The Vanguard: The ‘have a go budget’ – Coalitions second attempt to savage welfare spending

After massive community opposition to Coalition’s 2014 budget the Senate majority wisely decided to oppose the $24 billion spending cuts to social welfare. The two stand out measures that the Government couldn’t implement last year were reductions to the age pension and introduction of the GP co-payments.

Unable to force through the savage budget cutbacks that the Business Council wanted, Treasurer Hockey has now changed tack with his language from the aggressive “budget emergencies” and “ending the age of entitlement” to the more reassuring tones of “fairness” and “jobs for families”.

Some ‘choice bits’ under assault from the 2015 Budget

However this new rhetoric attempts to camouflage their spurious claims of assisting families but which are in actual fact another round of attacking the poor, workers and their families. The Government asserts that their proposed changes to childcare rebates will see families  who earn between $65,000 and $170,000 a year, $30 per week better off.

However this is a sleight of hand. The rebate will cost around $3.5 billion but will be paid for by cuts to the family tax benefits which amounts to $5 billion.

The Coalition has stated that this new rebate is on the proviso that the Senate accept their cuts to the family tax benefits. This will see payments to families stopped once a child reaches age 6 instead of the previous cut out age of 16; a reduction by as much as $6000 per year for lower-income earners.

To rub a bit more salt into the wounds of hurting families parents will have to undergo a workforce activity test to be eligible for the full rebate. A definite attack on single parents, who in the main are women.

Women who secured paid parental leave in their workplace agreements will now loose access to the existing Government paid parental scheme from July, 2016. The Coalition ferociously demonises this once legal entitlement to access both private and government parental leave with the blame speech of “rorting” and “double-dipping”; a measure that will save the budget over the next 4 years $968 million.

The unemployed is another section of the community that the Government still wishes to victimise. It is an indictment of the capitalist system that unemployment exists at all.

In fact capitalism always operates on basis of having a reserve army of unemployed, it cannot guarantee nor does it want to achieve full employment. This keep labour costs down and curbs militancy on the job.

Even though the Government has backed off from last year’s scheme for a 6-month wait before school leavers can receive unemployment benefits, they still propose a waiting time of one month. Job seekers under the age of 30 will be required by the new “Work for the Dole” scheme to complete 25 hours per week of work for the dole or another “approved activity” for six months each year.

The age pension will not suffer the original plan to cut indexation rates, but the government will now impose assets tests (set previously at $1.15 million to a $823,000 limit) to refuse pensions to greater numbers of retired people. This will see 91,000 lose the age pension and 235,000 suffer a pension reduction, a saving to the budget over the next 4 years of $2.4 billion.

Abbott and Hockey parrot the Business Council’s ideology that the pension should not be seen as a retirement entitlement but only as a protective measure.

As much as the government boasts about cutting taxes it is relying on bracket creep, where PAYE tax payers are pushed into higher income brackets as a result of wage increases and inflation, to supply 80 percent of their increased revenue over the next four years. This will see the average income tax rise from 21.7% to 27.4% over the next ten years and is the main method of eradicating the $35 billion budget deficit within four years.

Buying off Small Business with “Get out there and have a go!” tax bribe

With ironic opportunism the government in this year’s budget has presented small business and contractors with $5.5 billion worth of tax concessions, after previously overturning Labor’s small business instant asset write off tax deductions.

This small business package is Hockey’s showpiece to achieve ‘economic growth and job creation’, and to buy votes at the next Federal election. On offer is tax write-offs up to $20,000 for equipment purchases to the 780,000 businesses who have turnovers of less than $2 million a year and a tax rate reduced from 30% to 28.5%.

Small businesses who spend up to the $20,000 limit will be able to claim an unlimited number of tax deductions over the next two years. However ‘tradies’ who rush out to spend may inadvertently lift their output and push themselves over the $2 million a year threshold and automatically lose the $20,000 write-off.

Interesting figures from The Australia Institute

The Australia Institute (TAI) argues in a document entitled It’s the revenue stupid: Ideas for a brighter budget , “… that 70 per cent of the budget deficit is caused by a fall in revenue and 30 per cent by an increase in spending. In other words the budget it is not collecting enough tax while increased spending is only impacting on the budget in a relatively minor way.”

In order for the government to: firstly, “reduce the budget deficit by billions”; secondly, “make savings progressively with those with the most ability to pay paying the most”; and thirdly “make savings efficiently, minimising market distortions and in some cases correcting distortions already in the market” TAI recommends eight policy solutions.

TAI has put forward two different types of revenue proposals. The first are fully modelled and costed policy changes. They include;
– Changes to super tax concessions
– Restrictions on negative gearing
– Scrapping the capital gains tax discount
– Introducing a Buffet rule (minimum average tax rate on high income earners)

The monies raised by this policy approach:
Revenue measures                                         Estimate of revenue raised ($m)
Super tax concessions                                                      $9,616
Restrictions on negative gearing                                        $3,491
Scrapping the capital gains tax discount                             $4,039
Introducing a Buffet rule                                                   $2,492

“If these four policies were introduced they could raise up to $19.5 billion dollars a year, the majority of which would come from high income households.”

The second are revenue measures that have not been modelled. They include;
– Banking super profits tax
– Financial transactions tax
– Estate tax
– Restricting fossil fuel subsidies

The monies raised by this policy approach:
Revenue measures                                         Estimate of revenue raised ($m)
Bank Super Profits Tax                                                    $5,700
Financial transaction Tax                                          $1,000 to $1,400
Estate Tax                                                                      $5,000
Restricting fossil fuel subsidies                                         $11,517

“These options have not been modelled to the same degree of detail as policy options such as negative gearing and capital gains tax, superannuation tax concessions, and the Buffett rule. As such, these are offered not as fully-costed policies but as an illustration of the wide range of options available to Treasury, each of which must be preferred to spending cuts on services disproportionately relied-upon by low-income households.”

The case for a super profits bank tax and ending tax concessions

Recent profit figures for each of “..the big four banks in table below have seen these banks earn pre-tax profits of $41 billion or an average return on equity of well over 20 per cent. Super profits worth some $18 billion are generated by the big four banks.”

Profit of the big four banks in Australia
Bank                                             After tax ($m)     Before tax ($m)
ANZ                                                 $7,283                $10,308
Commonwealth Bank                         $8,650                $11,997
National Australia Bank                      $6,802                $7,955
Westpac                                           $7,625                $10,740
Total                                                $30,360              $41,000
“Tax concessions are worth $11.5 billion to the firms who claim them. Business lobby groups generally try to down play the importance of tax concessions. It is not hard to see why given the size of some of these tax concessions.”

Selected tax concessions
Subsidy                                                                   Year     Subsidy amount ($m)
Fuel tax credits                                                          2015-16             $6,822
Concessional rate of excise levied on aviation
gasoline and aviation turbine fuel                                2015-16             $1,310
Excise concession on ‘alternative fuels’                        2015-16             $450
Statutory effective life caps                                        2015-16             $1,930
Capital works expenditure deductions                          2015-16             $1,005
Total                          $11,517

The above figures and information gathered by TAI powerfully argues the case that the rich and corporate world could quite easily and should be made to pay down the Federal Government budget deficit.

Banksters are the predators and winners of government debt crisis

Government budget deficits are the consequence of permitting large corporations tax minimisations scams, low company tax rates and a plethora of government subsidies. PAYE taxpayers, who are considered responsible for the social welfare component of the budget, are then automatically blamed for causing government debt.

The cheaper option of taxing the corporations and banks rather than borrowing from them, with the accompanying interest, is never considered! Lenders demand that capitalist governments cut social spending, sell off state assets or tax workers to service their public debts.

Banks being the biggest lenders to governments are the major beneficiaries from government debts. It is a bonanza for them.

This credit/debt crisis encouraged by the banks induces governments to temporarily borrow their way out of their debt problems. When the government net debt-to-revenue ratio is seen as getting too big and becoming a risk, at the instigation of the IMF and credit ratings agencies, lenders demand higher interest payments or refuse to lend more.

Their panacea of cut backs on social spending, sell off/privatisation of state assets and finally raising taxes on the working class only exacerbates the economic crisis they brought about in the first place.

Links to articles posted on the http://www.cpaml.org  website for week ending 24 May 2015

Social Impact Bonds – private capital moving in on social service                             http://www.cpaml.org/posting1.php?id=196

The ‘have a go’ budget – Coalition’s second attempt to savage welfare funding     http://www.cpaml.org/posting1.php?id=197

Contributed articles, comments and enquiries are welcome.

Comradely regards,

CPA (M-L)

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