Aged care before tax cuts: Experts say budget needs revenue, not tax relief
WA Today.
May 7, 2021


Two of the nation’s top policy experts, Bernie Fraser and Andrew Podger, have urged Treasurer Josh Frydenberg to dump at least part of his stage three personal income tax cuts and use the money to increase spending on aged care and other critical services.

As a long-running public survey showed support continuing to decline for the $17 billion a year tax cuts to middle and high-income earners, Mr Fraser and Mr Podger said future budgets would face a revenue squeeze if the tax cuts were maintained. 



But tax experts said without the reforms, the nation’s personal tax system will become increasingly reliant on the incomes of high wage earners and overly complex.

The budget will extend for another year the low and middle-income tax offset, heading off a tax increase of up to $1080 next year for 10 million workers earning less than $126,000. The government remains committed to its legislated stage three cuts, which deliver their largest benefits to people earning more than $200,000 a year.

In last October’s budget, the government brought forward its stage two tax cuts that increased the threshold for the 19 per cent tax rate to $45,000 and the threshold for the 32.5 per cent rate to $120,000.

While the move cost $23.8 billion, the government was able to book a saving of $5.7 billion in the 2022-23 financial year when the stage two cuts were originally planned to start. That saving was due to low wages growth and fewer people moving into higher tax brackets.

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Mr Fraser, a former Reserve Bank governor, said the third stage was “particularly and blatantly unfair”. He said another reason to stop stage three cuts is to help fund critical services. Next week’s federal budget is expected to include billions of dollars worth of aged care spending to tackle the numerous challenges raised by the royal commission.

“They have to be raising revenue and they can start by not giving away tax cuts like stage three,” Mr Fraser said. “Aged care and [managing] ageing in general is going to require an awful lot of spending. It’s going to be a lot more expensive than it is now.”



“Governments can’t borrow forever and they have to raise taxes. That includes not giving [tax revenue] away to relatively well off groups in the community,” he said. “Governments [globally] will have to come to grips with the fact they can’t keep relying on central banks to churn out more and more money.”

ANU Professor Andrew Podger, former Public Service Commissioner and former secretary for the departments of health and aged care and housing, said there should be significant changes to the stage three tax cuts.

“I think there is a serious question about whether the cost of stage three as it is in the legislation is something we can afford right now or if it might be wiser to have more revenue to fund the various things the government is trying to fund,” Professor Podger said, suggesting aged care and child care as among these costs.

“I would’ve thought broadly speaking it’s unwise to reduce the revenue from personal income tax unless you have some alternative source of funds readily available.”

He said continuing the low and middle-income tax offset for another year would be “a cop out” that fails to simplify the tax scale and address future bracket creep and he would prefer to scrap the offsets and replace them with a significant increase in the tax threshold.

“I think that would be much fairer.”

Deloitte Access Economics director Chris Richardson said sluggish wage growth and last year’s tax cuts meant the 2024-25 cuts were now more generous than planned and more than made up for bracket creep.

He said under the government’s plan, the share of total personal tax paid by the top 5 per cent of income earners actually increased. It edged down for people between the top 10 and 20 per cent of all taxpayers.

“The upshot was that lower income earners got two tax cuts, middle income earners got one, and higher income earners got none.” If stage three tax cuts arrive, households will pay $20 billion less in tax by 2024-25 than 2014-2015.


The long-running annual tax survey by independent progressive think tank Per Capita, released on Friday, shows there is little public support for the stage three tax cuts already legislated to begin in 2024-25. About 43 per cent of the more than 1500 people surveyed believe the tax cuts should be scrapped completely or reduced. About 29 per cent were comfortable with the current plan.

The survey also found reversing the stage three tax cuts and diverting the revenue to aged care was “the most popular choice of the various options given to find sufficient funding to address the recommendations of the Royal Commission into Aged Care Quality and Safety”.

Ye Grappler: yes, the general public (but ESPECIALLY Left voters) always lose, courtesy of the neoliberal mainstream narrative that "the (federal) government's money is our taxpayer money."

It's dogma designed to serve vested financial interests.

Time to read Stephanie Kelton's best-seller: 'The Deficit Myth'.

Even mainstream commentators like Ross Gittins are catching on; google: ross gittins money printing is closer than you think.

whinge whinge whinge whinge 

its all some folks do!

from the ABC
Quote:


Quote:

https://www.abc.net.au/news/2021-05-11/budget-cash-splash-comes-from-good-luck-a...

John Smith wrote on May 11^th, 2021 at 6:46pm:

Why would no one be paying income taxes?

the entire western world has now decided that QE , money printing and inflating the money supply is simply more "palateable" then trying to balance the books.

it is the new norm in every western country.

need cash for a pet project or natural disaster or covid stimulus.

just keep interest rates at zero (QE) and there is no real cost to money printing.

you can contnue to do this indefinitely and the public dont really notice.


what you WILL notice is that this extra money in the economy HAS to flow thru to higher prices.

now, at the moment this is flowing thru as higher asset prices (real estate and stock prices) and , because most poor people dont own much real estate or stocks, they are blind to this scam which is literally pumping up the wealth of the wealthy.

the big question for the less well off is "will consumer spending prices rise?"

will groceries, power , water, commodities , fuel and rego and insurance rise in price.

the answer is

absolutely.

you cant pump more money into the economy without those things rising.

as an example, the tax cuts put more money in peoples pockets and those people compete with each other for everything that is sold.

take the cost of an iphone.

if people have more money, there is no need for retailers to discount to get a sale...prices rise.

an interesting example is the mitsubishi triton which mitsubishi have said "we will seel x number of these each year and we will discount until we do.

in 2017 they discounted to 34,000 driveway, same for 2018,  in 2019 35,000 drive away for the base model.

last year and this year that is up to 43,000 driveraway.

there are more buyers with more cash due to money printing and so the price rises.

there is no such thing as a free lunch.

when people ask for tax cuts or jobseeker and job keeper to be doubled, when they ask for cash handouts for the NDIS or aged care or mental health or womens issues, you are pumping printed money into the economy and people now have more cash to compete with their neighbour for goods and services.

prices must rise.

traditionally, governments would then raise interest rates to reduce the ammount of spending and prices fell.

if you can borrow at 3 % to buy that car, more people will be competing then if you have to pay 8 %.

dont forget that keating (who was a pretty smart treasurer) had to hike interest rates to 20 % to control inflation in the 80's.

what happens if we do that now?

the government simply couldnt. they can service their deficits by issuing short term bonds but if rates went to even 6 or 7 % they would no longer be able to service that debt and neither would the banks and neither would the people with mortgages.

you would see  a societal collapse.

so we now, for the first time in history cannot fight inflation.

that is catastrophic news for the poor, the pensioner, the renter, the superannuant

its ok for the investor as he has a hedge.

but for the poor, the government borrowing will, eventually, demolish them

it has to

its a ponzi scheme and they are the suckers who cant get out


ever

Bam wrote on May 11^th, 2021 at 7:06pm:



you are quite right.

but look at biden.

he is printing money for covid stimulus at a rate twice as fast as Trump.

and NO TAX HIKES for the rich.

do you think albo will try to raise taxes.

lets not forget that Shorten tried to raise a very small tax on a very small part of franked dividends for superannuation and all morrison had to do was say

"you are raising taxes' and he was gone.

politicians now have no appetite for raising taxes and the debt is too large anyway.

you could not pay off any western countries debt with tax hikes.

you can only allow inflation to eventually debase the currency to the point where the debt is "inflated away".

I watched the budget -
not one mention of the outrageous over $1 trillion of debt.

Also - not a penny in the budget for me. NOTHING.