Think of the Federal Budget as a gigantic swimming pool of public money.
Some big tax revenue pipes pump our money in. The largest is income tax. This tax on labour yields $336 billion. Next is income tax on business – it’s pouring in 20 per cent of revenue ($144 billion). GST pipes in 13 per cent, then a smaller bunch of pipes do the rest. Fuel excise, ‘sin taxes’ (on tobacco and alcohol), fringe benefits, customs duties, ‘resource rent’ (on oil and gas) and fees for service.
It’s a big pool but thousands of big and little straws are sucking money out – in the deep end the government is spending. State governments are fighting for a share in the shallows for GST and services grants like hospital and school funding. Everywhere people are asking for grants and handouts.
Albo is ever-reluctant to enter these turbulent waters. But the pool is rapidly draining – so Treasurer Jim Chalmers jumps in to try to rebalance taxes on labour (wage earners) versus assets (investors). He wants to cut investor money pouring into existing housing stock (40 per cent of bank loans for homes are for investment). This should increase owner occupation by cooling house prices.
I believe Australians are fine with fairness for housing. The issue is messy because Labor went a step too far by increasing capital gains tax on non-housing investment. It was a tax grab out of the blue, so yes there is blowback.
I was puzzled as to why Labor is taking from ‘the rich’ but not giving back by lowering taxes on workers?
‘Bracket creep’ is the tax issue no government wants to deal with. It’s Australia’s numero uno cost-of-living killer. It is also guaranteed tax revenue growth for government. So Treasury loves it.
As an example: salaries/wages between $45,000 – $135,000 are taxed at 30 per cent. If you are earning $50,000 and manage to get a 4.6 per cent CPI wage rise it’s an extra $2,300 a year. You have maintained the real value of your wage – right?
No. It is eroded because of the tax take. Your pay rise is all taxed at 30 per cent costing $690. This is a ‘real cut’ in your wages.
Why not index tax brackets? Too much taxpayer money has vanished due to mismanagement and handouts.
• The NDIS ($39 billion per annum blow out). The NDIS was budgeted to cost $14 billion in 2025-26 but costs $53.8 billion. It is riddled with inequities and rorts. Labor has pledged to repair it by capping its growth – so this has to be funded going forward.
• Tobacco tax fiasco ($8 billion loss). Like the NDIS all the parties are to blame. Any economist could have told them what would happen when the price for a pack surged past $50. The black market is estimated to cost $8 billion in tobacco revenues forecast over five years.
• The 26 cent (Iran War) fuel excise rebate (cost: $1 billion per month). It expires end June, it is not targeted so another subsidy for mining, and most benefits the wealthy. If it ends on 30 June, fuel prices will jump 26 cents pushing inflation to 4.6 per cent. Interest rates will rise.
• The Whyalla bail-out ($2.4 billion includes SA contributing $60 million). Mr Albanese has made ‘Green Energy’ a funding condition adding $500 million cost to taxpayers.
• Melbourne Suburban Rail Loop ($3.8 billion). Labor Premier Chris Minns describes this as ‘NSW taxes being trucked down the Hume Highway to Melbourne’. Victoria goes to the polls on 28 November.
• The Universal Energy Rebate ($5.3 billion spent over two years). A $450 universal handout that put my own electricity bill into credit (thanks to solar). The scheme has ended but taxpayers will never see that $5 billion again.
This sort of hubris is why Labor cannot afford to index tax brackets. Even though it would bring greater relief than a random spray of universal handouts.
Liberal Angus Taylor opposes Labor’s housing investor reforms. His housing solution is to rip into immigration, launch a mass deportation program, and strip a million Australian residents of entitlements unless they become citizens.
Some facts for Mr Taylor
In 1943 Robert Menzies explained the core beliefs for a new Liberal Party: ‘One of the best instincts in us is that which induces us to have one little piece of earth with a house and garden which is ours’.
He also supported large scale immigration. Australia’s population doubled from 7.2 million in 1943 (year of his ‘forgotten people’ speech) to 14.7 million in 1980. At the same time, home ownership increased from 53 per cent to 70 per cent. So, right there Mr Taylor, is the irrefutable proof Australia can do both.
It was Menzies who allowed non-European refugees to stay, and later eased restrictions on Asians. Menzies who abolished the dictation test in 1958. He told us ALL migrants should be treated ‘in every way as a fellow Australian’. I rest my case.
Lennox Head-based Catherine Cusack is a retired NSW Liberal MLC.
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