Lenore Taylor, political editor
theguardian.com, Tuesday 29 April 2014
It’s not bringing the budget back to surplus that is the problem. It’s what we are learning about sharing the pain
Tony Abbott spent four years in a hi-vis vest telling us over and over about the hit on families from the carbon tax. Photograph: Alan Pottitt/AAP
Now that the prime minister has confirmed the government is considering a “debt levy” and Sydney’s Daily Telegraph is telling us it is likely to be 1% for those earning between $80,000 and $180,000 and 2% for those earning over $180,000 it is possible to calculate the extent to which Australian voters may have been duped.
Tony Abbott spent four years in a hi-vis vest telling us over and over about the “almost unimaginable” hit on families’ cost of living from the carbon tax and how the average household would be $550 a year better off when he “axed the tax”. He somehow forgot to mention another tax that for many families would take all, or most, of that money away again.
(And if a three-year fixed carbon price is a tax, prime minister, as you told us it was, and if the Gillard’s government one-year flood levy was a tax, as you told us it was, then it really beggars belief that you are now claiming a “temporary debt levy” wouldn’t really be a tax at all on the grounds that it won’t last forever.)
Let’s take a single income family with a couple of kids on $150,000 a year. Under the detailed calculations Labor provided with its carbon tax plan, they would have paid around $760 a year in extra bills as the tax flowed through at its original $23 price, and would have received $77 in compensation, leaving them $683 a year worse off.
If that family did their sums before they voted last year, and believed what Tony Abbott was telling them, they would have assumed they would be about $837 a year better off in real terms – because they’d keep their compensation but they would not be paying the tax any more. But according to the Tele they’ll now be hit with an $1,500 debt levy, eating away everything the coalition had promised them and another $700 besides. (If the $638 a year hit to their cost of living was unimaginable, it must be truly terrible to contemplate what a $700 impost might do).
Or take a dual income family with kids where both parents earn $100,000 a year. They didn’t get any compensation under the carbon tax and – according to the former government’s tables – wound up $1,000 a year worse off. Under the debt levy they’d be paying $2,000.
(And the coalition’s election refrain that the tax would go up and up doesn’t change these calculations because it was set to float, and on current projections that would mean it would go down from these levels for at least a decade.)
The prime minister is quite right that middle and high income earners should share the budget pain. He’s right that people like him should pay. I’d go so far as to say they should bear a higher proportion of the pain than the poor.
But if pensioners and lower income families bear permanent pain with tougher cut-offs and lower rates of indexation for their benefits and co-payments for going to the doctor, then surely the rich should bear permanent pain, too, not just a temporary tax.
As I pointed out on Monday, many think-tanks looking at the long term structural problems of the budget (basically that we aren’t raising enough tax to keep spending the way we are) conclude a much more effective way to include the wealthy in the national “heavy lifting” would be to reduce the generous tax concessions on superannuation contributions and/or the tax-free status of superannuation earnings for people over 60. Super tax concessions already cost the budget almost as much as the aged pension, and their cost is rising by 12% a year.
Both the Grattan Institute and the Australia Institute have pointed out that superannuation changes could deliver big savings over time, and the vast majority of their benefits flow to high income earners.
But the government has already announced it will not proceed with the previous Labor government’s policy to impose a tax of 15% on superannuation earnings of more than $100,000 a year.
Maybe the government will introduce superannuation changes to take effect after the next election. It’s kind of hard to tell.
So far we’ve been told they won’t introduce any new taxes, except for the new “debt levy” tax and they won’t change pensions, except – it would seem – for cuts that take effect in three years. They said there would be no changes to superannuation, but on current trends, who could tell?
The prime minister is now saying he promised “lower, simpler, fairer taxes” rather than “no new taxes” despite on the record quotes of him saying the latter.
It’s not the government’s aim of bringing the budget back to surplus that is the problem. It’s what we are learning about how they might share the pain – the ridiculous semantics of talking about a new tax while pretending it’s not a tax and of pretending they never promised not to raise taxes when they quite clearly did, and the gross insult to voters’ intelligence to think they might not notice.
