In my first column for the year, I reflect on the debate I kicked off regarding the absence of any publicly managed super solution and the role the Future Fund could play in this context. After dealing with criticisms from vested interests, I query whether Chris Bowen has unwittingly wedged himself by rejecting this proposal, which is a decent chance of becoming government policy. This begs the broader question of whether Labor's tax-everything-that-moves approach to the election could result in it losing a seemingly unloseable election a la John Hewson's GST intervention in 1993 (click on that link to read the column or AFR subs can click here). Excerpt enclosed:
Although a public super benchmark has been backed by Labor-aligned luminaries, including the co-founder of industry, Bill Kelty, Grattan Institute fellow Brendan Coates, and economist Nicholas Gruen, who was an adviser to Labor treasurer John Dawkins and led Labor’s 2.0 government’s task force, it was rejected by shadow treasurer Chris Bowen.
This is surprising given the proposal looks like it has walked out of the party’s central casting and as John Kehoe revealed yesterday, was official Labor policy in the 1980s. My worry is that Bowen has boxed himself into a corner and might be torn asunder in electoral debates with his adversary, Treasurer Joshua Frydenberg.
You can imagine Frydenberg demolishing Bowen (and Scott Morrison tearing strips off Bill Shorten) on how they could legitimately oppose enhancing competition by introducing at least one unconflicted, public benchmark for what the Productivity Commission and Royal Commission have found is a failing system. There is no real downside, aside from that faced by incumbents, which Labor could be wedged to side with.
Coupled with Shorten’s decision to slug every imaginable constituency with hefty new taxes, some inside the party must harbour fears of losing what would otherwise appear to be an unloseable election, as John Hewson did with his ill-timed GST intervention in 1993.
Labor is slamming all investors by hiking capital gains tax by 50 per cent through halving the CGT discount for assets held for more than 12 months.
It is hammering retirees who pay little-to-no tax by removing their ability to claim cash refunds on their franking credits, which has been described as a “horrible” decision by the economist who led the Keating government’s original 1992 super review.
It is smashing investment housing through the 50 per cent hike in CGT and disallowing “negative gearing”, or the ability to deduct losses on properties against your assessable income, on purchases of established dwellings.
Although Labor argues existing property owners will not be impacted, this is wrong: when they come to sell their asset, the buyer will not be able to negatively gear, and they will, therefore, wear lower sales prices.
Some analysts reckon the removal of negative gearing will be equivalent to a 23 per cent increase in mortgage rates while the increase in CGT will reduce property prices by 2 per cent.
There is no doubt that the spectre of Labor’s anti-investment policies has exacerbated the housing downturn Australians have suffered since late 2017.
Labor is also proposing to raise the marginal tax rate on higher income earners by 2 percentage points and subject family trusts to a minimum 30 per cent tax rate, which is more than many pay today.
It opposes internationally competitive tax rates for businesses with more than $2 million in revenue, and wants to limit an individual’s deductions for tax advice to just $3,000.
This seems to be a very effective platform for losing an election. A smarter strategy would have been to adopt a lower radar cross-section and allow the crazy Liberals to self-immolate.
Great points. However, you can't use economic based reason with people who don't contribute to the economy or own anything. If you don't pay net taxes, taxes don't really matter. If you don't own property or invest, collapse doesn't matter. They will fly the plane into the mountain as in Venezuela - because socialism only stops when they run out of other people's money.