I have the feeling something important to me (and to you, too) is merely a prelude to something else. To borrow movie language, I have that feeling of prequel.
Our budget on 2 May is a prequel to an election.
The budget is important to us, after all. It’s the government telling us what it intends to do for us by way of spending with all those taxes and charges (revenue) it has collected from us (expenditure).
How can I not be interested in this so-called fiscal outcome? It’s personal, after all: will I be better off, or not?
Maybe I will not be better off. Casting a dismal shadow is that single D-word – Deficit. It’s always being mentioned, but it’s government shorthand, saying its current level of funding services may not be sustainable.
‘Deficit’ is clearly a bad word. But when you and I do Deficit, we don’t call it that, we call it living on temporary overdraft or on the credit card. Somehow, what is familiar to many families – tide-over financing – is unacceptable for a nation.
Instead, neoliberal fiscal virtue reigns, requiring our Triple A credit rating be maintained at all times. In reality, this is nothing more than some private American ratings agency telling us to balance our national accounts, since, in their view, a Surplus is good, and any Deficit bad.
Unlike you and me, a country need never balance its books. It’s not a household economy. But now that the mining boom is over and the property boom looking precarious, we are being admonished that we are living beyond our national means. So, if our Triple A rating is not to slide to Double A, or, worse, A, then we must raise additional tax, or spend less, or some combination of both fiscal measures. Ironically, however, our present economic growth is good.
But we all know that your additional benefit is my increased tax rate, and your lessened benefit is to my tax liking. Whom here do you keep happy?
So, it’s the annual what’s-in-it-for-me? conundrum, except this year’s brought-forward budget being an election prequel also heralds the onset of that triennial thrill for all swinging voters of what is REALLY in it for me? Who will have my vote?
And there’s a particular edge to this question in this year’s election. The parties are level-pegging in the opinion polls. And Malcolm Turnbull’s falling mana may soon match Bill Shorten’s in the leadership stakes. Malcolm is the Liberals’ single best hope for another term of government.
The politics of budgets
So, politics must triumph over budget reforms. This budget will not engage seriously with needed tax reform. That’s too controversial, and anyway, no government has ever been elected on the platform of tax reform (ie your paying additional tax). Yet necessary nation-building projects in education, health, and infrastructure require more than current account or overdraft financing.
Deliberate leaks and kite-flying in advance have already disposed of GST reform – widened State taxation powers, moderating negative gearing, curbing the Capital Gains Tax concession, and ridding workplace deductions. The government, having initially said such were ‘on the table’ for discussion, immediately came under fire from vested interests, and, as quickly, these ‘reforms’ were swept from the table.
And for that lack of debate, we are all to blame. What’s-in-it-for-me?-ism blinds us to meaningful tax reform.
So what’s to be done if we must maintain our lifestyle and our Triple A rating? Just recently, the ratings agency Moody’s sternly told us something has to be done on taxing and spending. Damnably bad timing, telling us that in an election year.
The leaks so far indicate any tax reform will be slight. A mooted tax hike on tobacco (but not alcohol) is being touted, coincidentally, as good for the health of the classically cigarette-addicted poor. But the still affordable-champagne-drinking class can expect some winding back of generous superannuation concessions. They can expect to pay a 30% contributions tax on incomes over $180,000 (down from $300,000), although that is only expected to affect 2.7% of taxpayers, and a much reduced concessional payment into the fund (to $20,000 down from $35,000) which may affect a few more.
Note, there is no proposed change to the limitless tax-free income received by a retiree. Not surprising, given the grey vote is significant, both to Liberal and to Labor parties.
One solution is to tax people who have yet to retire; possibly, they won’t notice, or won’t care, or are rich anyway.
The rich can buy another negatively-geared property – no tax changes there – but those 2.7% of taxpayers do pay 30% of the tax take.
The policy idea behind encouraging us to fund our own retirement is to take the pressure off the public purse. But with 80% of the retired population on a government pension, self-sufficient super schemes have a way to go. At $44 billion a year, age pensions are the government’s biggest welfare payment. Expect some ‘expenditure’ tinkering to welfare payments.
It wouldn’t be a proposed election budget if there were not a suggestion of some needed tax cut, perhaps a pandering to the neoliberal notion that company tax cuts will stimulate growth and employment, and that the current company tax rate of 30% is too high. Both notions are wrong. The former is myth, and companies, after allowable deductions, pay closer to 16% tax overall. But neoliberal myths are hard to kill.
As none of us likes paying tax, and while tax and morals continue to inhabit different universes, perhaps those nefarious multinationals can make up our revenue shortfall by paying a bit more tax on our behalf.
But until there is a turnover tax on multinationals’ Australian earnings, expect only a tinkering with transfer pricing rules, and exhortations to the under-funded tax office to be more aggressive.
The Panama Papers won’t change anything, either; they just reinforce (with a few names we missed) what has been going on and will continue to go on. Remember, despite the mauling the British prime minister’s reputation took recently, Britain cannot or will not close down its own tax haven, known delightfully as the British Virgin Islands.
The budget will attempt to define electable differences between the parties, the Liberals promoting growth and jobs, and accusing Labor of being a taxing-and-spending party; while Labor, in its budget reply, will predictably promote fairness, seeking to convince us the Liberals are governing for their rich mates.
It’s a long seven weeks between the budget and the election. The populace is already cynical, causing one to cry out that, if voting were not compulsory, so what if they threw an election and no one came?
Just for a second, contemplate the ultimate voter backlash: a no-vote protest.