Friday, May 06, 2016

This tax-raising budget kicks the fiscal can down the road

On budget night you could hear the sound coming from Parliament House.  It was the sound of a can being kicked down the road.  And by all accounts most Australians are happy to keep kicking the can down the road.

A budget that increases government taxing and spending, does nothing about the deficit, and enshrines a permanently bigger role for government in the economy has almost universally been described in terms such as "modest", "cautious", and "prudent".  Maybe Greece's budgets were also once called "modest".

This supposedly "cautious" budget is built on Treasurer Scott Morrison's hope that in three years' time government spending will be 25.2 per cent of GDP.  That means that, at best, government will be nearly 10 per cent bigger in 2020 than it was under John Howard.  That's hardly the triumph of "neo-liberal economics".

What Tuesday's budget actually demonstrates is just how far the political pendulum has swung to the left.  And it shows what happens when nearly half of the electorate gets its income from the government — either directly as public servants, or indirectly through welfare.  The figure would be even larger if the number of people employed in the private sector but who received more in welfare than they pay in taxes were included.

The legacy of the Rudd/Gillard/Rudd years on our political culture can be seen in the way the Coalition government is now in a battle with the Labor Party over who can levy the highest taxes on rich people and multinational corporations.

In its eagerness to raise taxes on the rich it seems the Coalition is even willing to tolerate doing away with one of the fundamental principles of the rule of law — that legislation should regulate what people do in the future, not retrospectively punish or tax them for things they were allowed to do in the past.

The new lifetime cap for after-tax superannuation contributions will take into account all contributions made on or after 1 July 2007.  That's retrospective law — pure and simple.  It's no different from the Treasurer saying on Tuesday night that he's decided to raise the level of income tax payable on any income earned in the 2008 financial year and he's going to ask the Australian Taxation Office to start collecting that additional tax next week.

When the Treasurer justified his increase in superannuation taxes by saying it would "only" hit 4 per cent of superannuation account holders he came perilously close to replacing political principle with a narrow utilitarianism.  A policy should be judged to be good or bad on its merits, not according to the percentage of the population affected by it.

The shift of the pendulum to the left is not only seen in regards to the budget.  A few weeks ago the industrial relations minister Michaelia Cash famously said the Coalition would not "swing the pendulum to the right" on industrial relations.

Leaving aside the question of whether any Liberal MP should ever simply dismiss policies giving individuals more choice and more freedom as merely being of the "right", there's the substantive issue of the quality of the policies that the minister says she only wants to incrementally change.

The minister is ignoring just how far left the pendulum has shifted.

The industrial relations system is now more slanted against employers and individuals who want to make their choices about their own employment than at any time since the 1980s.  Yet it seems a Liberal minister for industrial relations is happy to accept the status quo.  Just as a Liberal Treasurer is willing to accept Australia's budgetary status quo.

As Tony Abbott discovered with his first budget in 2014, it is now almost possible to take away any benefit from any voter relying on a salary or a welfare payment from the government.  The new politics of budgets, at least as far as the Coalition is concerned, is to increase taxes on people who the Coalition believes are going to vote for the Coalition anyway, and then give that money to voters who'll support whichever party promises them the biggest handouts.  For sheer electoral logic it's hard to fault the Coalition's tactics.


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