December 18, 2013

Horse 1582 - MYEFO - It's MY EFO, get your own dang EFO

As Mr Hockey delivered the Mid-year Economic and Fiscal Outlook, he did the usual things that an incoming small G government is want to do:

1. Bring forward capital expenditures to look like expenses.
2. Blame the previous government for any failings.
3. Promise cuts to expenditure.

Of course, being a small G government, cutting expenditure is the only solution. If you can paint as terrible a picture as possible at the first available opportunity, then the media who happens to agree with you, will equally write opinion pieces making out government waste to be the enemy.
The thing is though, if say a government was in surplus, where did that money come from? And if there happens to be a debt, then whose fault was it?

If we dare to look at the other blade on our debt cutting scissors, the one which both Mr Hockey and the media negligently never mentioned, lying to us through omission, we find this:

We find that the highest tax bracket was pushed further out from $50000 to $60000, $62500, $70000, $95000, $150000 and finally $180000. At the same time, the highest marginal tax rate was dropped from 47 cents to 45 cents. But wait, there's more!
The lowest marginal rates also decreased from 17 cents to 15 cents and then when the lowest marginal bracket was "cleaned up", the tax-free threshold was pushed back from $6000 to $18000.

All of this means to say that from 2002-03 to 2013-14, which happens to split twelve years nicely into two parts - the Howard/Costello part and the Rudd-Gillard/Swan-Bowen part - there were 5/6 years under a Coalition government which yielded tax cats and 4/6 years under a Labor government which yielded tax cats.

I took a sample of AWOTE figures at the June quarter on a calendar year basis and came to the conclusion, that across ten million taxpayers (the actual figure is now closer to eleven and a half million), that had the tax brackets only been adjusted at a rate of 4% per year, then the total extra tax collected from 2002-03 to 2013-14 would have been $143bn. The total extra tax collected for 2013-14 would have been $51bn which is still more than the $47bn* which Mr Hockey is claiming as the deficit.

"Even if there are no tax cuts for ten years, the budget will never come back to surplus"
- Joe Hockey, 7.30 ABC1, 17th Dec 2013

Of course it isn't. The budget currently suffers from a major skew, caused by previous horrendous tax cuts and no government has bothered to correct the problem. The solution is not tax cuts but a restoration of revenues; which means tax increases. Obviously there's a revenue problem here.

Mr Hockey won't of course tell you this of course. He can't. It would hurt the ears of his own electorate to hear it.
As the Member for North Sydney he is member of the electorate with the highest average income in the country. The members of his electorate on a per capita basis benefited the most from 10 of 12 years of tax cuts. Also, owing to factors like wealth condensation and rule changes to do with superannuation, they also benefited on a far greater basis than any other electorate in the country.
Meanwhile in the electorate next door, the  Member for Warringah equally can not tell you this either. The Prime Minister happens to be the  member of the electorate with the second highest average income in the country. It also contains Mosman Municipal Council which became incidentally the first area in Australia to generate more than $1bn in private domestic property sales in a calendar year (2013).

So then, what is the solution to all of this? Is it to restore income taxes to levels? Well no. It's to appoint people like Ziggy Switkowski (the man whose job it was to destroy Telstra) as head of NBN, to render that useless and then sell that off. It's to appoint Tim Wilson, of IPA fame who was fundamentally opposed to the existence of the Human Rights Commission, to be the head of that same commission and probably with the intent to render that useless and shut that down. It's to remove legal aid for Aboriginal people and to cripple Indigenous legal services. It's to destroy the outcomes of Gonski reforms, to disable the NDIS, to destroy trade training centres and to eliminate the Communities Fund.
Rather than redress the fact that the people who have benefited the most from taxation cuts for more than a decade should start to contribute a little, Mr Hockey and this government has decided that the best people who need kicking are the least advantaged in society.

This is the place we've reached in the political debate in this country.

*By the way, GDP is about $1500bn. This means that $47bn is only about 3.1% of GDP. According to The Business Spectator, the average since 1975 is only 2.7% of GDP. In other words, this is less about actual maths and more about hurting real people.

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