Tornado Alley (PROG)

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Tony Abbott's deficit levy will make a taxing issue even worse

"Australia's debt situation is considered relatively pretty darn decent .. part of it stimulus
money for uno?, too .. yet, Abbott is flogging the 'danger of debt' monster as hard as he can .."

Date April 30, 2014 - 6:46PM

Anne Davies

Let there be no bones about it. A levy, temporary or otherwise, is a tax, and if the Abbott government goes ahead with such a measure on middle- and high-income earners, it will be a shoddy way of trying to repair the budget, and will do little to improve the productivity of our economy.

The political hypocrisy of Prime Minister Tony Abbott contemplating such a tax, after explicit promises of no new taxes and three years of lashing Julia Gillard over her broken carbon tax pledge, is breathtaking. But it is more serious than this.

The Australian Industry Group and other business leaders are already warning that lifting tax rates will slow the economy.

"The business community completely understands that the government has a very hard job ahead of it to get us back into surplus over the longer term, but a one-off debt levy on people who are working, who are contributing to our economy, who are spending at a time when our economy is already fragile, we think is deeply problematic," the group's chief executive Innes Willox warned.

"The impact on economic growth would be clearly negative and equal to the amount of the tax taken out of the economy," economist Stephen Koukoulas said. "The debt tax is as good as an interest rate hike – or two."

Treasurer Joe Hockey has spent the last few months talking up an air of crisis before his first budget on Tuesday week. There are some long-term structural problems facing this nation, driven by an aging population and past policies of spending the dividends from the mining boom as if they would flow forever.

But to argue it is an urgent crisis is hyperbole. A comparison of Organisation for Economic Co-operation and Development countries with Australia shows we are in the relatively luxurious position of enjoying stable, if slightly below-trend, growth and relatively low net government debt to gross domestic product.

According to the International Monetary Fund's World Economic Outlook released this month, Australia's general government net debt as a percentage of GDP stood at 13 per cent last year, and will rise to just under 20 per cent by 2019 on a do-nothing basis. Compare this with Germany, which has net debt as a percentage of GDP of 53 per cent, the United Kingdom 84.5 per cent, the USA 82 per cent and Canada at 39 per cent. And Japan and many EU countries have net debt well over 100 per cent of GDP.

The government is right to review spending and seek to wind back on unsustainable programs. But clearly Mr Hockey is finding the process of making the nicks and tucks as unpalatable as his predecessors. It is no wonder he has turned to the revenue side.

Chris Richardson, from Deloitte Access Economics, points out that after a decade of tax cuts under John Howard, Kevin Rudd and Julia Gillard, personal income tax receipts were at 10.6 per cent of national income in 2012-13, well below the 11.2 per cent average over the last 25 years.

But good tax reform is about broadening the base of the tax system, making it pro-growth, making it simple, transparent and resilient, and doing away with inequity.

For a start, the government could dust off the review by former Treasury secretary Ken Henry. It includes a wealth of suggestions with an eye on a more efficient economy.

For example, if Mr Abbott wants to tax the rich more, he could tax all super contributions as income at the taxpayer's marginal rate, replacing the tax concessions with a flat-rate refundable tax offset. Tax concessions cost $13.5 billion to $16 billion a year. Most go to high-income earners. Or he should lead the debate about a broader-based goods and services tax at an increased rate, with appropriate compensation for those hurt by it.

That is the job of leaders: to lead debate, not jump at quick fixes after being caught in a tight a political corner.

As for Mr Abbott's insistence his government stick with his signature pre-election promise of a paid parental leave scheme, the question remains: can we afford it? Perhaps some may feel, as Mr Abbott does, that paid maternity leave in the form of a full wage for six months should be a workplace entitlement, like sick leave or annual leave. Instead Mr Abbott has proposed a 1.5 per cent levy on big business, supplemented by taxpayer funding.

But once taxpayer dollars became involved, it was inevitable there would be discussion about the $150,000 annual earnings cap and welfare for "millionaire mums". In the last 24 hours, the Prime Minister has signaled he may limit it to women on $100,000 or less. This would reduce the maximum payment to $50,000 a year.

But analysis shows this would have little impact on the cost of the scheme. Only one in fifty women of child-bearing age earns more than $100,000.

So what are the better alternatives? If Mr Abbott is serious about helping women balance work and family, then boosting affordable, accessible and high-quality childcare is the key. Just as important is encouraging a more flexible workplace culture, so women can genuinely make the difficult choices about how to balance work and family.

http://www.brisbanetimes.com.au/comment/smh-editorial/tony-abbotts-deficit-levy-will-make-a-taxing-issue-even-worse-20140430-zr1va.html

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Scaled-back parental scheme still in doubt

5 hours ago April 30, 2014 5:15PM


Tony Abbott is reportedly backing down on the generosity
of his paid parental leave scheme. Source: AAP

TONY Abbott's pared-back paid parental leave scheme may still struggle to clear parliament after the Greens signalled only conditional support for the policy.

In a decision the prime minister described as "regrettable" the scheme's salary cap is to be reduced to $100,000 from $150,000.

Women who earn more than $100,000 will be entitled to a maximum payment of $50,000 over 26 weeks, rather than up to $75,000 promised before the 2010 and 2013 elections.

After months of sticking by his signature policy, Mr Abbott blamed his backdown on the need to spread the burden of restoring order to the federal budget, which he said was facing a "debt and deficit disaster".

"I don't want any sectors of the community to feel they are getting special privileges," he told reporters on Wednesday.

Mr Abbott said the expenditure review committee, of which he is a member, had made the decision to trim the scheme earlier this week.

As late as Tuesday, however, he said the government was "absolutely committed" to his policy.

The prime minister has faced opposition from within the coalition over the generosity of the policy, with calls for him to cut the threshold or scrap the scheme altogether, and threats that some may cross the floor.

The decision is likely to appease critics inside the coalition, especially Nationals MPs who believed the scheme was too generous and discriminated against stay-at-home mums.

While the new threshold matches the previously stated policy of the Greens, the minor party now wants the government to guarantee the scheme is affordable.

That means it has to be fully funded from the planned 1.5 per cent levy on big business.

"We will not see this scheme funded by touching other areas of the budget," deputy leader Adam Bandt said.

With few women earning $150,000, it's unlikely the new threshold will save the government much from its original $5.5 billion cost.

The Greens are also demanding Mr Abbott prove his policy has the support of cabinet and coalition MPs.

Without backing from the Greens, the scheme won't get through the Senate.

Labor certainly won't support it, reiterating its opposition to what it has previously labelled a "gold-plated" scheme.

"$50,000 is ... a lot of taxpayers' money to be paying to people who don't need it, who have plenty of money themselves," opposition families spokeswoman Jenny Macklin said.

She said Mr Abbott had been forced into an embarrassing backdown, and no amount of tinkering would change the scheme's fundamentally unfair principles.

"(It's) desperation from a desperate prime minister."

Advocacy group The ParentHood welcomed the decision to lower the salary cap but said it would do little to save the government money.

It would prefer to see funds re-directed to affordable child care because it would support parents longer than the first six months of a child's life.

http://www.news.com.au/national/breaking-news/abbott-to-reduce-parent-leave-cut-off/story-e6frfku9-1226900421459

.. just so you guys know what, not exactly, just kinda, is going on down here .. lolol ..