-on-tax-shield-sparks-labor-fury-20151203-gle9ft.html#ixzz3taKrNOA9
Follow us: @smh on Twitter | sydneymorningherald on Facebook  )

Also considered recently in discussion has been the decision by the Greens several months ago to agree to another compromise - tightening means tests on Aged Pensions in order to save $2.4 billion over four years. 

By contrast Labor was arguing for reform of Superannuation Concessions delivering windfall gains to some of the very most wealthy: though arguably Labor wasn’t considering a broad enough base (including the upper middle class) in order to bring in serious revenue without need for unfair austerity elsewhere.  

To summarise: Shorten’s plan foreshadowed savings of $14 billion OVER TEN YEARS.  But the Government is facing a deficit ballooning to over $40 billion a year ; and root and branch reform of tax is what is necessary – not only to get the deficit under control, but to pave the way for a reforming Federal Labor Government which actually improves the social wage, social insurance and social welfare by tens of billions in the context of a $1.6 trillion economy.

Again by contrast:  The deal agreed to by the Greens with the Liberals  had 170,000 of the most financially disadvantaged Pensioners standing to gain $30/week as of 2017; But approximately 330,000 (relatively better-off)   Pensioners would see cuts through tougher means tests ; and more than double that into the future. 

 

(See: http://www.smh.com.au/federal-politics/political-news/pension-assets-test-deal-with-greens-secures-coalitions-changes-20150616-ghplxg.html )  

 

The following are some excerpts regarding my thoughts: not only on this specific compromise, but on the ALP working with the Greens generally.

 

SL in relation to the Greens ; Is it right for the SL to Criticise ALP Policy?

 

At the ‘ALP Socialist Left Forum’ Group we’ve had plenty of debate on the place for criticisms of the ALP. Should criticism be considered ‘treason’ of some kind? Should we work for co-operation with the Greens – or should we fight them tooth and nail on account of the threat to several of our most talented Left MPs ; and the likelihood of declining Socialist Left influence in Caucus and Cabinet?

 

Nonetheless: Labor often gets it wrong on policy.  For instance, we often pursue symbolic policies for appearances sake which are far from the ‘root and branch’ reform needed to serve the interests of our constituents.   Shorten’s Superannuation Concession reforms are very modest , and at this rate Labor will be pressed to pursue extensive austerity if we regain government. Perhaps regressive policies such as more attacks on vulnerable groups such as Sole Parents.  Or an increase in the Age of Retirement.  And yet Labor’s Platform leaves the way open potentially for an expansion of progressive tax and social expenditure.  Labor still has options for a genuinely progressive mandate.

If as the most significant Left formation in the country (The broad ALP Socialist Left)  we do not criticise our own party's policies when our leaders get it badly wrong - then who will step into that space? There are a number of possibilities. Either groups like the Greens will step into that space ; or because of our silence the Left more broadly will be demobilised.  This would especially be a threat if the Greens’ tending towards compromise marked ‘a move to the Centre’ which again would leave a space in the Left of the Australian political milieu.  A new challenger on the Left of Australian politics could take a long time to re-emerge therefore ; just as it has taken decades for the Greens to establish themselves properly.  This would simply assist the broad Australian Right in consolidating their hegemony.

 

Don't get me wrong:... I'm all for staying and fighting within the Party. But when the Party leadership gets it badly wrong its up to us whether we vacate that (public) Left space and/or demobilise the Left - or whether we choose our battles - and publicly dissent at times – in the context of important debates – such as a much more robust winding back of superannuation concessions for the wealthy and the upper middle class.  We must do this because there is the alternative of Left demobilisation. And before we know it even our own people don't know what we're supposed to be fighting for anymore... (take privatisation, tax reform, social wage and welfare expansion and reform, industrial rights and liberties etc)

 

Insofar as criticism is constructive we shouldn’t just tolerate criticism of  Labor policy - indeed it must be encouraged. 

Nonetheless,  the trend towards Labor and Greens just trashing each other always seems to involve a degree of 'spin' and is not necessarily 100% honest.  What we need is honest, reciprocal criticism.

 

There's also the urgent question: What will WE (ie: Labor) do on Company Tax? Here we really need ALP and Greens to team up and vote down Company Tax cuts - because that is Corporate Welfare.  That is business avoiding paying their share for the services and infrastructure they benefit from!  So instead ordinary citizens, workers, taxpayers - are left to pick up the tab – directly or indirectly. (whether with an increased GST, or austerity elsewhere) Where does Shorten line up on this? (seriously)  There are many billions at stake.

 

More on Greens Compromises

 

Regarding Greens’ compromises it must be observed: It’s the old dilemma over whether to compromise and get something 'right here right now' - or whether to hold back - in the hope of discrediting the Conservatives - and getting something much better with the next change of government. Labor has faced these dilemmas itself at times.

 

For instance, the Carbon Tax was the best policy - but was politically impossible after Gillard’s commitment "There will be no Carbon Tax in a Government I lead". The Greens should have recognised this. There were other options. Like billions in annual direct public investment in renewables research and infrastructure.  In a convoluted kind of way the Greens’ insistence on the Carbon Tax could even have been considered an instance of opportunism in its own right.  The Greens got their policy – and it granted them prestige with their constituencies.  But arguably it sealed the fate of the Labor Government.  This is not to say the Greens shouldn’t press their leverage to get robust policy compromises from Labor.  And arguably Julia Gillard should never have backed Labor into that corner in the first  place.  But direct investment in renewables research and public infrastructure would not have involved a blatant, high-profile broken promise.  Of note:  Labor must not back itself into a corner on ‘small government’ now either!

 

 

What Reforms must Labor and the Greens pursue now as the 2016 Federal Election approaches?

Instead of just positioning against each other with the hope of gaining an electoral advantage over largely ‘cosmetic’ policies, again Labor and the Greens should be projecting root and branch reform in any Labor Government where the Greens hold decisive sway over the cross-benches

More specifically: Labor and the Greens need to move together to secure a minimum $35/week increase in all full pensions INDEXED upon Labor taking government.
This must include Newstart and Student Allowance.   Although I've been arguing for this for years already and $35/week isn't as much as it used to be. Full indexation is crucial, and perhaps now the figure should be somewhat higher.  (eg: $40/week)

 

Also in an exchange at the ALP Socialist Left Forum Facebook Group I accepted the need for subsidies to help the elderly invest in air conditioning and heating. Increasing the Aged Pension should be part of that. Existing pensions and payments make insufficient consideration of contingencies which vulnerable Australians may be faced with.  From a visit to the dentist to having to replace a washing machine – such everyday challenges can leave our most vulnerable destitute.  

Some would call the Greens' compromises through 2015 opportunism. Labor would attract that claim from the Greens themselves if it was Labor who had made the compromises. The Greens are trying to shake off their reputation as a ‘protest party’ – which never has to compromise.  Labor argues the Greens are about appearances re: policy protest – but are not about outcomes. 

But there is the argument that some of the compromi...ses the Greens have pursued have helped the most vulnerable. Though in a way which has hardly been fair to some people who would not fairly qualify as 'rich'.

There are two sides to this. What matters is that if we get a Labor Government - and if the Greens hold the cross-benches - there will be no more need for 'compromise with the Liberals'. And in that case we should see the whole policy schema recalibrated in a way which is truly fair - and doesn't involve 'compromises' whereby one constituency (not really 'privileged' by any reasonable measure) is played off against another (truly, genuinely disadvantaged). Better to target the top 15 per cent income and wealth demographics for redistributive measures aimed at improving the lot of those on low and middle incomes ; workers and vulnerable welfare recipients.

 

Target 'the top 15 per cent' as it is a narrow enough constituency for redistribution to be fair ; narrow enough to be electorally viable ; and broad enough to bring in serious revenue for serious reforms....

 

The problem right now is that most in the Parliamentary Labor Party will oppose taxing the sole residence of the elderly - fair enough - but they may not support other progressive measures (as listed) necessary to repairing the welfare state, social insurance and social wage.

 

Ideally we should pursue a more progressive tax mix which does not necessitate the elderly being forced to sell their home towards the end of their lives when familiarity can be so important. We should hit superannuation concessions for the wealthy and the upper middle class. We should restructure the income tax mix radically. We should consolidate Company Tax and begin to gradually wind back D...ividend Imputation - which most advanced economies manage to do without. (worth over $20 billion now)  Perhaps we should tax the banks. And perhaps we should tax the largest inheritances ; and introduce a Tobin Tax on financial transactions. Finally we should definitely raise the Medicare Levy - and progressively restructure it into more progressive tiers.

With this we can bring in tens of billions. We can introduce National Aged Care Social Insurance ; we can implement Medicare Dental, Physio and Optical and cut waiting lists. We can fully implement NDIS. We can implement Gonski and transform HECS into a genuinely progressive tax.  We can invest billions into social and public housing, as well as infrastructure of all kinds – increasing housing supply , making housing affordable , providing transport and services to new suburbs. We can revivify Legal Aid, and we can provide Federal Funding for Local Government - to make Local Government less dependent on relatively regressive levies/council rates. And we can reform welfare, support payments and pensions and lift the most vulnerable out of poverty. Finally, we can invest in the ABC and SBS. That's what we should do ; and it doesn't necessitate driving the elderly from their homes - even if their homes are valuable. And especially if their residence is their major asset - and they are not wealthy aside from this by any reasonable measure.

 

In conclusion – Labor needs to settle on policies of depth and substance. Because while ‘cosmetic’ policies may win over some voters – that is not our ‘reason for being’.  Labor should not be driven by the quest for government purely for its own sake: outside the context of winning deep, meaningful reforms.  Before Thatcherism and the decades-long retreat of the Left there was reference to the notion of “The Forward March of Labour’.  We need to reconceive of our reform trajectory.  Of what comprises our ‘forward march’ on policies which reform social wage, social insurance, welfare, personal and collective liberties, the extension of democracy – and more. 

And we need to establish our reform trajectory quickly and soon if we are to have the time and the opportunity to sell such a package to voters ahead of the Federal Election in 2016.

Treasury ‘White Paper on Tax’ seized upon by an Abbott Government Considering Regressive ‘Reforms’

 

The Abbott Government's 'White Paper' on Tax could see big changes to superannuation and the overall tax mix.  But the Paper seems oriented towards the Government's Ideological preference for 'small government', 'low tax' and 'simple/regressive tax' as opposed to a progressive tax system. Labor and the Greens need to enunciate a comprehensive alternative - also informed by a progressive ideology of equity and fairness.  Tristan Ewins looks at the alternatives.

Tristan Ewins

31/3/2015

The Federal Australian Treasury’s White Paper on tax reform seems to have been received well by the Abbott Conservative Government. 

Amongst other suggestions, it urges slashing the Company Tax rate to make Australia a more attractive place for investment.   

But arguably decreased Company Tax is not the answer and will only lead to further ‘corporate welfare’. 

The white paper complains that 70 per cent of Commonwealth tax revenue is drawn from personal and company taxes.  But what is the alternative?  A higher GST?  More user pays?  More austerity in the context of an-already stunted social wage and welfare state? 

Dividend Imputation, Corporate Taxation, Corporate Welfare

On the good side, Gareth Hutchens of ‘The Age’  (30/3/2015) notes arguments have arisen for the potential rescission of Australia’s regime of Dividend Imputation. (tax breaks on share dividends; ostensibly to make up for ‘double taxation’)

For a start, lower Company Tax rates dilute arguments about the unfairness of ‘double taxation’.  Australia’s Company Tax rate has been reduced markedly since the Keating Government which introduced the dividend imputation system.  Countries such as the UK and France – which once had imputation – have now dropped the measure.  It no longer appears ‘necessary’ either for ‘fairness’ or ‘competitiveness’.

To clarify: Nicholas Gruen of ‘The Age’ pointed out in 2012 that the cost of Dividend Imputation to the Australian people (as represented in the Government) of over $20 billion a year!  

The result of falling Company Tax, dividend imputation and other pro-corporate measures has been much lower levels of tax paid by business, and the effective consequence of ‘corporate welfare’, in tandem with other effective corporate subsidies. 

For instance David Holmes  at ‘The Conversation’ has noted– “the fuel tax credit scheme to the mining industry”  which delivered $2 billion in corporate subsidies for mining corporate interests in 2011 alone; and a total of over $5 billion all up.

But it goes much further than this.  Corporate welfare can also be interpreted as taking the form of a falling minimum wage and a falling wage share of the economy. In Australia specifically the wage share fell by about ten percentage points since 1959.  (see the associated graph via the hyperlink above)  That means higher levels of exploitation of working people by business. That is, Australian workers are subsidising corporate profit through lower relative wages.

Further, there is an assault on welfare rights to ‘make room’ for effective corporate tax subsidies; and ‘punitive welfare’ , ‘work for the dole’ etc, effectively reduce the bargaining power of workers because of an insecure and desperate ‘reserve army of labour’.

Also consider the proliferation of ‘user pays’ measures. (for example for access to transport infrastructure;  school ‘levies’; a higher cost of living re: water and energy etc)  User pays mechanisms can only spread as a consequence of lower taxes.  What we do not pay for collectively as tax payers, we will pay for (and usually we will pay more) in our capacity as private consumers.   

Declining levels of corporate contributions (via tax) to the construction of infrastructure, and the development of skills which the corporates benefit from – means the burden is increasingly paid by workers, consumers and individual (private) tax payers.  More corporate welfare!

Privatisation of communications, energy and water utilities and assets such as state-owned banks also saw an end to progressive cross subsidies. At the same time – progressively from the 1980s and 1990s - a more regressive tax mix (including the GST) ‘began to bite’.

Importantly, the argument that rates of corporate and personal income tax must fall because of ‘competition’ does not apply to all companies and individuals.  Many companies cater to Australian markets and Australian consumers.   The threat of capital flight is not universally applicable; and contributing to a ‘race to the bottom’ on corporate tax will result in spiralling and out-of-control corporate welfare.  Global action is necessary to stop the existing ‘race to the bottom’ on tax. 

To get the situation in perspective: Company Tax (now 30 per cent)  has been reduced by approximately 20 percentage points since the time of the Hawke Labor Government. 

The cost to the Australian people of this is tens of billions in revenue annually - which might otherwise have been directed towards infrastructure and education (which the corporate world benefits from after all), as well as health, social services and welfare. 

Even though a return to the ‘high water mark’ of corporate tax may not be possible, an increase to levels enjoyed by other advanced economies might be doable, and would make a big difference.  (nb: US Company Tax goes as high as 39 per cent; Japan 37 per cent and France 34 per cent – see HERE)

Furthermore, arguably most Australians are not so ‘mobile’ as the proponents of lower income tax suggest either.  Taxes also contribute to the quality of infrastructure and services which underscore the desirability of living in particular country. This includes the professionals which some say are likely to ‘pack up and leave’ if progressive income taxes remain.   Indeed the quality of education, services and infrastructure also acts as a ‘pull factor’ for investment and skilled labour.

Income Tax and GST

Treasury is also pressing for lower income taxes and a higher, less discriminate GST.  (eg: apply it also to education and food)

But because apparently an increase in GST is rejected by the Andrews Victorian Labor Government we might hope for a more equitable alternative.  

Unfortunately, though, it is more likely we will simply see further austerity.

The Treasury white paper apparently complains that only Denmark relies more on income and company taxation than Australia.   But ‘just because other people are doing something’ is not a strong argument to follow suit.  More appropriate would be to consider what –if anything – is wrong with the Danish tax system and economy.

Wikipedia states of Denmark that:

It has the world's lowest level of income inequality, according to the World Bank Gini (%),^[8] and the world's highest minimum wage, according to the IMF.^[9] As of January 2015 the unemployment rate is at 6.2%, which is below the Euro Area average of 11.2%.^[10] As of 28 February 2014 Denmark is among the countries with the highest credit rating.

So Denmark has a strong economy.  It has chosen ‘a different path’, say, compared with the Anglosphere. But its path of high, progressive taxes, labour market regulation and strong social welfare works! 

Finally the Treasury White Paper has considered the threat of bracket creep, and apparently the Abbott Conservatives are considering an increased GST as an alternative.

Bracket Creep refers to workers being pushed into higher tax brackets as a consequence of inflation, and (only nominally) increasing wages.  Both Labor and Liberal governments have a history of dealing with bracket creep by returning the proceeds to tax-payers through tax cuts.  Though even under Labor arguably this has sometimes been dealt with in a regressive way.   Higher brackets have been eliminated or cut - or raised so high as to minimise their progressive impact - and restrict strongly progressive taxation to only the most wealthy of all.  Arguably this is to the benefit of the upper middle class and the wealthy; and to the detriment of working people, including the working poor.  It means the working class and the poor pay more proportionately; and that those in need suffer with the constriction of the social wage and welfare.

But this is not an honest Liberal-National Federal Government.  Joe Hockey made the ingenuous claim, for instance, that Australians pay 50 per cent of their income in tax.  

As Ben Phillips explained at ‘The Conversation’:

“ Nobody in Australia pays 50% of their income as personal income taxation. According to NATSEM modelling, around 3.5% of those who have a tax liability actually face a top marginal tax rate of 49 cents in the dollar. Around 25% of taxpayers are paying a top marginal tax rate of at least 39 cents in the dollar.”

To summarise – Australia’s income tax system involves several brackets.  Higher brackets and rates only apply after specific thresholds are met. So as Phillips insists: NO-ONE is paying 50 per cent of their income in income tax! 

Hockey is not stupid.  Surely he understood this.  Apparently he was attempting to tap into populist anti-tax sentiment through a deceptive and false argument.

But depending on your notion of ‘the good society’ tax as a whole needs to go up; and the tax and spending mix also needs to be reformed.

Negative Gearing, for instance, benefits upper middle class investors; but does not create much in the way of new employment.  And important social programs demand higher levels of social expenditure.

Crucial priority areas which need substantial public funding include:

·         Full implementation of the National Disability Insurance Scheme as well as ‘lifting up’ the standards and resource base for state schools; Extend the NDIS to apply to aged disability pensioners

·         A big public investment in a National Aged Care Insurance Scheme: to provide for the needs of aged Australians both at home and in care

·         Investment in a comprehensive Medicare Dental Scheme

·         Implement Programs to ‘Close the Gap’ on both Indigenous Life Expectancy and Life Expectancy for the Mentally Ill

·         A big investment in new Public Housing stock – solving the housing affordability crisis by increasing supply

·         Fair Welfare and amelioration of Poverty – Raise all welfare payments by at least $35 a week on top of the current indexing arrangements; Thereafter implement fairer indexing arrangements for Newstart, Sole Parents and Student Allowance;  Relax criteria and significantly slow the withdrawal of payments for disability pensioners attempting to re-enter the work-force; Eliminate welfare poverty traps

·         Restructure the Higher Education Contribution Scheme (HECS); raise the repayment threshold and lower interest on debt; suspend all debt for former students who acquire a disability which interferes with or prevents work

·         Public investment in public infrastructure – Including the National Broadband Network – with Fibre to the Home Broadband

At a crude estimate these items would likely cost over $50 billion a year to implement in the context of an economy valued at around $1.6 Trillion.

Options to fund include Company and Income Tax reform, and withdrawal of Dividend Imputation;  but also the following

·          reform of Superannuation Concessions for the wealthy and the upper middle class*

·         cut Negative Gearing and plough the proceeds into Public Housing;

·         implement an Inheritance Tax;

·         Restore the original (Rudd-inspired) Mining Tax

·         Increase and progressively restructure the Medicare Levy

·         Implement a banking sector tax on super profits

·         Implement progressively-structured infrastructure levies on business and individual taxpayers– to provide for communications, transport, energy-related and water and sanitation related infrastructure – without regressive user pays mechanisms or inefficient/wasteful private finance

·          Implement a progressively structured Aged Care Levy

The Treasury ‘white paper’ on taxation seems to largely comprise a ‘wish list’ for Liberals pursuing an ideological ideal of small government, low taxes, and high levels of inequality. (which the Liberal ideologues put down to ‘merit’)   Labor and the Greens need to develop their own responses.  And hopefully this post will contribute meaningfully to that process.

 

*It should be noted, however, that even $1 million in accrued superannuation will  provide a relatively modest retirement income of $33,000 a year.  (compared with a Single Aged Pension of just over $22,000 and in the case of a couple roughly $17,000 each)  This is far from grandiose – though assuming the recipients’ home is owned it provides relative comfort compared with those fully dependent on the Aged Pension.   (more than $10,000/year additional income)  But The Australia Institute has suggested that cuts in Superannuation Concessions  - which cost taxpayers tens of billions annually – could instead be channelled into a more robust Aged Pension – lifting the full Single Rate to just over $26,000/year, and just under $40,000/year for couples.   The rate at which the Aged Pension is withdrawn could also be slowed, benefitting those with smaller superannuation accounts – and especially women – as a consequence of interrupted working lives and the devaluing of ‘feminised’ professions.