THE reaction to our disclosure of Joe Hockey’s ‘share the pain’ deficit levy was entirely predictable, but still extremely disappointing and even pathetic.
One part of that reaction was understandable and my fault. While we stated the rates of the levy and the $80,000 start-point correctly, we overstated the dollar amounts that taxpayers would be slugged.
Someone earning $100,000 will lose $200 a year for the four years of the levy’s life, not $1000. Someone earning the $80,000 start-point won’t pay any levy at all, as against the $800 figure we used.
So it is entirely understandable and would have been even more justifiable, if such a person had seen such a potential tax hike as being way, way too punishing and indeed outrageous.
The broad thrust of the levy’s impact though, was as stated. The tax accelerates sharply as income rises, especially when someone kicks through the $180,000 top tax threshold.
Someone earning $200,000 will be slugged a still hefty $1400 a year, for the four years, just not $4000. Someone earning $500,000 gets hit for $7400 a year as against $10,000.
This though was the only part of Tuesday’s reaction that was reasonable. The rest ran from the yawning hypocrisy of the Labor Party, through the yawning idiocy of the Greens, and on to the various shades of unrealism among the economentariat.
Here we had Labor which created Australia’s debt and deficit problem, moaning about steps proposed by the Abbott-Hockey government to try to deal with it.
Further, if Labor is so concerned about stopping the government breaking an (alleged) election promise with the deficit levy; at the very least it should be consistent and allow the government to deliver its promise to abolish the carbon tax.
Shadow treasurer Chris Bowen must think all Australians are simpletons with short memories, trying to claim Tuesday that the huge deficits bequeathed by the government he finished up in as treasurer, were all a concoction of the new government.
He was laying great stress on the independent Treasury forecasts in its PEFO before the election. These pointed to the budget coming back into surplus in the 2016-17 year.
In his post-election midyear budget update, new treasurer Hockey said the budget would still be in deficit to the tune of $18 billion in that year.
Bowen was claiming that the blowout was all due to the government’s new spending promises and making the underlying forecasts more pessimistic.
This was rich coming from Bowen. If the PEFO was such gospel truth, why didn’t he point out that it had rather pointedly increased the total for future Labor deficits to $54 billion from the $28 billion claimed in Wayne Swan’s (last) budget just a few months earlier.
And to stress, the PEFO was prepared by Treasury before Hockey got anywhere near the treasurer’s office.
So if Hockey was fiddling the figures to make them look worse, according to Bowen, then Bowen must surely be admitting to Swan having fiddled them to make them look better last May.
That second part is certainly true — although Bowen is so clueless he wouldn’t even realise what he had accidently ‘fessed up to.
Indeed, Swan was fiddling them every year, to keep promising that yes, he truly would get the budget back into the black, but always only in the ‘outest of the out years,’ four years into the never-never.
Those surpluses never came; they were never going to come; and finally in late-2012 Swan admitted as much when the fiscal fiction became too farcical.
We saw the first real signs of fiscal honesty in the independent PEFO; and all Hockey’s subsequent midyear update did, was to be coldly, honestly, realistic.
The simple answer to Bowen’s pathetic accusations will come in the actual budget numbers as they unfold each year.
It’s a simple matter to take out any outcomes on the budget caused by the new government; the almost certain still huge deficits that would be left are all well and truly and completely undeniably Labor’s.
If a picture tells a thousand words, this one of the deficit trio, prime ministers Rudd and Gillard and treasurer Swan, tells us exactly why we are getting Hockey’s deficit levy, and all the other tough budget repairs.
The best thing one can say about the reaction from Greens leader Christine is that it was no more utterly incoherent than anything — everything — she ever says about substantive policy.
She simultaneously attacked the deficit levy as a broken promise while demanding the government break its promise to abolish the mining tax.
It completely escaped her that she wanted the government to keep a tax that raised no money instead of switching to a tax that would not only raise significant sums, but raise it mostly from the very same high income earners that Milne and her colleagues are always claiming should pick up the tab!
As for the economentariat; no, this tax is not a substitute for structural tax reform. It is about raising a substantial sum of revenue at a point when the deficit is (hopefully) at its biggest.
It self-evidently is not permanent — indeed that’s its whole basis, so the increased revenue won’t be permanent. Duh.
But the $12 billion-plus raised in the four years does mean we come out of this with $12 billion less debt than otherwise. And that is permanent.
It was also less than helpful the way various commentators casually suggested that Abbott should have ditched more clear-cut promises not to raise various taxes.
Apart from the fact that he and Hockey can make at least an arguable case that a temporary surcharge with a locked-in four-year time-frame does not break an explicit promise.
Please show me the video where Abbott, or Hockey, said explicitly, in the election campaign: there will be no increase — not even a temporary increase — in the income tax under a government I lead.
Apart from this, knock-knock, the government has initiated a separate, more ordered, more considered, root and branch tax reform process, in which — sensibly, and totally unlike the Rudd government — Abbott and Hockey have left everything, including the GST, on the table.
It would be the height of poor policy, and basic stupidity, to just pluck some big tax change out of the ether now to get a seeming ‘budget fix.’
Abbott and Hockey have correctly identified a debt and deficit mess created by Bowen and his colleagues. Most disturbingly, the budget will reveal that the mostly Swan-Bowen deficit was still going to be $30 billion in 2017-18 — the first time that year is formally budgeted.
They have focused most of their efforts to get the budget back to the black and to cap the debt created by Rudd, Gillard and Swan in just six years of fiscal irresponsibility and sheer mayhem to a still-thumping $350 billion or so, on the spending side.
But it is entirely reasonable and indeed arguably mandatory — those to both the left and the right, take note — to ask high income earners to make a direct, temporary contribution.
A few sharks have been jumped when we have Shorten and Bowen joining hands with Milne to demand that people earning $200,000, $500,000, and more, should be saved from a tax hike.
http://www.heraldsun.com.au/business/three-reasons-for-hockeys-new-tax-levy/story-fni0d8gi-122690019...
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