For a Coalition Treasurer, giving a speech to a group of accountants should be a golden opportunity.
Treasurer Joe Hockey must have thought so when he accepted a chance to speak to the Tax Institute and Chartered Accountants of Australia and New Zealand. The government has been attempting to kickstart a conversation about tax reform for some time now.
True, that effort has been pretty ineffectual, in keeping with the general state of disorganisation afflicting the Abbott government. Hockey has held some tax summits and chaired some COAG meetings. He has put out media releases and given speeches. But he hasn’t announced much. No tax cuts. No GST proposals, save for putting the GST onto online purchases. No agreement of substance on tax issues with the states.
Even so, yesterday must have seemed like a pretty easy crowd. Hockey duly turned up to deliver a speech on the evils of bracket creep, that onerous burden on the hardworking taxpayer.
Bracket creep, he reminded us, punishes industrious Australian taxpayers simply because inflation pushes up their incomes.
“Where, we have to ask,” the Treasurer had to ask, “is the incentive to work harder and to reach higher?”
“Why should the reward for hard work and endeavour be swallowed up by higher taxes?”
Hockey went further: income taxes should be cut. This is the way to restore the incentive for good honest Aussies to “have a go.”
“Reducing taxes will put money back where it belongs — in people’s pockets — and send that simple message I spoke of earlier: have a go!”
It sounded like a stump speech for the coming election campaign. Hockey’s office clearly thought they were onto a good thing: the speech was dropped to media outlets and got a good splash on Monday morning, including on the TV networks.
Who could have any quibble with a Coalition Treasurer announcing his intention to lower income tax?
Plenty of people, it turns out.
The speech was just hours old when a rival group of accountants, CPA Australia, slammed it. “The Treasurer appears to be caught in a cycle of restating the problems rather than rethinking the solutions,” CPA’s Alex Malley told the ABC.
“The issue of income tax, GST, superannuation, company tax, land tax is yet to be discussed ... it really is being deferred and deferred and deferred.”
Malley is right. This Treasurer is nowhere near a genuine discussion of tax reform. Meaningful reform would have to include a holistic examination of Australia’s tax and transfer system, and therefore Australia’s remnant welfare state. It would also have to look at pressing economic distortions like negative gearing and superannuation tax concessions.
That’s not what we’ll get from the Coalition.
Coverage of Hockey’s speech was sceptical, to say the least. Fairfax reported it as “Joe Hockey can't say how he would fund personal income tax cuts.”
Business journalist Alan Kohler called it “truly awful.”
As New Matilda’s Ian McAuley points out today, Hockey misled on the key issues. Australia does not have a particularly high rate of income tax. Nor are we a high tax country. And the idea that cutting marginal tax rates will provide incentives for people at the top of the income scale to work more is largely discredited.
But there is a bigger credibility issue for the Treasurer than tax. That issue is the budget deficit. No-one made more of the fiscal deficit than Joe Hockey in opposition.
Anyone who can remember longer than a fortnight can recall Hockey banging on about budget emergencies. The doom-laden rhetoric was constant. There was a “budget emergency.” It was “the end of the age of entitlement.” We must all be “lifters, not leaners.” We had to “get to surplus and do it fast.”
This has left Hockey with a bit of a problem. Announcing tax cuts looks rather inconsistent.
Tax cuts will increase the deficit. This is an actuarial fact that is quite independent of Hockey’s incentivising injunctions. So if cutting taxes means increasing the deficit, where does the government stand on the deficit?
Hockey’s innumeracy, or perhaps simply his confusion, was on display when asked on ABC Radio today whether the deficit or income taxes were his priority.
"Well, it's both," he replied.
No wonder Greens leader Richard Di Natale called it, pointedly, “voodoo economics.”
As Hockey blundered his way through the tax debate, Australia’s financial markets nose-dived. After the markets opened for Monday, the ASX 200 shed more than $50 billion in volatile trading.
The new burst of global financial instability put a poignant semi-colon on Hockey’s tax thought bubbles. Suddenly the Treasurer’s insouciant promise of lower taxes was placed in a whole new context.
Hockey did his bit for confidence in the moment. He appeared on Channel 9 today to reassure investors. “There is no crisis, it is a correction," he claimed.
Time will tell. Markets do indeed go up and down.
But it’s also clear that the economic situation in China is serious, and that Australia is already being affected by Chinese events. If things go really bad in China, Hockey’s worst nightmares could come true.
Australia’s economy is growing only slowly. Domestic consumers are only just beginning to awaken from a long slumber. Our big resources exporters are being hammered by plunging commodity prices. Interest rates are already pushing on a string. An economic downturn from here could be very nasty.
How would the Abbott government handle a full-blown economic crisis? What if the property market crashed? What if a big bank got into trouble?
Considering how badly the Coalition has mishandled even small-scale political dramas, the signs aren’t good. Confusion and crisis mismanagement have been hall-marks of this term in government.
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jexpat
Posted Tuesday, August 25, 2015 - 15:21
Hockey sounds like nothing so much as George W. Bush in the early 00's.
This user is a New Matilda supporter. nobody456
Posted Tuesday, August 25, 2015 - 15:55
When Hockey and Rudd were morning television "celebrities" during the Howard years it was very very obvious who had the brains and who was the buffoon. Lots of people must have seen Hockey's inadequacy then and yet they somehow thought that when he was allowed to run the country he would miraculously know what he was doing.
This user is a New Matilda supporter. ejhr
Posted Tuesday, August 25, 2015 - 16:22
Voodoo economics is the name of the game right throughout the western [at least] world. Hokey[sic] is just spouting the corporate world's line that austerity is good, and that prosperity is just arounfd the corner, if only we give more to the rentier parasites and keep cuts to the income of the 99%.
Reality is different. We NEED BUDGET DEFICITS otherwise we take from the non government sector and that's austerity, leading to loss of jobs and GDP. The government has to spend money into the non government sector, to keep up with economic growth and have fuller employment and more GDP. That's why we see priogress today. We have a budget deficit. If Hokey[sic] got his way into surplus we would soon descend into recession. The economy is motoring along precisely because the reality is not what he preaches. He can take no credit!
Harper in Canada, and Cameron in the UK are in the same boat as Abbott and Co. Labor also is the same, except for the stimulus in 2009, which was what was exactly needed!
Max Gross
Posted Tuesday, August 25, 2015 - 16:45
These dangerous idiots really are just making it up as they blunder along. My budgie knows more about economics than smoky Joe!
This user is a New Matilda supporter. hannahs dad
Posted Tuesday, August 25, 2015 - 17:03
Plan A part 1
Whip a quick $9 billion into the Reserve Bank even if they don't want it and blame Labor for a terrible horrible budget deficit crisis that is an emergency and use the fear generated as an excuse to cull social services and hit the poor in the first budget and to cover up all the pre-election lies. ...
That plan failed.
The public were too smart.
Plan A part 2
Assume that just cos we are the COALition and the natural leaders all will be well and there will not be a blowout in the deficit, jobs will nagically grow fron out of the woodwork climate change will go away and we will be praised for our cruel xenophobia.
That plan failed, reality intervened - unemployment is a record levels for a decade and the abuse is actually getting attention [thanks NM]
Plan A part the third
OK get the media to go quiet on the budget deficit emergency and switch to standard operating procedure for the COALition, namely tax cuts for our deserving rich mates and shove the tax burden where it belongs- onto the poor via GST increase.
Plan A, all its parts, have failed or/and are failing.
There is no plan B.
This user is a New Matilda supporter. RossC
Posted Tuesday, August 25, 2015 - 17:06
Thats no surprise, Max Gross, as Joe is getting his directions from a smuggled-budgie
umibozu
Posted Tuesday, August 25, 2015 - 17:21
"Reality is different. We NEED BUDGET DEFICITS otherwise we take from the non government sector and that's austerity, leading to loss of jobs and GDP. The government has to spend money into the non government sector, to keep up with economic growth and have fuller employment and more GDP. That's why we see priogress today. We have a budget deficit. If Hokey[sic] got his way into surplus we would soon descend into recession. The economy is motoring along precisely because the reality is not what he preaches. He can take no credit!"
^^ What EJHR just said.
I am so sick of all this surplus rubbish. It's smoke and mirrors.
sigemuk
Posted Tuesday, August 25, 2015 - 17:24
I argue that the tax is only a vivid picture of the folly of government in managing the state. They beg from people. Ironic, but that happens in all countries
Jasa SEO | Jasa pembuatan website
HarryV
Posted Tuesday, August 25, 2015 - 17:32
@ejhr
You are on the right track. We (usually but not always) need budget deficits to soak up un and under employment. In most circumstances attempts to get to surplus will only lead to lower employment and probably, recession.
The Federal government is never fiscally constrained and does not need to fund its spending from taxes. It spends simply by book entries. Taxes act to control demand, to discourage or encourage certain activities, but never to fund spending. The federal government is the issuer of the currency and its capabilities are not comparable to other entities such as households, sub-national governments and businesses which must fund themselves from wages, taxed and/or debt in order to spend.
Deficits do NOT matter, the aim should be to run the economy at a level that soaks up the most of the 800,000 unemployed- a national disaster we seem to accept.
There is NO debt and deficit disaster. Only an under-performing economic disaster.
PS: no "printing money" is involved and inflation will only become a problem should the federal government try to spend beyond the productive capacity of the economy. We are running well below capacity (high unemployment) so doubt we need to worry about inflation untlil full employment is reached.
http://www.nextnewdeal.net/deficit-nine-myths-we-cant-afford
HarryV
Posted Tuesday, August 25, 2015 - 17:42
I should also add that ideally taxes SHOULD be as low as possible as low taxes put more money into people's pockets.
Taxes do not fund the federal government, it does not need taxes in order to spend- quite unlke households etc. But... taxes serve other purposes, namely to control demand, promote equity in society and to encourage or discourage certain activities.
In that vein, taxes on low income earners ought to be as low as possible; low income earners will stimulate demand because they tend to spend most of what they receive. In contrast, higher income earners tend to save more of what they earn.
Megpie71
Posted Tuesday, August 25, 2015 - 17:57
(Mods, you have a comment spammer - sigemuk. Might want to talk to them about paying for advertising space, and sparing the rest of us the sight of the Mad Monk in his speedos).
It's increasingly clear this government has no idea whatsoever when it comes to taxation. They're reluctant to increase taxes on the upper end of town, or chase down avoided tax from corporations and family trusts. They're trying to get the states to push for an increase to the GST by pleading poverty (we can't afford to spend money on health or education, that's a state thing, so the states need to ask for more GST). They're trying to look tough on the GST by decreasing the overseas purchase GST-free amount to $0 (even though it's looking likely to cost them over $2 billion to pull in $600 million in GST - so we're going to be spending more than $3 to recover $1). They don't want to look at altering capital gains tax, or reducing the tax breaks for super for the well-to-do, or anything like that, because that might just hurt their (rapidly diminishing) base. Now they're talking of another "discussion" with the Australian people to look at what can be done about the tax system (didn't we just finish spending money on one of those, notwithstanding the Henry report a few years back?). The only conclusion I can draw from all of this is that they're going to keep on holding reviews until they get one which gives them the answers they want.
I think the thing which annoys me most about it all is that the Liberals keep telling us they're the party of small business, and the party which understands money management. So what are they on, and is it available on the PBS? I could use some.
PaulMurchie
Posted Tuesday, August 25, 2015 - 18:01
stagnating wages generally wouldn't rob the middle income earner via bracket creep so WHY NOW (as Fairfax pointed out) does Hokum, after getting paid very well to do NOTHING for TWO YEARS, launch into a new Pantomime of flagrant NeoCon stupidity ? could it have to do with his "leadership" capabilities or prospects ? :1% !
and what is the concept of "more work" to people earning above $180,000 ? hyper-aggressive tax avoidance ? coming up with more off-shores than previously to hoard wealth in ? having to instruct the Property Manager that housing is about More Money and that it's probably better to rent to wealthy Chinese than not-so-wealthy Australians ? pffft ... as usual, Hokum the Tatcherite dismisses "society" (because it doesn't exist) and, as is the anti-intellectual duty of such Corporate Borg, talks down to the Uppity Plebs in Voter Land (who don't exist and who wouldn't understand if they did) by saying that tax cuts for the Rich will be great (for those whose jobs are diminishing and being erroded and whose wages are stagnating). what is left out of the equation are further Austerity measures and cuts to services (health, social security, education, housing, investment), but half a lie can sort of look like a carrot if you hide the stick and omit the details ... "the best kind of welfare is a job" as they like to tell themselves - it must be the case; these political Careerist-Pensioneers have been rorting the system for decades ...
ret
Posted Tuesday, August 25, 2015 - 18:13
Well said, @ejhr and @HarryV.
Nothing guarantees a recession like a string of surpluses. If more people understood that 'government debt' is just another term for 'private savings', we could have a sensible conversation about this stuff.
Instead we get this rubbish about 'sensible path to surplus' as if it's the very paragon of economic virtue, and it most certainly is not.
Target unemployment and underemployment and the rest will take care of itself.
Allan
Posted Tuesday, August 25, 2015 - 19:30
Several commentators on this article (ret, ejhr, and HarryV) seem to understand how the monetary system actually works, especially regarding the fact that budget defecits finance non-government savings. A good place to start for anyone interested is Bill Mitchell's blog.
This user is a New Matilda supporter. swarmi
Posted Tuesday, August 25, 2015 - 21:27
Capitalism is a system of crisis. The one percenters will limp comfortably along for as long as we let them. The debate about how best to manage a system wedded to inequality and planet destruction best start with how to get rid of it. Otherwise, just hope that in the next crisis, if not this one, the market does not dispense with you as well. Or raise your taxes.
This user is a New Matilda supporter. KJames
Posted Tuesday, August 25, 2015 - 22:00
Why oh why does no-one seem to understand that we need a much larger deficit, ie much higher government spending to STIMULATE the economy? We are on the verge of a recession, Australian infrastructure is in need of a massive boost, not to mention the clear need for much greater public investment in housing stock.
Hockey and the coalition are clearly incompetent economic managers, their policies (if we can calll them that) are contradictory, short-sighted and foolish. ALP policies are not much better alas, as they are still in thrall to the neo-liberal economic idiocy that has created the mess of the last 30 years.
Why are income gaps widening, real wages stagnant and workers under constant pressure to get by on less (penalty rates)? it's the neo-lib con. Profits are up, wages are down as a proprtion of GDP.
Are we going to keep putting up with this rot?
ret
Posted Tuesday, August 25, 2015 - 22:13
Thanks Allan. I'd actually recommend https://modernmoney.wordpress.com as the best place to start. It reprises a lot of Bill's material, but is a little more accessible for the beginner.
I liken this fixation with budget surpluses and monetary policy (interest rates etc) rather than full employment as being like a footy coach using the number of inside-50s or scrum wins to measure their success. Yes, they're probably useful numbers, but they don't tell you whether you're winning or not.
This user is a New Matilda supporter. Sooz
Posted Tuesday, August 25, 2015 - 22:42
Meanwhile there were also reports yesterday that Hockey plans to give $2.2billion to Adani to build their railway line to nowhere.
And then there's this:
https://theconversation.com/three-holes-in-hockeys-plan-to-levy-gst-on-overseas-purchases-46460
kieranbutler
Posted Tuesday, August 25, 2015 - 23:29
I think I've said it best here at the Edinburgh Fringe for the past 3 seasons. Australia is Fucked. Until 9.40 PM at Cowgatehead in Up2 Extra till Aug 29. Extra show on Aug 29 at 2.30 PM at Cowgatehead in Up L. Next stop Ireland & England. Spreading the word as best I can. "Don't be like Australia. It's Fucked". See kieranbutler.com for songs and more info.
"We're cruel, we're racist, we're genocial. And very soon we're gonna be an economic basketcase." - Tony Abbott, being remarkably honest at a piss up you weren't invited to.
calyptorhynchus
Posted Wednesday, August 26, 2015 - 07:29
Everyone agrees that the real probelm with Australia is high-income people not working hard enough, which they will do when they get tax cuts [sarcasm mark].
Screaminkid
Posted Wednesday, August 26, 2015 - 08:17
As simple as it sounds, the whole aim of this scurrilous Gov is to cut tax for the Rich while wacking it up on the poor and ordinary working Australians(the Rich just hope Joe can keep to the script) mostly in the form of raising the GST.
We are being groomed to be an impoverished, cheap, desperate workforce for the rich corporations while our Social Services are starved of funds or closed down.
We will hav to pay for everything and the premiums will never go down!
This bunch must be thrown out and we will hav to b careful of who we put in their place.
Unfortunately we don't have a man like Jeremy Corbyn untouched by the Malignant hand of Rupert Murdoch.
New Labour in UK was dominated by Murdoch because of the skeletons he knew in their personal cupboards which is why they are fighting their own Social candidate within their own party!
zeroxcliche
Posted Thursday, August 27, 2015 - 01:48
from what I have read.... and think people should be aware of is that the fast drop in many western markets during their first hour is mostly a result of computer generated algorithms. This is part of a new culture of volatility that may contribute to a serious crash in the future but in most circumstances is a way for investment companies who specialise in this area to drain profits from the system over time - like the big investment banks now and in the past making killings from recessions but on a reduced scale.
I think Australia could solve its loss of corporate tax revenue problem by looking into a Turnover Tax - like a GST but applied to companies who have cycle through values of more than a hundred million. Like the GST it can't be offshored or ultilise deductions - In the case of Apple and its costs shifted to Ireland for taxation there, the Turnover Tax would act like another GST based on a Gross or sale figure. This would lead to a change in their taxation strategy rather than an extra charge to consumers. Changes in Company Tax for big domestic companies could be made to effect revenue neutral for many and greatly simpify the system.
DrGideonPolya
Posted Thursday, August 27, 2015 - 09:21
One can well ask where does the Australian Government stand on deficit.
Thus Australia’s Gross National Debt is about $500 billion but this can notionally be removed by default, national bankruptcy, printing money or being forgiven.
However there is an inescapable Carbon Debt for all countries arsing from accumulated greenhouse gas (GHG) pollution that will inescapably have to be paid by future generations (thus, for example, if we don’t spend hundreds of billions on a sea wall, Melbourne’s 200 kilometre string of bayside suburbs will be flooded by storm surges in the coming century).
Based on a damage-related Carbon Price of US$200 per tonne CO2-e (see (see Dr Chris Hope, “How high should climate change taxes be?”, Working Paper Series, Judge Business School, University of Cambridge, 9.2011: http://www.jbs.cam.ac.uk/fileadmin/user_upload/research/workingpapers/wp1109.pdf ), the World has a Carbon Debt of $540 trillion that is increasing by $20 trillion each year, and Australia has a Carbon Debt of $11 trillion that is increasing at $600 billion per year with an annual per capita increase in Carbon Debt of $60,000 for under-30 year old Australians (see “Carbon Debt Carbon Credit”: https://sites.google.com/site/carbondebtcarboncredit/ ) .
The Young aren’t revolting yet, but at some point in time the truth will get out through the Mainstream Media Wall of Silence, the penny will drop and they will demand their pound of flesh from the climate criminal older generations who have betrayed them.
Since accumulated wealth in our Carbon Economy is based on GHG pollution and 50% of wealth is owned by the One Percenters, the Young will get the Olders to meet the accumulated Carbon Debt via a Wealth Tax (see Gideon Polya, “4 % Annual Global Wealth Tax To Stop The 17 Million Deaths Annually”, Countercurrents, 27 June, 2014: http://www.countercurrents.org/polya270614.htm ) ) and they will insist that increasing Carbon Debt is minimized through application of a proper Carbon Price.
Unfortunately the penny hasn’t dropped yet and in Australia Lib-Lab (COALition and Labor Right) governments are still flagrantly stealing the one common atmosphere and ocean of all people as a sewer for GHG pollution and burdening the Young with an annual per capita increase in Carbon Debt of US$60,000. And they are also are complicit in the annual deaths of 10,000 Australians and 100,000 others worldwide from Australia-generated carbon fuel burning pollutants (see “Stop air pollution deaths”: https://sites.google.com/site/300orgsite/stop-air-pollution-deaths and World Health Organization (WHO), “7 million premature deaths annually linked to air pollution”: http://www.who.int/mediacentre/news/releases/2014/air-pollution/en/ ).
The Young and those who care for them will utterly reject the thieving, mendacious, mass murdering and climate criminal Lib-Lab (COALition and Labor Right) climate terrorists, vote 1 Green and put the COALition last.
ret
Posted Friday, August 28, 2015 - 00:46
Dr Polya,
I don't disagree with you regarding your comments about carbon and GHG debt, but your suggestion about the Gross National Debt being solvable through default, forgiveness etc is just not right.
The National Debt is the amount of net financial assets floating around in the economy, and equates to the total dollars held by Australian citizens, Australian businesses and foreign exporters who sell stuff into Australia. There will always be national debt whilst ever people and businesses want to "save" financial assets. The $A is fiat, and there is no limit to the number of them that the federal goverrnment can issue, unless there are more of them than there is productive capacity in the national economy, at which point inflation will occur. And with the high unemployment levels we have, there's no risk of that.
The term 'debt' is unfortunate, because it means very different things to currency users - you and I - and the currency issuer, the federal government.
cheers
RET
John Armour
Posted Friday, August 28, 2015 - 21:18
Dr Polya,
I second ret's remarks. The national debt should not be called a debt. It's an asset of the private sector, and never has to be "paid back".
Unfortunately, the Greens leadership doesn't understand this and continue their embrace of deeply flawed neo-liberal ideology , thereby handing their adversaries the ammunition to discredit their policies: "where's the money coming from?"
This user is a New Matilda supporter. Brian Harry
Posted Saturday, August 29, 2015 - 12:16
As Australia's Treasurer, "Shonkey" Joe Hockey would make a good showground spruiker. He realises now that his "Debt and Deficit" lie didn't work, and with an election just over the horizon he's trying to bribe voters with a tax cut.
Honestly, how on Earth did Australia sink so low as to vote Abbott, Hockey, and the rest of this extremely motley crew of idiots into power. It's worse than a second rate TV soap opera, but the stakes are Australia's future!
Stop that ceaseless giggling Julia, someone's going to have to clean up this mess very shortly..............
Roy69
Posted Friday, September 4, 2015 - 02:09
Don't blame Australia. Bill Shorten and his merry men deserve all the credit. To cap it all, he's still hanging around, just to ensure that Tony gets a second term!