Costello slams debt tax, ignores own failings

ScreenHunter_2275 May. 06 09.33

By Leith van Onselen

It seems the Abbott Government’s proposed Budget debt levy has no friends, with senior Liberal elders lining up against the tax.

Yesterday, The Australian reported that former Howard Government minister, Peter Reith, had received numerous angry phone calls from die hard Liberal supporters and revealed that he himself opposes the tax:

“People were not happy, I mean they were angry and I’m talking about solid Liberal party people who have supported the party for years,” [Reith] said.

“I don’t like the deficit tax, I don’t like it at all”…

Mr Reith said the government was now “stuck with” the levy, even though public opinion was against it, amid a tough economic environment.

“I don’t think in any of my years in politics I don’t think we’ve ever had anything like the challenge we’ve got this time.”

Meanwhile, former treasurer in the Howard Government, Peter Costello, has today penned an opinion piece in the Daily Telegraph lashing-out against the deficit levy, arguing that it has no economic benefit and is a purely political move:

Australia has a spending problem. Labor geared up spending to stimulate the economy and never stopped. The public understands. They know spending has to be cut…

[But] the proposed tax “levy” has no economic benefit. It will detract from growth by reducing consumption. It will produce no interest rate reduction and, if it lasts four years and raises $10 billion, the most it could save would be $400 million in annual interest — hardly enough to touch the sides of the annual $12 billion government financing requirement…

The argument for increasing income taxes through some kind of levy is all about the politics. That’s why it was floated — to gauge reaction.

…it will not go through the Senate ­unless the Palmer United Party (PUP) votes for it. PUP will only vote for it if it can create maximum damage to its No. 1 political enemy — the Coalition.

The Liberal Party could be caught campaigning for a tax rise that will never be law. All on the grounds it has to be seen to do something to the middle and upper-middle wage earners who voted for it.

It is a little ironic that Costello is lobbying against the levy, seeing as it was his government that is partly to blame for placing the Federal Budget in its current predicament, necessitating such a measure in the first place.

As argued yesterday, it was the Howard/Costello Government that was largely responsible for the ballooning of entitlement spending aimed at middle class families, the aged, and wealthy retirees, which has arguably contributed much more to Australia’s structural budget deficit than any policies implemented under Labor. Such largesse included baby bonuses, increases in aged pensions, and generous tax breaks for superannuation – including tax free superannuation for retirees and cuts to the superannuation contributions surcharge on higher income earners. His government also made the short-sighted decision to end indexation of petrol excise, which now costs the Budget some $5 billion per year, as well as halving the rate of capital gains tax.

While I agree that abandoning the levy would be no bad thing, since it does absolutely nothing to fix the crumbling structure of Australia’s taxation system, whereby the tax base is shrinking via falling (or soon to fall) company and indirect taxes, as well as the declining workforce participation as the population ages. It would be nice if Costello, and the Coalition more generally, showed some intellectual honesty and admitted its own role in Australia’s deteriorating budgetary position.

Lumping all of the budgetary blame on Labor, while ignoring its own mistakes, is likely to only breed cynicism and opposition, and further erode electoral support for reform.

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  1. “The Liberal Party could be caught campaigning for a tax rise that will never be law.”

    And that’s what I love so much about this idea. I still, still can’t truly believe that Abbott is that stupid (despite all the evidence to the contrary).

    • I reckon the Greens will go for it, if it targets the wealthy sufficiently.
      The Coalition/Greens alliance will then have delivered us Abbott’s PPL and the deficit tax.

  2. It’s not stupid – it’s righteous.

    He is God’s tool don’t forget. (Pun intended)

  3. sydboy007MEMBER

    between the deficit levy and his PPL it’s mind bogglign that he’s so poorly moved from being such a great negative opposition campaigner to an ineffectual PM.

    How many months of bad polls before he’s given the boot? I can’t see anything before the next election that will help improve his standing within the voting public. It’s like he thought people voted for him because they like and support him, when it was really just a massive protest vote against Labor.

    • The thing is, the libs can’t remove him openly

      They ensured he is locked in because they castigated the ALP for removing Rudd whilst a sitting PM.

      he may ‘step down’ due to health concerns or so, but they can never roll him.

      • migtronixMEMBER

        Well you say that… but are you so sure they’ll stare certain and irrevocable defeat in the face for 2.5 years and not do anything? #libspill

      • “JWH was certain to get the arse mig and they kept him.”

        There are plenty within the party room who don’t like Abbott – remember that he only won the leadership ballot by one vote.,_2009#Results

        “And “Fran Bailey, a supporter of Turnbull, was absent for the vote, and there was one vote of “no”, which was recorded as informal.”

        While we’re reminiscing, let’s remember Hockey in 2009 before Abbott taught him Trite 3-Word Political Slogans 101 with particular emphasis on the subject of “Great Big Tax”. A true man of principles he is.

        “Hockey faced a dilemma. A moderate in the Liberal Party, Hockey had been a consistent supporter of the ETS. Running against Turnbull would mean taking the leadership with the support of the party’s right wing and climate change sceptics. Turnbull seized on the dilemma, claiming Hockey had given Turnbull his “complete support” and was still a firm supporter of the ETS legislation.”

      • migtronixMEMBER

        @jel no Greens to speak of then (I should know I was a greenie is my late Teens at the time, Walpole the whole shebang)

      • jelmech, read somewhere that Costello had the support but didn’t have the stones to do it.

    • Basically he thought he had so much effective control of the MSM that he could get away with pursuing his own agenda (taking money from the poor and the elderly and giving it to his daughters), while the populace would lap up the media spin.

      I’ve noticed he’s gone so far now that the media’s stopped spinning as much…. even News, that’s how far he’s gone.

  4. It doesn’t matter Leith – we are all complicit in one way or another. The price you pay for living in a modern redistributive economy. Something for everyone until there isn’t 😉

    • ceteris paribus

      The primal fear that makes hoarders and thieves of us all. “Is there enough?”. It is a relentless hunger that can never be satisfied in a material sense. The answer lies elsewhere.

  5. Meanwhile, former treasurer in the Howard Government, Peter Costello, has today penned an opinion piece in the Daily Telegraph lashing-out against the deficit levy, arguing that it has no economic benefit and is a purely political move:

    And he would know too. How many of such policies did Howard have him put in the budget?

  6. surflessMEMBER

    This the problem, when you have politicians trained and skilled at being lawyers for example Costello and Hockey in charge of budgets. Lawyers are more interested in transactions and off the cuff answers to transactions, not long term management of accounts. Look at the Howard/Costello off the cuff tax cuts for upper middle income earners and baby bonus. Off the cuff purchases of F-35 and M1A1.

    • M1A1’s replaced Our Leopard I tanks, which are 50 year old technology.

      They weren’t off the cuff.

      F35’s are the only 5th gen fighters available to us, they weren’t off the cuff either.

      • When you become supreme ruler of Australia, we can have our kids at age 14 join the Miguel-Jurgen, and all be vigilantly trained as sturmpanzergrenadiers

        We’ll invade Nauru and force them to accept the relocated GWS giants side for the AFL

        (G)reat (W)aste of (S)pace

      • surflessMEMBER

        F35 are no match for T50 nor J20 on paper. F35 is still only a wet dream and selection was overridden by Howard (See Four Corner program MONDAY 18TH FEBRUARY 2013 for full brief). M1A1 are second hand at purchase, spend most of the time in maintenance, (Leopard II is far better reliability) and require whole new infrastructure ie ships and airplanes to transport them. M1A1 is questionable product in Australia’s forward projection and doctrine. Army was looking at Leopard II before Howard purchased M1A1.

      • T50 and J20 are prototype planes with no data. How anyone can assert they are ‘better’ is beyond me.

        The J20 in particular looks like a fraud with no stealth properties. The ABC program, featuring two lunatic members from APA, namely Dr Karlo Kopp, and the other bloke.. Goon I think, are thoroughly discredited.

      • The 1A1’s have been zero-houred in their refurbishment, and they don’t have a record of maintenance issues.

        The Leopard II stock we would have received would have been 2nd hand from post cold-war stocks from European armies.

        As far as LHD’s and C-17’s go, most branches of the military are happy for their acquisition with no forethought of the M1A1.

        The M1A1 also has a track record through two gulf wars, it is the best tank in the world bar none.

      • migtronixMEMBER

        @Rus wait wait wait you can’t make that claim based on Gulf I & II, they were both paid off in advance not to fight…

  7. ceteris paribus

    Are Reith and Costello so hostile to Abbott because they believe they were “entitled” to be the PM before him? Is there some corrosive jealousy and ego at work here?

    Is it possible that many things in life are fundamentally driven by vanity?

    • melbourneguy

      You say that as if it’s not obvious why Abbott should be criticised and we need to look for ulterior motives or hidden agenda.

      Sure people are driven by various motivations.

      However, the plain reason why he’s being criticised is obvious. He’s a bad PM.

      Plain and simple. To look for ulterior motives for the criticism is a bit silly.

    • Abbott is a shocker of a PM, no question. That said, I think there might be a bit of revisionism going on with Costello. He has a hell of an ego, but surely even he can recognise that he and Howard f*cked up with some of the structural economic timebombs flaws they lit the fuse on.

      Perhaps Costello feels Abbot is drawing a bit more attention to some of these than he is comfortable with.

      • “That said, I think there might be a bit of revisionism going on with Costello.”

        I don’t doubt that. Anything he writes these days seems to favourably contrast himself with the current mob.

  8. ceteris paribus

    Slightly off topic, Hewson slams levy and refers to obvious alternative savings to be made on excess super tax expenditures to wealthy.

    Sinodinos, Brogden and other Liberal luminaries will not be happy.

  9. “halving the rate of capital gains tax”

    Costello did not halve capital gains tax. This is urban folklore.

    Costello removed cost-base indexation, which usually removes all (or more) of the “benefit” of “halving” capital gains tax.

  10. Costello selling off Australian Gold reserves in 1997 at $300 per Oz was another one of Costello’s ideas

  11. Costello says deficit levy is bad as it will reduce consumption. What about cutting transfer payments? Won’t that reduce consumption?

    Abbott may be forgiven a lot if he is very even handed but personally I can’t see it.

    Turnbull must be beside himself with anticipation.

    A more moderate Liberal like him could rule for a decade.

    • drsmithyMEMBER

      A more moderate Liberal like him could rule for a decade.

      …If he were leading the Labor party.