A Federal Budget in an election year always offers handfuls of sweets for the kids. But it can often be the case that while the goodies taste great at the time, the bill from the dentist can come as quite a shock.
This was the case when Treasurer Josh Frydenberg and Shadow Treasurer Chris Bowen put forward their respective plans last week. Both offer hundreds of billions of dollars in tax cuts yet project a return to surplus.
Australia’s mining boom is long gone and while I’m eternally optimistic about our nation’s future, you have to wonder how it all adds up. While voters are sceptical about surpluses after a decade of deficits, we must also weigh up just whose money is being used to fund the bonanza.
Taxation is a vexed issue for governments. It is needed to pay for services, yet increasing taxes is considered a politically risky move. Voters don’t like it, particularly when they see precious taxpayers’ dollars being wasted. The Prime Minister’s $185 million jaunt to Christmas Island is a prime example. We also need to ensure that society’s most vulnerable are not left behind. It is a tough task to get the balance right.
Labor’s attack on franking credits is well-intentioned but fundamentally flawed. The proposed changes to the way fully-franked dividends are treated allow high-income dividend recipients to monetise their franking credits while low-income dividend recipients will lose these credits.
While I agree with Labor’s intention to ensure that multi-million dollar self-managed superannuation funds pay their fair share of tax, the problem is that not all of these entities receive their income by way of fully-franked dividends. That means that entities with high incomes that aren’t generated through fully franked dividends will continue to avoid tax under Labor’s approach, while genuine low-income dividend recipients, as well as many retirees, will get caught out by the proposed changes.
I also do not support Labor’s proposed changes to negative gearing, nor to capital gains tax. The property market is already falling with many households entering into dangerous negative equity situations. I want to see the market stabilise before we start making changes that could lead to hard-working Australians losing money on their investment properties or rents going up.
As expected, the Government announced further tax relief for low and middle-income earners, building on last year’s Personal Income Tax Plan which is already legislated. While much of it looks good on paper, unfortunately, most tax cuts for high-income earners will only start in 2024.
So rather than rein in spending, Prime Minister Scott Morrison has instead chosen to deny earlier tax relief to the Australian people, preferring to use us as a Government ATM.
Perhaps not surprisingly, Labor’s budget reply didn’t offer much hope for higher wage earners either. Mr Shorten offered even bigger immediate tax cuts to 3.6 million taxpayers who earn under $48,000. He also reiterated that the Abbott government’s 2 per cent deficit levy, which Labor plans to impose on the highest wage earners, taking the top effective marginal tax rate from 47 per cent to 49 per cent, would only be re-assessed as soon as the budget returned to strong surplus.
Personally, I think the top income tax bracket is too high. We need to encourage competition and aspiration and many Australians find it difficult to stomach losing nearly half of every dollar earnt in the top bracket to income tax.
If elected, I will work with the next government to ensure that everyone pays their fair share of tax. This will include ensuring that the Australian Taxation Office is properly resourced to do its job. The Coalition’s cuts to the ATO are nonsensical and counter-productive.
At every election, there is a temptation for Governments – particularly Labor – to take the emotive stance that the rich can afford to pay, when in fact wage earners and businesses prop up the national economy by creating jobs, paying income tax and fuelling consumption.
So both sides will duel all the way to election day with their competing visions for Australia’s future.
But something we can all agree on is that taxpayers’ money could and should be better spent and Independent Members of Parliament have proven time and again their value in holding the Government of the day to account.
Anthony Pesec is a Director of Intelligent Energy Solutions, a Canberra-based renewable energy developer, and is an Independent candidate for the Senate for the ACT.
Region Media’s election coverage policy can be found here.