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Making the budget balance

The levy is now part of a package of tough measures under consideration that include scaling back benefits for families earning more than $100,000 a year and charging more fees for bulk-billed visits to doctors.

NATSEM estimates that putting a cap on family benefits for families with a combined income of $100,000 would hit a further 280,000 families and save $1.1bn.

NATSEM principal research fellow Ben Phillips said loss of the benefit would cost these families an average of $3900 a year and be particularly harsh on larger families. With Tony Abbott stating that no tax cuts are likely for another four or five years, the government will also be relying on inflation pushing an increasing share of all salaries and wages into higher tax brackets.

The failure to adjust tax thresholds will be costing individual taxpayers an additional $3bn each year, according to calculations by Deloitte Access Economics. The added burden is cumulative so that by 2017-18, taxpayers will be paying $15bn more in income tax than they would if the Abbott government was adjusting the tax thresholds for inflation.

This still leaves a substantial gap to be filled by spending cuts, with the Audit Commission warning that the deficit — forecast to be $33.9bn in 2014-15 — would still be above $30bn in 2017-18 in the absence of corrective action.

While the details of the deficit levy are yet to be finalised, it is expected to amount to 1 per cent on incomes over $80,000 and 2 per cent on incomes over $180,000.

Within the government the tax measure is seen as the only way to ensure the pain in the May 13 budget is spread evenly to those on higher incomes, given that cuts to benefits leave richer Australians unscathed.

Labor, the Greens and smaller parties have all declared their opposition to the levy.

Source

I’m rather ambivalent about this on one hand I can see the necessity but I wonder about the politics if this actually comes to pass . Because we should all remember that this idea could still end up being far less onerous than it currently seems simply because what is mooted now may be in excess of what is actually in the coming budget.  Good to se that the PPL scheme is having its threshold lowered from 150K to 100K though.

Interestingly as the Labor Party and the Greens historically advocate for higher taxes for the rich its amusing to see them having kittens about what is an impost mainly on the rich…

on the other hand some of may conservative friends are understandably  upset about any tax increases .

Anyway what do readers think about all of this budget speculation?

Cheers Comrades

20 australian dollar note john flynn

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18 Comments

  1. les h matthews says:

    “an impost mainly on the rich…” ???

    you cannot be serious.

  2. Ray Dixon says:

    The point is, Iain, that all of Abbott’s harsher policies are aimed at ordinary individual taxpayers, while he plans to leave large corporations untouched. Actually no, that’s wrong – he’s giving large companies a 1.5% tax cut worth $billions to them, while at the same time taking tax concessions away from small businesses like mine. Oh, and he’s repealing the Mining Tax so Gina can make more $billions. This is what you fail to acknowledge, Iain – Abbott and his merry men (and one woman) are all about giving benefits and free kicks to the large corporates while making the rest of us pay. And while hurting pensioners. This is crap Governance by any measure.

  3. Iain Hall says:

    Tony Abbott steps into a ute near Bourke in New South Wales Tony Abbott steps into a ute near Bourke in New South Wales. Photograph: Andrew Meares/AAP

    The Abbott government is considering a measure that would prompt another vicious backlash to its May budget: cutting back fuel tax rebates for miners and farmers and other agricultural businesses that are worth more than $3bn a year.

    Senior government sources have confirmed the budget razor gang has the fuel tax credit (formerly known as the diesel fuel rebate) “firmly in its sights” – a scheme that rebates miners and farmers and others for the off-road use of diesel.

    Another source said the rebate would be pared back for claims above a certain threshold, perhaps once $100,000 in tax credits have been claimed in a year, which would spare small farmers and small-time diesel fuel users such as fishers, some irrigators and Indigenous communities, but hit big miners and large agricultural concerns.

    A final decision has not been taken, but winding back the benefit would enrage the powerful mining industry which says the allegation that fuel tax credits are a subsidy, or corporate welfare, is part of a “thinly disguised anti-mining agenda” and which proved how hard it could lobby with its huge campaign against the Labor government’s mining tax.

    It would also cause a significant backlash from the farming lobby and would hit not just farmers but agricultural businesses including processors, sugar mills and irrigators.

    But the move would be backed by the Greens and environmental groups, which have long called for the abolition of the excise rebate.

    According to the parliamentary budget office the rebate to the mining industry will cost $2.4bn in 2014-15, $3.4bn in 2015-16, and $3.5bn in 2016-17. According to the tax office the full cost of the rebate was $5.5bn in 2011-12 – around $2bn to the mining industry and $700m to farmers, with large amounts also to the trucking industry – which gets a partial rebate of the 38.1 cent a litre fuel excise.

    What were you saying about the fuel rebate Ray?

  4. Ray Dixon says:

    I will believe that they’ll hit the big miners when I see it, Iain. Something tells me they won’t.

  5. Jeff G. says:

    Simple answer: increase the GST to 12.5% with a temporary increase (2-3 years?) to 15%. Tax people based on what they spend, rather than what they earn.

  6. Jeff G. says:

    Follow on from above, a GST increase is a sure fire way to raise tax revenue by billions. Increasing the GST should be a disincentive to spending and an incentive to saving. But Australians are too addicted to spending money to stop doing it. They would grizzle about the increase (like they did about the GST at first) but it would be forgotten in a few weeks.

  7. GD says:

    Before Abbott imposes a levy or a ‘great big new tax’ on high achievers, perhaps he should completely eradicate the remaining useless green schemes along with the wasteful Direct Action plan. There’s a few billion saved already. This governments’ proposed ‘Direct Action’ policy will do nothing to alter the climate for the better, whatever that ‘better’ is..

    While Direct Action is preferable to Labor’s Carbon Tax and proposed emissions scheme, it is a huge waste of money. Two pillars of Tony Abbott’s election campaign were ‘stop the boats’, which he has done and ‘stop the waste’.

    Until he ‘stops the waste’ he has no largesse to throw around on the PPL and other fanciful schemes.

    His mandate is clear. A ‘great big new tax’, such as this levy, is a denial of his election promises.

  8. Ray Dixon says:

    Direct Action is preferable to Labor’s Carbon Tax and proposed emissions scheme

    On purely dry economic grounds, which is what you are clearly advocating above, GD, that is a totally wrongheaded statement. The Carbon tax brings in about $6.5 billion per year, so how does Abbott’s plan to ditch the CTax and then spend a further $3 billion per year (as handouts to polluters!) stack up economically speaking? Something wrong with your maths there.

    As for the rest of your comment though, I’m pleased to see you’re none too happy with a lot of Abbott’s crazy ideas and not afraid to say so. You’re making progress old boy.

    As for increasing the GST, that won’t happen until their next term (if they get one) and even then, they’ll face a mighty big backlash from pensioners and low income earners who’ll obviously be the ones most impacted by having to pay up to 5% more on everything they consume, including possibly 10%+ more on food if it’s expanded to cover all consumption. What about rent? Do you think they’ll leave that alone? I’m not sure how (as was suggested) you encourage those on low incomes to “spend less and save more” – their problem is they don’t have enough to spend in the first place and will be the ones most cruelled by any lift in the GST unless they are compensated. Going to an election proposing an increase to the GST could be doing a Hewson.

  9. Jeff G. says:

    Of course any increase to the GST has to take low income earners and pensioners into account. As I have said here before, I think base pensions should be increased but that means and asset tests should be tightened up. It is ridiculous for people to be living in McMansions and getting the full pension because they have pumped money into their house rather than their super. Their options are either to sell up and downsize, to borrow against their equity, or go back to work. The pension should be a safety net but that is all.

  10. Ray Dixon says:

    any increase to the GST has to take low income earners and pensioners into account

    Easy to say, hard to achieve. The thing about GST is it is always increasing as the cost of Goods & Services rise. To add a further increase has a long term compounding effect and there is little that can be done to fully offset the disadvantage that would cause to those on fixed and/or low incomes. Increasing GST is just a lazy way of raising more revenue without addressing the underlying problems in the budget. It has no impact at all on high salary earners many of whom have their consumption paid as a form of salary, while their employer then claims the GST component as a credit. It makes the rich richer and the poor poorer. Pensions need to be addressed in any case, regardless of any GST imperative – ie the inequities that you (correctly) point out should be fixed independent of any other considerations.

  11. Jeff G. says:

    Increasing the GST might seem “lazy” but it goes the heart of the problem in this country, i.e. the way that we spend and tax. There is an “I want” consumer mentality that drives people to spend money on needless crap. This drives up personal credit and cheap imports, particularly of clothing and electronic goods. We need to up the GST not just to raise revenue but to have an effect on personal behaviours. One of the few things that should be exempt from GST is all fresh foods, i.e. fruit, vegetables, meat, milk.

    Taxation in this country is a joke. There has been no significant taxation reform for ages and we are in big need of it. Increasing the GST would be only part of a solution. We need to crack down on trusts, negative gearing, company tax. etc. Too many companies enrich themselves at the expense of the taxpayer, either through handouts or offsets.

  12. Ray Dixon says:

    We need to up the GST not just to raise revenue but to have an effect on personal behaviours

    Putting GST up to curb spending is an absurd, draconian notion and counter productive. You can’t get the two outcomes, only one will prevail and it’s likely to be the one that increases Govt revenue at the expense of the poor.

  13. Jeff G. says:

    When the GST was first brought in economists said it would be a brake on spending, I remember reading it at the time. As for the GST affecting “the poor”…. if there is no GST on essentials, like food basics and utilities, then “the poor” are no worse off. But if “the poor” spend their money on beer, ciggies, Tatts tickets and the pokies, that’s their own problem.

  14. Ray Dixon says:

    The introduction of GST in 2000 only caused a brake on spending in the short-term, as you would expect with an immediate 10% hike on nearly everything you buy. But spending soon returned to normal. You’re talking about a smaller increase having the ability to modify long-term behaviour on a range of goods including imported electrical goods and clothing. It won’t do that. Those goods are getting cheaper all the time so adding another 5% GST won’t stop people buying them. As for the “poor”, I wasn’t aware that the great majority of poor people “spend their money on beer, ciggies, Tatts tickets and the pokies”, I would have thought it was a minority. And GST does apply to the main utilities of electricity & gas. Only water is exempt. It also applies to a range of essential goods & services like petrol, phone bills, home repairs, newspapers, etc. Maybe the poor shouldn’t waste their money on those things either?

  15. Jeff G. says:

    Well I guess this all boils down to your view on who “poor people” are and what you think the welfare system should cover. For me welfare should ensure that people are housed, fed and kept warm. And, if they are unemployed, to help them find work. But that is all it should offer. Welfare should not be funding lifestyle choices like meals out or trips to the pokies. If people want those things then they need to make better or different decisions. If they can’t afford petrol, walk or catch the bus. If they can’t afford the newspaper, read it at the local library.

    Having said that, I think pensioners and people on heath care cards should be exempt from paying GST on all utilities. In fact there should be considerable discounts on those things (there already are but I think they are fairly small.)

  16. Ray Dixon says:

    I’ve already defined that: Those impacted most by any increase to the GST will be low income earners and pensioners. I’m not talking about those on unemployment and other forms of ‘I don’t want to work’ benefits, I’m talking about hitting those who through no fault of their own can least afford to be hit. That’s what increasing the GST will do. Better to increase the taxes on those earning over $100,000. Hit them hard. Labor’s only opposing that position because it represents an Abbott broken promise. But it’s one he should break. He should also break his promise to repeal the mining and carbon taxes on purely economic grounds. And he should break his promise to introduce that ridiculous PPL scheme and leave low income earners and pensioners alone – that’s not too hard to understand, is it?

  17. Jeff G. says:

    The problem with that theory is that the tax system is now so heavily weighted in favour of the wealthy that increasing progressive tax rates would not have make much difference. People on six and seven figure salaries have sussed all manner of avoiding tax. Same with companies, look at Google, $2 billion earned in Australia, total tax paid about $46 million. We need major tax overhaul in this country but as I have said, no party has the guts to implement it. Until then we are left to put band aids on gunshot wounds. And yes, it is the poor and lower middle classes who will suffer most.

  18. richard ryan says:

    ASIO informed Abbott his life was in danger, if he travelled to Bali—–too many terroists there, and they hate Aussies who are ruining their way of life——not the bull-shit we hear about the budget was his reason not to travel there. My opinion only.

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