My predictions for 2015?
The Abbott government will stop breaking promises, because there aren't many unbroken ones left.
Catching up on some pocketed articles. Almost feel sorry for hockey after this one, except he'll never admit the real cause of the problem.
Team Australia's mantra: in times of trouble tax the poor
Date
December 20, 2014
Richard Denniss
http://www.canberratimes.com.au/comment/team-australias-mantra-in-times-of-trouble-tax-the-poor-20141219-12aggc.html
When the economy was booming, John Howard and Kevin Rudd said they could afford to significantly cut taxes for the rich. Now that the economy is slowing, they say they have no choice but to cut spending on the poor. Welcome to Team Australia.
The economic survey of Australia, released by the OECD this week, shed stark light on the biased commentary dominating the debate about our nation's finances. The OECD made clear that Australia is a low-taxing country spending far less than average on essential social services.
OECD data highlights that Australia's rate of corporate tax is below average, our superannuation tax concessions are incredibly expensive and ineffective, and our unemployment benefits are incredibly stingy.
Of course, you wouldn't know it from the media coverage of the OECD report, which somehow focused instead on the apparent need to cut income taxes on the wealthy and increase the GST. Peter Costello spun advice that we're a low-tax country that spends too little on essential services and spat out his own translation, calling for Australia to cut taxes further. "If all you did was increase the GST it would be a negative for the economy," he said, "and if we don't get cuts in income tax, company tax, and other efficiencies, then it's not worth doing."
At least he is consistent. In government he cut taxes on the rich and spending on the poor and he is still pushing for the same.
There are alternatives. If the Abbott government collected the average taxes levied by other OECD countries, it would have an incredible $139 billion more revenue this year. If it only collected the average taxes levied by the Howard government, it would have collected an additional $22 billion. Instead, the government says Team Australia has a spending problem. The "fiscally responsible" thing to do, we are told, is to charge sick people to visit the doctor and cut investment in universities while charging students more to attend.
The argument for increasing the GST hasn't got many friends but those in favour of it are loud and powerful. Business lobbyists love the GST for the simple reason that businesses don't pay it. Owners of foreign companies love it because, by definition, their shareholders consume primarily outside of Australia. So it's really no surprise their spruikers would lobby for a cut in company tax, funded by an increase in GST. For politicians, though, the determination to shift the tax burden from people who can't vote for them and onto people who can is one of the most remarkable features of modern politics.
While increasing the GST is not the only way to collect more revenue, a chorus of commentators are barracking for "base broadening". Normally, that means including the GST on food but business groups supportive of base broadening are much less vocal when it's suggested the GST be expanded to include private school or health insurance fees. While poor people paying more tax on food is considered fiscally responsible, asking rich people to pay more tax on their premium services is apparently not.
But while the government persists with trying to start a "mature debate" about raising the GST, it ignores a far simpler and less controversial revenue solution right under its nose. The easiest, fairest, way to collect much-needed revenue is to rein in Australia's enormous superannuation tax concessions. The OECD say they're bad, the recent Murray Inquiry into the finance sector found they're an expensive inefficiency, and even Joe Hockey concedes they do nothing to alleviate the cost of the age pension – the very purpose they're designed for.
The key point that gets lost in the complex tax treatment of superannuation is that the majority of tax concessions go to people too wealthy to ever get the age pension. And it is simply impossible to reduce the cost of the age pension by pouring money into people who were never going to get it.
In the dying days of the Howard era, a decade and a half of growth and low unemployment meant the government was raking in record amounts of corporate and personal income tax while spending relatively little on unemployment benefits.
Economic theory suggests governments should stockpile such "cyclical gains" and either pay down debt or save for a rainy day. But, confident the good times would last forever under their management, Howard and Costello instead responded to a temporary boost in revenue with permanent cuts to income tax. What could go wrong?
Well, the first thing to go wrong was that the big injection of cash into an already booming economy forced the Reserve Bank to increase interest rates. The pinkos at the International Monetary Fund described the fiscal stimulus in the Howard government's final years as "wasteful".
This became a problem when, to the shock of nobody outside Howard's front bench, the government's confident prediction that things would be good forever turned out to be wrong. Now that coal and iron-ore prices are back near their historical average, and unemployment has begun to rise (something it usually does after it falls) the fiscal policy chickens let loose by the Howard government are coming home to roost.
Analysis by the Australia Institute shows that the cumulative cost of the tax cuts introduced since 2006 is more than $200 billion. Unsurprisingly, the top 10 per cent of income earners got more of those benefits than the bottom 80 per cent. And men got significantly more than women.
Another Howard government foul, currently perched on the head of the Treasurer, was the decision to double the generosity of the means test for the age pension. Despite all Costello's hand-wringing about the "costs of ageing", one of his last moves was to ensure a lot more rich people were made eligible for the age pension and health concession cards; the very cost increases Joe Hockey says he is now worried about
The rate of GST in Australia is significantly below the OECD average. Given our overall level of tax and public spending is also far below average that's hardly a surprise. You might think that calls to increase the GST would be used to reduce the budget deficit or increase spending on essential services. But this week's report from the OECD was used instead as just another opportunity to call for tax cuts to the corporate tax rate.
The best way to judge a politician is by their actions, not their words. Joe Hockey says he would do anything to reduce the budget deficit. Anything, that is, except collect more revenue. The Abbott Government doesn't want to reduce the deficit. Like the Howard government before it, they just want to reduce taxes.
And when the cost of tax cuts takes its toll down the track? Team Australia just declares a "budget emergency" and cuts some spending on the poor.
Richard Denniss is executive director of The Australia Institute. Twitter: @RDNS_TAI
