Hell will freeze over before Labor Treasury spokesman Chris Bowen presents a worse set of four-year budget figures than the Coalition’s during the next election campaign.
He tried this trick last time and it blew up in his face. Assurances that Labor would put in a better budget performance over 10 years fell on deaf ears, in part because 10-year predictions are questionable at best.
So how will Bowen achieve this? In addition to his ragtag collection of what he calls tax reform measures — pause for laughter here — he has added one that counts the most in terms of near-term revenue.
By disallowing the payment of cash refunds for franking credits, he is expecting a short-term revenue surge — $10 billion over four years — that should mean he can boast, on paper at least, that the budget position under Labor will be better than that under a Coalition government. And in line with this magic pudding version of economics, he will pledge bigger short-term income tax cuts for low and middle-income earners and even higher spending on health and education.
But here’s the thing: eliminating cash refunds for franking credits for everyone apart from age pensioners (and charities and not-for-profits) is appalling, regressive policy. That $10bn is sourced from people with zero or low taxable incomes.
The vast majority of them are just modest self-funded retirees whose assets and incomes put them just beyond the Age Pension. They earn between $3000 and $10,000 a year in cash refunds, on average.
They are not wealthy, but they save taxpayers a lot by not depending on the Age Pension. But this is the group that Labor principally wants to punish.
Wealthy retirees will have no problem avoiding Labor’s policy by rearranging their portfolios to continue to gain access to franking credits. That’s the Labor way these days — help the well-off while harming those who have worked hard to amass modest nest eggs for their retirements.
If you have any doubt about Labor’s fiscal arithmetic, it will be OK because Bowen is sticking with the same three old wise men he used last time to check his figures: former PM&C head Mike Keating, former finance professor Bob Officer, and chartered accountant and company director James Mackenzie. I guess he thinks that arrangement worked so well last time.
As for the rest of Labor’s proposed tax measures, the net effect will be to discourage hard work, risk taking, saving and investment. In other words, they run the risk of shrinking the size of the economic pie in the name of redistributing more income. Rather than tax reform, the measures are retrograde both in terms of their design and impact.
But being high-taxing and high-spending doesn’t seem to worry Labor anymore. The days of Hawke and Keating are well and truly over. The driving force for Labor is to spend even more taxpayer money on health and education, thereby creating more jobs for Labor voters.
No questions are asked whether this additional spending will achieve anything — our education standards have slipped in the face of massive increases in spending, but what the heck. The key is to outspend the Coalition while seeming to do more to repair the budget.
It’s the politics of envy meets buying votes. The only upside is voters will have a clear choice of policies between Labor and the Coalition come the next election, sending Tweedle Dee and Tweedle Dum into an early, albeit possibly temporary, retirement.
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