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September 21, 2021

Thus Spake Mungo: Batman win should hearten Shorten

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By Mungo MacCallum

So far so good.

To the surprise of many – including, one suspects, Bill Shorten himself – the Batman by-election is done and dusted and it appeared that the confected furore over the great dividend imputation refund had little, if anything, to do with it.

And the same applies to South Australia – sure, the well-known Liberal nonentity Stephen Marshall finally got across the line, but after 16 years and a redistribution that practically gifted him a majority, he could hardly fail. In fact he went surprisingly close to doing so; it appears that Shorten’s great gamble was either ignored, or more probably the enormity of it has not really sunk in.

But one way or another it will, and whether the punters buy Shorten’s plans for a giant war chest that will solve all his fiscal problems or Scott Morrison’s dismissal of a brutal tax grab which will steal from pensioners may well determine the next election.

Like many of Labor’s initiatives in opposition, the move is a courageous one, and as such the shadow treasurer Chris Bowen believes it will succeed: when the government’s fire and fury sputters way, imputation refunds will be seen as part of the mainstream debate, and Morrison and indeed Malcolm Turnbull will once again be exposed as frauds and wolf-criers.

But this time it may be more difficult, because this time there really will be losers, and quite a few of them. Of course there will also be winners – lots of winners. But the history of Australian politics shows that while winners seldom offer the politicians any thanks, the losers can be massively vindictive. Thus there will there have to be a lot of tweaking, a lot of spin to land the massive prize.

It should not be so; the current regime was not long established and was even then regarded as something of a rort, albeit a very profitable one for the lucky few. In the old days – well, about 30 years ago – the taxing of dividends was straightforward enough. Firms collected their revenue and did what they could to legally minimise their tax. They then paid company tax at the normal rate and what was left, the profit, was distributed to, among other needs, the shareholders.

The lurk was wildly popular, increasing tenfold in the first few years… But for those who have wangled it, it has become an entitlement, as sacred as the right to massacre school children in America.

These took their dividends and paid tax on them on their own final assessment. But then the Labor government decided that this was a form of double taxation, so a portion of the tax paid by the companies was to be returned to the shareholders, so some of the personal tax for which they were liable was to be deducted.

But then came the killer – awash with surplus money, the Howard-Costello decided that even if the personal tax rate, through various manipulations, could be reduced to zero, the deductions would keep flowing – a benefit denied to other taxpayers whose PAYE deductions could not be pushed into negative territory.

The lurk was wildly popular, increasing tenfold in the first few years, which is why Shorten is so keen to snaffle some of it. Most economists agree that it cannot and should not go on; they would like the whole imputation system scrapped as an economic boondoggle. But for those who have wangled it, it has become an entitlement, as sacred as the right to massacre school children in America.

And they mean to hang on to it – or if they don’t, they can be persuaded by the shock jocks. And the denizens of the hard right, many of whom no doubt avail themselves of the rort themselves, have no intention of clarifying a rather complicated issue. Class warfare, politics of envy, snatch the money and run. It’s us against them.

For the libertarians it is simple enough: taxation is theft – not some taxation, but all of it. Tax is stealing money from the individual to the state, which makes it unconscionable, and for the real free-enterpriser it is a positive duty to avoid and evade it.

Even our excitable Treasurer, Scott Morrison, would probably not go that far – well, not quite. But he has made it clear that any proposition on tax put forward by Bill Shorten, no matter now mild, logical or desirable, is a crime against the public and must be resisted as such.

It could be argued that he said exactly the same against reform of negative gearing and capital gains tax concessions and became something of an embarrassment when it emerged that his own department said that in fact the ideas would not only do little or no damage to the economy, but would remove notable distortions from it. This experience will not deter Morrison and Malcolm Turnbull, gearing up for his latest burst of hyperbole in the last session of parliament before the budget.

And the initial frenzy of outrage, principally and predictably from the comfortable elitists of The Australian, has provided a fitting overture. This has been relatively simple to orchestrate because the whole subject of taxing investments, and especially superannuation, is so fiendishly confused as to make it incomprehensible to the normal voter.

And the voter, being essentially a conservative type, is not about to risk his or her hard earned cash without a rolled gold guarantee of a lavish return. But of course this is precisely what Shorten will be promising: personal tax cuts on a substantial and sustainable basis, as well as a bandwagon load of goodies, and, if anyone really cares or believes it, a real reduction in the national deficit and an accelerated return to surplus.

So the question will be whether Shorten maintains sufficient credibility to deliver the gain, accepting that this is not a zero-sum game – there will be some pain, The Australian will always be able to locate a pensioner who has missed out, and preferably not one of the asset-rich sitting on a couple of million in tax free superannuation while diddling a few thousand bucks on the imputation scam.

This has already been tried last week, with a notable lack of success, particularly in Batman. It may be a long way to go, but Shorten is entitled to be cautiously optimistic. So far so good.

 


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4 COMMENTS

  1. To the surprise of many Greens on St Patrick’s Day the political back slapping in the seat of Batman stopped and that upset the beer flowing and was returned with a stabbng pain with some leg pulling as Bill Shorten in his labouring way pulled the wool over their eyes.

  2. Labor won because it was the better option
    In fighting in the greens did not help neither did nailing posters onto trees
    In this areas greens could not give a rats a about nature
    As nature is supposed to be what greens are about.

  3. There are many like you, Mungo, that are embracing the new policy with an ‘about time’ gusto but I’m not so sure it’s all it seems. To start, I don’t know that anyone can ‘sit on a couple of million of tax free super’ anymore, since the Coaltion changes. Labor also has/had a policy of taxing super pension earnings above $75,000 at 15% and I hope they do. I might have it totally wrong though but I can see the financial planners doing the sums already to calculate the right balance of franked shares in these accounts to maximise the benefits of their offsets? If so the windfall from these super rich might not be all it is calculated to be.

    Meantime a couple with enough in their combined super pension accounts to earn around $20,000 each will lose 30% of any earnings they previously achieved from fully franked shares. What’s more, this couple is likely, with conservatively invested super balances, to be approaching the threshold for complete pension ineligibility. Do your own checking of the Centrelink website.

    You’re right, it is ‘fiendishly confused’ and not my area of expertise but I wonder if CB completely understands it and I would welcome any critical analysis of my musings.

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