Can somebody please tell Peter Costello to shut up about the Budget?
After his hypocritical outburst two weeks ago, in which he labelled the Abbott Government’s push for “lower, simpler, fairer” a “morbid Joke”, Costello has returned today with another sermon lambasting Labor’s proposed superannuation reforms whilst telling politicians to stop “soaking the rich”. From The Daily Telegraph:
The trouble with the idea that we can tax the budget back into balance by soaking the rich is there just aren’t enough rich to go around…
In taxation it is more effective to raise small amounts from a large number of people than large amounts from a very small proportion of people. Raising the GST by 2 per cent would raise 10 times the amount that raising the top tax rate by 2 per cent will raise. That’s because everyone pays the GST and only 2 per cent of taxpayers are on the top income tax rate.
And that top 2 per cent is already pulling its weight with 26 per cent of income tax. That’s the other problem with the soak the rich policy.
It’s not as if it’s virgin territory. Just about everything that can raise a reasonable amount of revenue has already been implemented.
The government is right. The Budget problem is a spending problem. Just as you raise money by taking small amounts from lots of people you save it by cutting back on small amounts for lots of people — a policy the government is trying to pursue by altering indexation and income thresholds that apply to the payment of benefits.
Budgeting is a numbers business. Unless you touch the bulk of the population, then it doesn’t touch the sides.
Here’s a question for you Peter. Do you honestly believe that the Budget would be in such poor shape if you, whilst Treasurer, hadn’t implemented the following short-sighted reforms?
- Halved the rate of capital gains taxes, which now costs the Budget some $4 billion in revenue foregone and overwhelming benefits the rich;
- Froze fuel excise indexation (costing more than $5 billion annually today);
- Greatly loosened the assets test to qualify for the part Aged Pension and Commonwealth Health Card;
- Implemented tax free superannuation for those aged over-60, a move dubbed by Saul Eslake as “one of the worst taxation policy decisions of the past 20 years”;
- Removed the superannuation surcharge on high income earners; and
- Implemented generous “transition-to-retirement” superannuation rules, assisting those approaching retirement to avoid paying tax.
I could add other changes that you implemented, such as continually lowering income taxes (a good move, in my view) and ballooning middle-class welfare (e.g. baby bonuses – a bad policy in my view), but you get the idea.
The point is, you have no right to lecture on fiscal management, given you enjoyed highly favourable global and domestic macroeconomic conditions, and was chief architect of multiple Budget howlers.
For other views on Peter Costello’s Budget sabotage, consider reading Peter Martin’s article published in Fairfax earlier in the month, along with The Australia Institute’s stinging critique.
