Scummo losing the tax debate

The world’s most boring election continues. Via The Australian comes the cost carbon mitigation:

Australian businesses could be forced to spend more than $25 billion on international carbon credits to meet Labor’s 45 per cent emissions reduction targets by 2030, jeopardising one of Bill Shorten’s fundamental election pillars, which he declared would have no cost to the economy.

…A day after refusing to answer questions on the cost to the economy of Labor’s climate policy, Mr Shorten yesterday declared a 2015 report by economist Warwick McKibbin showed “our 45 per cent reduction, including international offsets, has the same economic ­impact as the Liberals’ 26 per cent”.

Correct in theory. Fake Greens aren’t happy, at Domain:

Greens climate change spokesman Adam Bandt expressed concern at the open-ended commitment from Mr Shorten to allow the use of international permits, suggesting there would be no cap on the purchases.

“It’s like paying someone else to go on a diet for you while you keep eating burgers and chips,” Mr Bandt said.

“Passing the buck is not a credible policy. International offsets will delay the push to renewable energy at home.”

No killer blow there for anybody.

The tax yawn goes on with Domain unhappy that its customers won’t see more cuts to spend on realty:

Labor has decided to sacrifice further tax cuts for more than 1.5 million workers in favour of promising bigger budget surpluses than the Coalition, in a fresh bid to win a crucial pre-election contest over economic management.

The Sydney Morning Herald and The Age can reveal Labor has completed its internal deliberations over whether to propose a last-minute tax reform package for Australians earning between $90,000 and $120,000, and has opted to instead funnel the billions of dollars the cuts would have cost into improving the budget bottom line.

The Guardian has the better end of that stick:

High-income earners will receive at least $77bn from the Coalition’s 10-year income tax package, shrinking the proportion of the overall tax burden shouldered by the rich, according to a new analysis.

The Australia Institute modelling, released on Thursday, furthers the progressive thinktank’s argument that the Coalition’s flat tax policy is a “radical attack on Australia’s progressive tax system”, as its senior economist, Matt Grudnoff, summarised.

Labor and the Coalition largely agree on tax cuts for low- and middle-income earners in the short term, but the opposition has rejected the government’s plan to extend more generous income tax cuts to middle- and high-income earners from 2022.

Under the plan in the 2019 budget, those earning more than $41,000 will receive a tax cut in 2022 and by 2024 everyone earning between $40,000 to $200,000 will pay a marginal rate of 30%.

According to Treasury documents, flattening tax brackets will result in a total tax cut of $1,205 a year for a person earning $50,000, $1,955 for someone earning $80,000, $3,040 for a person earning $100,000 increasing to $11,640 for those earning $200,000 or more.

Based on the government’s figures that the Coalition’s plan will cost $230bn more than Labor’s, the Australia Institute analysis finds those earning more than $180,000 will get at least $77bn in tax cuts over the next 10 years. Most of that benefit ($64bn) will flow to those earning more than $200,000, it says.

The entire tax flattening plan is a regressive disgrace and should be dumped. Not to mention that by 2022 there won’t be any surpluses to give away as China slows and commodities fall. Then there is the $40bn black hole which needs to be filled to pay for the tax cuts even if by some miracle commodities do hold up, also at The Guardian:

The Grattan Institute analysis used projections about GDP growth from the 2019 budget and assumed 4.5% growth per year for the rest of the decade.

Danielle Wood, the budget policy program director at Grattan, told Guardian Australia that projecting growth higher than 4.5% would be a “non-standard assumption”. “Are the Coalition seriously saying they can boost GDP growth beyond that?”

Wood also disputes the claim the Coalition has limited spending growth to 1.9%, explaining this is based on:

Using 2013-14 as the baseline and blaming Labor for that year – even though the Coalition were in charge for three quarters of the year, during which they gave a cash injection to the Reserve Bank of Australia.

Including the next four years, when spending is projected to be limited to 1.3% growth.

Wood calculates that since the Coalition was elected government spending has increased by 2.6%.

And they will slash and burn spending as the economy falls apart ahead? I think not. Scummo is losing the tax debate.

Then there are the apparatchiks both doing a poor job, at Domain:

GetUp has been forced to amend its instruction guide for volunteers after the activist group’s boss was caught in an embarrassing interview in which he was unable to justify claims that Treasurer Josh Frydenberg was “part of the coup” against Malcolm Turnbull.

National director Paul Oosting had defended a GetUp instruction manual that suggested volunteers tell voters Mr Frydenberg was “part of the coup that removed Malcolm Turnbull as prime minister”, even if he might be “a nice person”.

But that gaff pales versus non-Get-up, also at Domain:

The conservative lobby group Advance Australia has made a complaint to Queensland police about a reported death threat made to its “satirical superhero” Captain GetUp.

The caped conservative crusader, who is confusingly named after progressive activist group GetUp, is a superhero-style character created to drum up publicity for Advance Australia causes, and to highlight what it says is GetUp’s agenda “to change Australia’s way of life”.

The character has been unleashed on electorates around Australia where GetUp is actively campaigning to get rid of conservative candidates, notably Tony Abbott’s seat of Warringah and Peter Dutton’s seat of Dickson.

So, AA produced a bunch of blow-up dolls to promote the Get-up brand nationwide. That’s a new low in stupid.

The only thing worth reading, and it’s hardly new either, is John Kehoe at the AFR:

Underlying the election battle between the Prime Minister and Labor Leader over taxes and climate change is an intergenerational fight over income, wealth and the future.

Labor’s tax crackdowns on negative gearing, capital gains, superannuation, dividend franking credits and family trusts are part of what Shorten argues is ending the “intergenerational bias in our tax system” and stopping the “war on young people”.

…In sharp contrast, Morrison was playing lawn bowls this past week with retirees near Geelong in Victoria, pledging no superannuation tax rises.

True enough. But even that is a fake of omission. So long as the Quantitative Peopling growth model is pursued uncritically by both sides of politics then the war on youth continues unabated in higher house prices, lower wages, crush loaded services and environment. Labor is playing around on the margins trying to limit the damage not make life better, while the Coalition wants to make it much worse.

One can’t help wondering where the Coalition sees itself in a decade as its Boomer cohort dies off like flies and it is left surrounded by enemies.

Comments

    • Flattening is not a disgrace at all. It’s a worthy pursuit. The problem is that the Coalition is categorically not trying to achieve this noble aim. Although the Coalition is hellbent on lowering the top headline rates for those over $180k, the problem is their fixation on the headline rate, and not the effective marginal rates.

      Yes, the headline rate is 45cents in the dollar. However, effective marginal tax rates are *enormous* at the lower end of the scale (typically those below $90k). Many people have effective marginal tax rates of 80-90%, with some instances seeing tax rates FAR in excess of 100%.

      It’s a disaster, and that’s how the Coalition likes it.

      • HadronCollision

        this is a genuine question: how are effective marginal rates around 80-90% for those below 90k, and what is the prevalance of these instances along with those at 100%?

        GST 10% where is the rest coming from
        rates, that’s a tax

  1. I love this line, so the GI thinks that growth will be 4.5% this year.
    The Grattan Institute analysis used projections about GDP growth from the 2019 budget and assumed 4.5% growth per year for the rest of the decade.