Belt up, fellow Australians interested in sensible public policy. We’re in for another Big Stupid. Not since the “great big new tax on everything” line mowed down reasonable discussion about alternative ways to reduce greenhouse gas emissions has a political party so gratuitously abandoned rational policy development in the interests of a sledgehammer slogan.
The new Big Stupid is the Coalition’s decision to rule out any changes to superannuation taxes ever, or at least for a very long time – so that they can claim that only Labor and Bill Shorten increase taxes.
I’ve been banging on about this policy change ever since it happened, quite suddenly, earlier this month.
One minute the treasurer, Joe Hockey, was sounding very much like he would consider cuts to hugely generous superannuation tax concessions as part of the tax review, and assistant treasurer Josh Frydenberg was, quite properly, saying that pension and super changes had to be considered in combination. “You can’t look at any of these individual issues in isolation. You have to look at the broader system and how the superannuation system impacts upon the pension and is affected by the tax system,” he told Sky News.
The next minute the prime minister was ruling out any changes to the taxation of super because tax was, like, totally Labor. “They all live on Planet Tax. There’s their carbon tax, their mining tax, there’s all the superannuation taxes that they inflicted in government and they want to inflict again on the retirees of Australia,” he told parliament.
The new campaign was backed by videos and a barrage of tweets. It features in the speaking notes provided to MPs each day to help them stick to the script when answering questions.
“The Labor mantra is, and always will be: tax, tax and then tax some more”
“They will bring back the carbon tax. They will reopen the people smugglers’ opportunities. And at the first sign of rising mineral commodity prices, they’ll be at it again with their failed mining tax, despite their denials.
“Their latest thought bubble is a big new tax on superannuation and retirees,” they advise MPs to say.
And the new lines get an airing every time the prime minister takes the stage.
“What the Labor party wants to do is bring back the carbon tax, start up a super tax. Put the people-smugglers back in business and if they get a chance they will whack a mining tax back on as well. So there’s really a very clear contrast between the Coalition which is for jobs, for opportunity, for lower taxes. We’re for jobs, they’re for taxes. We’re for opportunity, they’re for taxes. We’re for giving incentives, they’re for more taxes and I think the contrast is becoming clearer and clearer and clearer,” was how he put it Friday.
Given the absence of most Labor policies and the screeching change of direction by the government, I’m not sure the contrast on economic and fiscal policy is actually at all clear, but the raw political strategy certainly is.
Except that a quick glance at the 2015 budget – replete with tax changes (mostly labelled “integrity measures”) and showing a revenue take rising to its highest level since 2006 and government spending rising to levels not seen since the global financial crisis – shows the silliness of the argument behind the new lines.
And when you consider that changes to the current superannuation tax system (which allows the top 10% of households to claim 40% of the $30bn in superannuation tax breaks each year) has been backed by the head of the government’s financial system inquiry, David Murray (a former Commonwealth bank chief), the treasury secretary, John Fraser, the former treasury secretary Martin Parkinson and most leading thinktanks and economists, it looks even sillier.
Yes, everyone agrees there should be generous tax concessions to encourage people to save for their old age. Yes, Labor would probably be well advised to consider some cuts to the pension as well. But virtually no one thinks the current super system, with its lavish wealth generation possibilities for the rich, is sustainable. In four years it will cost the budget more than the pension itself.
Of course Coalition governments will be more ideologically inclined to save money by cutting spending than by raising taxes, but to suggest that tax hikes can only occur under Labor is ridiculous.
The question is, can this new Big Stupid prevail? There are few factors running against it.
First, it is risking one of the biggest budget measures – Scott Morrison’s rejigging of last year’s aged pension cuts for a fairer system which sees about 170,000 part-pensioners get about $30 more a fortnight while better off part-pensioners lose their payments.
Seniors groups had been willing to wear the new plan, but only if it was followed by a proper review of retirement policy – both pensions and superannuation. Both the Council of the Ageing and National Seniors now say that without the review, they will oppose the pensions package. New research shows the pension cuts, without any changes to super, squeeze lower-to-middle income earners the hardest. The pensions policy may end up blocked in the Senate because the government wants to prosecute a simplistic political line.
Second, not even all Coalition MPs think it’s a good idea. The former assistant treasurer Arthur Sinodinos said publicly it was all about political tactics, confirming it was a “strategic decision” taken after Labor announced a policy for modest changes in superannuation taxation, aimed at creating a clear point of difference for the Coalition. Others called it an “illogical” and a “huge problem of our own making”. Few Coalition MPs are prepared to defend the decision privately.
Third, Labor was preoccupied with its internal leadership hari-kiri as Tony Abbott began the anti-carbon tax campaign and was flat-footed in its responses. This week, asked about an election fought around super and taxation, shadow treasurer Chris Bowen’s response was “bring it on”, although it remains to be seen whether Labor can actually mount the argument.
Any changes to pensions or super policies are messy and complicated – including the Coalition’s pensions plan and Labor’s on superannuation. But voters also have a strong self-interest in understanding them. And given the extraordinary consensus that some change to the taxation of superannuation is required, it surely can’t be ruled out by the comic book argument that “higher tax = Labor = bad”.
Then again almost every economist said some form of carbon price was the best way to reduce greenhouse emissions and that was blown away by rhetoric claiming that a price with an inflationary impact of less than half a per cent was a toxic wrecking ball that would destroy jobs, strike like a cobra and usher in an era of $100 lamb roasts. That mash-up of mixed metaphors makes “Planet Tax” look almost sensible.
