Contributed by Joe Montero
On the eve of this year’s federal election, we should note the claims made during the campaign. This especially applies to those concerning the affordability of services and that ongoing matter of the budget surplus.
A big part of the Coalition’s line has been that they are responsible managers of the economy and that Labor would take money out of the citizens’ pockets, and yes, and blow out the budget deficit as well.
This is all based on fiction. The above broad sweeping claims are wrong. So are those concerning some specific areas of policy.
There has been a great carry on over franking credits, claiming that this will take out of the pockets of average retirees. This is not true. It applies to self-funded retirees. In other words, business owners, whether they pay tax or not. Franking credits have little effect on retirees living of their modest superannuation earnings.
What are they? In essence, a rebate provided to shareholders, brought in to overcome the fact that profits are taxed twice. Once through company tax and again through the personal income of the shareholder. Franking credits are therefore a means to benefit mostly the major owners of corporations.
According to 2018 treasury documents, $5.9 billion was handed out this way in the 2014-15 and $6.3 billion in 2015-16 financial years.
Labor has promised to significantly narrow down this taxation loophole for the wealthiest Australians. The Coalition’s real position is that the advantages for the most privileged should not be touched. But it would not serve well to say this honestly in an election campaign.
The same story applies to ending negative gearing, reducing capital gains tax and clamping down on corporate tax avoidance. None of these must be touched. Not only this, but company tax must be reduced, so must the tax on landlords. Minimal action must be taken to close off high-end tax shelters. There can be no talk on curbing the excesses of the banks, despite the findings of the recent Royal Commission.
What this shows, is that the real issues are not spending beyond our means and the budget deficit. they are,where the money is going to be spent, and how is the money to cover expenditures going to be raised.
While the Coalition has gone for spending on providing welfare for the high end of town and imposing the cost on the lower end, wage earners and those dependent on Centrelink benefits, Labor has gone some of the way to promising to reverse this.
The Greens have gone further. They want to introduce a super profits tax on the oil, gas and mining giants; impose a system where corporations must pay for their own pollution; do more to close the tax evasion industry; and raise again tax cuts already given to corporations and the very wealthy.
They say they want to use the $16.8 billion raised on these measures alone, to create “a more diverse equal and peaceful future;” provide more affordable housing and improve public services through more spending and reversing privatisation; support more than 2 million small businesses. Increase Newstart and Youth Allowance, as well as provide more for training; break up the big banks and create a government owned bot for profit bank and put considerable investment into building a future sustainable economy.
Costings for Labor’s policies, released during the election campaign, show that closing down tax concessions provided to the high end of town will raise $13 billion a year by 2022. This windfall would provide the government with a great deal to both pay off its debt and invest in health, education and other services and provide a dignified income for those on benefits.
This is only the tip of the iceberg. Just imagine what could be possible, if action was taken to put an end to multinational creative accounting, shifting money to tax free havens overseas and widely used other tricks. This is not easy to quantify. What we can be sure of, is that it would raise much more than $13 billion a year.
It would go a long way towards providing the capacity to invest in an economy that will actually grow, be modernised and sustainable into the future. Economic growth coming from this, would provide even more revenue for the government.
On their current trajectory, the Coalition will reduce government spending on essential services in order to fund its welfare package for the rich. The promise that existing expenditure on key services will be maintained should not be believed. And there are good reasons for this.
Thew Coalition’s promise is dependent on its own figures of increased revenue coming in from the government’s share of Australia’s estimated economic growth, which, to put it mildly, is highly optimistic. It will not materialise.
Secondly, the promised tax cuts will shrink the quantity of available revenue considerably. There will be less money to spend on services.
Thirdly, paying off the government debt to the financial institutions will remain a top order priority., leaving even less to go round for everything else.
There will be cuts to services and this should be noted.
Dr Cassandra Goldie, who is the CEO of the Australian Council of Social Service (ACOSS) said:
“Closing down high-end tax shelters…will give us peace of mind that we can begin to restore funding for the services we need…
“Currently, we have people waiting for more than a year for dental care and for in home aged care. And we must not forget that we still have 3 million people, including 740,000 children living below the poverty line or that the most effective way to tackle our consistent poverty rates is by increasing Newstart and Youth Allowance.”