Ideas@TheCentre – The Centre for Independent Studies


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.

Tax and cut – the modern oxymoron

Matthew O’Donnell

11 May 2018 | Ideas@TheCentre

This week’s newspapers have been ablaze with headlines rejoicing at the government’s announcement of tax cuts. Unfortunately, the joining of the words tax and cut has become a modern oxymoron, a figure of speech in which apparently contradictory terms appear in conjunction.

A tax cut used to mean the amount of tax paid would be less than was paid in previous years. In modern political parlance, it now means that the planned increase in your future tax obligations is less than the political elite was originally expecting to charge you.

Sure some Australians will end up getting a one- or two-year tax cut, but most will not. In fact, due to further bracket creep, increased tax compliance measures and more new fees and charges, we will be all paying more tax in the future.

And how do we know this? Just look at the government’s own revenue projections. Even with the proposed ‘tax cuts’ for next year income tax receipts are expected to increase by 6% in 2018/19 and another 5% in 2019/20 which is a growth rate well above the expected inflation rate of around 2.5%.

It gets worse when you understand that total federal government revenues are expected to rise from $445 billion in 2017/18 to $553 billion in 2021/22. This $109 billion tax increase represents an increase in taxes of around 5.6% a year.

Politicians have an almost Wildean love of spouting oxymorons, and the one they all agree with is the belief they can resist anything, except temptation. The temptation to lighten the wallets of taxpayers to help fund their re-election campaigns is too great for any sane politician to provide an actual tax cut.

So until we find a solution to the problem of personal interest trumping the public good, we’ll just have to get used to ‘tax cut’ being a contradiction in terms.

If you’re not Santa, don’t sell it like you’re stuffing stockings

Eugenie Joseph

11 May 2018 | Ideas@TheCentre

While the government insists it’s not Santa when it comes to the Budget, the usual marketing and messaging of this year’s suggests otherwise.

No surprise then that the Budget encourages tribal thinking among demographic groups, particularly the elderly and young people — pitting one age group against the other, competing for goodies and handouts from their benevolent government. Inevitably, this mentality has led to moaning in the media that young people have once again ‘missed out’ in this year’s Budget.

And indeed, many of the spending measures in the Budget are firmly geared at older Australians: $30 billion for public hospitals, $1.6 billion for an extra 14,000 at-home aged care places, a home equity scheme to boost retirement incomes, and a $10,000 wage subsidy for older workers.

Some might condemn this strategy as blatant vote-buying, given the importance of retirees and pensioners as Coalition voters. And there is likely a great deal of truth to it.

But for young people — Millennials and Gen Z — their priorities should be very different.  In fact, most important to them are education, training and employment opportunities … not a new $23 million exercise program for the elderly.

This is why major policy reforms with long-term dividends — such as business tax cuts — are always of greater benefit to young people, as they reap the rewards of these reforms over time, through more jobs and higher wages.

Similarly, it is young people who benefit the most from large-scale government funding for infrastructure like roads and rail links. There is certainly plenty of that in the Budget — a total of $24.5 billion funding for transport projects, to be precise. Curiously however, governments are never very good at selling tax reform or infrastructure spending to young people.

But regardless, it is never a sensible idea to sell the Budget like stuffing goodies into Christmas stockings.  Inevitably, there will be a sad child who misses out — even if the stocking contains nothing the child actually needs or wants.

Section 44 is a question of loyalty

Simon Cowan

11 May 2018 | ideas@thecentre

Another five politicians have bitten the dust over their questionable dual citizenship status. Of course such dust-biting may well be temporary: four of the five will face by-elections and, other than the Xenophon representative, they may well win and return to parliament.

With each new tranche of politicians found to be ineligible, calls have increased to amend or abolish section 44. In a multicultural country like Australia, they claim it is unfair to expect people to know they are dual citizens or revoke their citizenship connection to their parents or grandparents home.

Australia is backwards for having a prohibition in our constitution banning dual citizens from being elected, they add.

It is telling that many are also criticising the High Court for not resolving the issue and allowing the (now approaching 20) ineligible politicians to stay in parliament.

It is telling because those advocating change suspect the public will give the reform proposals the short shift they deserve.

Citizenship is an important concept, bestowing both rights and obligations. It is much more than just the ability to get a passport. It is a formal connection of loyalty.

The Constitution actually asks relatively little of Australians seeking to be elected to parliament. One thing that it does ask is that they rid themselves of any allegiances that may give them divided loyalties.

Few people believe that it would be okay for Australian parliamentarians to have genuine loyalty to other countries — so what then do we replace section 44 with?

The Constitution cannot be subjective: it must be a set of rules that everyone can understand in advance. It cannot seek to divine whether someone who has dual citizenship has a ‘real’ loyalty or not. In that sense the High Court got it exactly right every time it has been asked on this issue. The rules are the rules for everyone.

People who sit in Australia’s parliament must be loyal to Australians alone and must be seen to be ‘in it together’ with the rest of us. It’s long past time for the people who set the rules to start playing by them, like the rest of us have to.