Just as important as what was in Tuesday's federal budget, was what was not in it. Unlike last year there were no new income taxes. Nor was there a tax on bank deposits. Nor was the GST extended to items costing less than $1000 from overseas.
Not imposing these sorts of new taxes is a good start towards the Coalition regaining its economic credibility. And promising no new taxes — and no higher taxes — is what distinguishes the Coalition from Labor (or at least it's what should distinguish the two sides).
Last year's deficit tax did the Prime Minister and his Treasurer enormous damage. In one fell swoop the Liberals sacrificed their mantle as the party of lower taxes. In the end, it was all for nothing anyway. The hope of the Coalition that in exchange for higher taxes on the wealthy, Labor would somehow be prompted to accept spending cuts, was misplaced. There have been few bigger miscalculations in recent Australian political history. Labor and the Greens supported the tax increase and opposed everything else.
A few years ago it would have sounded slightly bizarre to suggest a Coalition budget would ever need to be congratulated for not raising taxes. But such is the world we live in. Reform is a game of inches and any win, no matter how small, is a win nonetheless. In Australia these days the call for higher taxes is inexorable. Tony Abbott and Joe Hockey did as good a job as could be expected resisting those voices. Unfortunately, the government didn't completely hold out. It succumbed to the "Netflix" tax on digital products and it continued its quixotic pursuit of multinational companies. These measures, together with things such as the imposition of new fees and more regulation on overseas purchasers of property, reveal just how alluring populism can be. (It's unfortunate the Coalition's commitment to cut red tape doesn't apply to foreigners or real estate agents.)
NO SUPER SURPRISES
Most pleasing of all on the tax front is something else that was not in the budget. On Wednesday the Prime Minister promised no new taxes on superannuation. "There will be no changes to super, no adverse changes to super in this term of Parliament, and we have no plans to make adverse changes to super in the future," Tony Abbott said.
Increasing taxes on superannuation would have been the final straw for many Coalition supporters. The claim from a myriad of left-leaning economics commentators that "the rich" somehow get a special advantage from superannuation, is simply wrong. As has been said many times — "the rich" pay exactly the same taxes on superannuation as everyone else. Not changing superannuation is not just a matter of principle. There's practicalities. To avoid any potential changes operating retrospectively, the superannuation accounts of millions of Australians would have to be grandfathered. A complex system would become even more complex. The surest way to discourage anyone from putting more money into their superannuation than required by law, is for politicians to fiddle with the tax rates as they attempt to take more money from whoever is unlucky enough to be defined as "the rich".
Abbott and Hockey have learned from their mistakes. Last year they talked about the budget as "fair". In this country "fair" is usually code for redistributing income. There was no way the Coalition was ever going to win a debate about "fairness" — and it didn't.
The treasurer's description of his second budget as the "have a go" budget is corny — but good. If the public spent a bit more time pondering what's needed to allow people to "have a go" it might dawn upon them that some of the things stopping Australians from having a go are the rules and regulations that encourage exactly the opposite sort of behaviour. Fewer Australians are having a go at starting a small business. My research identified that the rate at which small businesses are being started in Australia is now at the lowest it's been in a decade.
This week Abbott and Hockey have been talking about growth — as they should be. It's a lot easier to be fair if the economy is growing than if it's shrinking.
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