Ross Gittins The Sydney Morning Herald's Economics Editor March 6, 2013
With the Federal election around the corner, here are five tips to help you survive the claims and counterclaims by our politicians with your sanity intact.
I guess you've heard the news: the Gillard government has obtained new analysis of data from the Bureau of Statistics showing that Tony Abbott's election commitments inflict brutal damage on working families, particularly those in western Sydney, increasing taxes and cutting support to families.
According to Treasurer Wayne Swan, Abbott's commitments include scrapping the tripling of the tax-free threshold, axing the new schoolkids' bonus and abolishing family payments from the household assistance package introduced in June last year.
The government tripled the tax-free threshold from $6000 to $18,200 a year from July last year, we're told, delivering tax cuts to all taxpayers earning up to $80,000 a year. Most of these people received savings of at least $300 a year, with many part-time workers receiving up to $600.
Illustration: Kerrie Leishman
The schoolkids' bonus is worth $410 a year for primary school students and $820 a year for secondary school students to families who receive family tax benefit part A.
The household assistance package increased payments to families who receive benefit part A by up to $110 per child and by $70 per family for those receiving benefit part B. The median family income in Fairfield is $106,000. This family, with two children both in primary school, father working full-time on $86,000 a year and mother working part-time on $20,000 will be almost $1500 a year worse off, we're told. The mother will pay $600 more in tax and they will lose $820 in schoolkids' bonus and $72 in other benefits.
The median family income in Penrith is $118,000. This family, with two primary and one high school student, the father earning $70,000 and the mother on $48,000, will be $2300 a year worse off, we're told. The father will pay $250 more in tax, the mother will pay $300 more, and they'll lose $1640 in schoolkids' bonus and $108 in other benefits.
Terrible, eh? There's just one small problem. This stuff is so misleading as to be quite dishonest.
For a start, this is just politically inspired figuring, which doesn't deserve the aura of authority the government has sought to give it by having it released by the Treasurer with a reference to ''new analysis of Bureau of Statistics data'' and allowing the media to refer to it as ''modelling''.
It's true you'd have to look up the bureau's census figures to get the details of the median family in a particular suburb, but after that the ''modelling'' could be done on the back of an envelope.
There's a key omission from Labor's description of its wonderfully generous household assistance package: why it was necessary. Its purpose was to compensate low and middle-income families for the cost of the carbon tax. Since the Coalition promises to abolish the carbon tax, Abbott has said that all the compensation for the tax will also go. (Strictly speaking, the schoolkids' bonus is linked to the mining tax, but the Coalition is also promising to abolish this tax, and Abbott has said the bonus, too, will go.)
The trick is that Abbott has yet to give any details of how or when these concessions would go and what they'd be replaced with. But this hasn't inhibited Labor. It has happily assumed what the Coalition intends and is presenting its assumptions as hard facts.
The most glaring omission from Labor's calculation of the hip-pocket effect of all this is its failure to acknowledge the saving households would make from the abolition of the carbon tax.
Based on Treasury's original calculations, this should be worth about $515 a year per household, including $172 a year from lower electricity prices and $78 a year from lower gas prices.
Some Labor supporters argue that even if the carbon tax is abolished, prices won't fall. This is highly unlikely. The state government tribunals that regulate electricity and gas prices would insist on it. And a Coalition government would no doubt instruct the Australian Competition and Consumer Commission to police the wider price decrease.
Labor's repeated claim to have tripled the tax-free threshold from $6000 to $18,200 a year has always been literally true, but highly misleading. That's because it conveniently ignores the complex operation of the low-income tax offset.
When you allow for this offset, which Labor has reduced and changed without removing, the effective tax-free threshold has increased by a much smaller $4500-odd from $16,000 to $20,542. This explains why the tax cut arising from the seemingly huge increase in the threshold is so modest (for many, $5.80 a week) and also why the move yields no saving to anyone earning more than $80,000 a year. For them, the threshold increase has been ''clawed back''.
The idea of a Coalition government bringing about an actual increase in income tax is hard to imagine. Labor omits to mention Abbott has promised a modest tax cut, though he hasn't said when it would happen.
Labor also omits to mention that the generous schoolkids' bonus replaced its earlier 50 per cent education tax refund, which offered savings of up to almost $400 a year on the eligible expenses of primary school students and up to almost $800 for secondary students.
Labor has assumed that Abbott would merely abolish the schoolkids' bonus without reinstating the education tax refund. Maybe he would; maybe he wouldn't - he hasn't yet said. But only a one-eyed Labor supporter would trust Labor to read Abbott's mind.
It didn't take the announcement of an election date to ensure the informal election campaign would begin as soon as we were back at work in January. It's a daunting thought.
But at least it gives people like me plenty of time to demonstrate the dishonesty of the claims being made.
Ross Gittins is the economics editor.
