Ideas@TheCentre brings you ammunition for conversations around the table. 3 short articles from CIS researchers emailed every Friday on the issues of the week.
It was entirely predictable that the Shorten government-in-waiting would eventually get around to cancelling the refundable status of dividend franking credits. After all, they have big spending promises to pay for, and they can grab this tax bucket in the belief that only the Liberal voting base will suffer.
At least Shorten and Bowen deserve credit for revealing their intentions before the election and not waiting until after it. But that is where the credit should stop: as a tax policy, it is misguided.
Full refundability is consistent with the logic of the dividend imputation system, which is that the final tax on a dividend — including the 30% company tax — is the taxpayer’s marginal rate and there is no double taxation.
In the case of a pension-paying superannuation fund, for example, the marginal rate is zero, and to reach that position (leaving aside any other taxable income) there has to be a refund of the tax pre-paid by the company.
This is not to suggest that the dividend imputation system should be off-limits in any broad tax reform. There is a debate to be had about trading off imputation for a company tax cut larger than the government is proposing. But shutting down refundability isn’t reform; it’s a piecemeal revenue grab.
Unlike many policies today, refundability was carefully thought through; it was initially proposed in the 1998 white paper that introduced the GST, and subsequently endorsed by the Ralph Review of Business Taxation before being set into legislation. The fact that it was not part of the original 1980s (Labor) design of the imputation system might give Bowen a debating point, but is neither here nor there.
The Opposition’s announcement is the latest in a stream of soak-the-rich (meaning those on more than $87,000 and all self-funded retirees) policies, which Bowen claims are needed to undo the Howard era ‘largesse’. But the only largesse is in Labor’s own spending plans.
This week marks the 25th anniversary of the 1993 federal election, which was fought primarily over Liberal Opposition leader John Hewson’s economic reform agenda called Fightback! This is what Fightback! meant to a 22-year-old growing up in the outer suburbs of Melbourne.
In 1991, on my way to job interviews in the city of Melbourne, I walked past buildings with advertising signs that read “40,000 square feet to rent.” The job market looked bleak.
The recession we had to have put my father out of work in the manufacturing industry. Victoria was once again a rust belt. Fightback! arrived in my life like a bolt of lightning to give me hope.
Hope of freedom from the collectivism beloved of the unions. Hope and inspiration for the individual. It was all in the title. Fightback! The antidote to a narrow and unsustainable tax base. An inflexible market for employment. A health system without market signals that will consume the entirety of a narrowing tax base with an ageing population. An inflexible workplace with union control of freedom of employment and involvement at the centre of government.
Those 650 pages might have been the epitaph of the longest suicide note in the history of Australian politics. And yet, far from death in 1993, Fightback! set the policy agenda and battleground for next 15 years of Australian politics.
Important elements of Fightback! have been implemented. We have a GST (though not as broad as it should be). Union influence in the economy has been wound back (however, the unions are on the march again). For a small period income tax retreated (but is once again a disincentive). Smaller government and market signals in health remain battlegrounds.
One of the authors might have retreated and said Fightback! was dead and buried. It lives! And those political convictions live on for those to whom Fightback gave hope. In 2018, after 10 years of federal nihilism Fightback! has the capacity to inspire another generation.
Once again it is time to Fightback!
Mark McFarlane is a member of the Centre for Independent Studies.
To watch our event on the 1993 election, click HERE.
The federal government is implementing Turnbull’s National Innovation and Science Agenda, but the real innovation is that the National STEM Education Strategy is prioritising industry collaboration and pathways to employment rather than ‘fads’ such as iPads and mindfulness.
Following the success of the US education program Pathways in Technology (P-TECH) — which partners high schools with industry to develop STEM skills — the federal government has provided $5.1 million in funding to pilot the program here, with 14 Australian sites to be operating by mid-2018.
The P-TECH program has students undertake hands-on workplace learning and receive classroom instruction focused on the STEM skills employers need.
Despite the programs benefits, taxpayer support for P-TECH must be removed. It is inappropriate to use taxpayer funds to provide industry participants the opportunity to future-proof their workforce at the expense of their competitors.
P-TECH has already had early successes. The Skilling Australia Foundation reports that while government funding for the Geelong pilot expired in June 2017, the program continues to operate with financial support from local industry and community groups.
As the excitement about STEM continues, it is easy to miss what is truly important about P-TECH: industry collaboration. Workplace learning has been a central component of vocational — and to a certain extent, university — qualifications, but has been ignored at school level.
The workplace learning component of P-TECH should be extended. Students would benefit from the opportunity to undertake workplace learning in sectors that have not traditionally participated in work-based learning at school level, such as logistics.
On-the-job training teaches students the relevance of their education to the employment landscape and prepares them for the workforce.
Further, the implementation of hands-on learning in communities with high youth unemployment would strengthen local economies and teach at-risk students the benefits of work.
As industry develops new pathways to employment, it has never been more important that Australia avoid the latest education ‘fads’ and deliver tangible outcomes for students by expanding workplace learning.
Max Bail is an intern in the education program at the Centre for Independent Studies.
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