Home > Economic policy, Oz Politics > Fistful of Dollars II

Fistful of Dollars II

October 15th, 2007

Given how far behind the government is starting, it probably makes sense to lead off the campaign with what has to be its biggest promise, tax cuts costing $34 billion over three years. As I recall, the spending promises already announced total about $9 billion a year, so its hard to imagine that there can be much left in reserve.

Although there’s nothing wrong with announcing a program for an entire term of government, it’s unusual in relation to tax cuts, and I can recall (perhaps with error) at least two instances of such cuts being promised and then taken back. One was Paul Keating’s L-A-W tax cuts in 1993, which (as implied) were actually legislated in an attempt to increase their credibility. The other was the “Fistful of Dollars” tax cut of 1977 (so named for the ads which showed precisely that) promised by the Fraser-Lynch team going into the election and then (if my fading memory serves) taken back by Lynch’s newly-appointed replacement. Now what was his name again?

The obvious question is, how should Labor respond? Now that the government has presented the headline figure of $34 billion, there’s plenty of room for some combination of tax cuts and increased public expenditure, and plenty of time to refine the details. I’ll follow the same plan, and take some time to think.

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  1. Glenn T
    October 15th, 2007 at 17:39 | #1

    Not to mention the Bicentenial road fund, the 3c per litre on petrol that was to fund the dividing of the Hume Highway between Sydney and Melbourne by 1988 – and we are still waiting. I don’t have any recollection of the 3 cents ever being removed, and as for the treasurer who made the promise – what was his name again

  2. spog
    October 15th, 2007 at 17:43 | #2

    The focus in recent years of delivering tax cuts to low income people by fiddling with the low income tax offset (LITO) is irritating. They are continually represented as providing cuts of $x a week, yet do no such thing. They are not available in the PAYG tax system, so low income earners are still having tax taken out from a threshold that is equivalent to $6,000 a year.

    Low income earners get their tax cuts as bigger tax refunds. This considerably defers their receipt of the Government’s largesse – this years tax cuts (effective 1 July 2007) won’t be received by low income earners until the second half of 2008.

    I wonder about the supposed incentive effects of this approach – there is no reduction in EMTRs at the time work is undertaken, just a promise (if it’s even understood by the average worker) of a tax refund over a year later.

    The other aspect of this is the extent to which tax cuts could tip the Reserve’s hand and bring on a rate increase. Low income earners are affected by the rate rise, yet they aren’t doing the tax cut related spending the rises are supposedly addressing, as they haven’t had them.

    Great stuff really.

  3. October 15th, 2007 at 18:43 | #3

    Better an overhaul of EMTRs rather than a $34billion bribe-a-thon. But then again, we really shouldn’t expect reasonable tax policy from anyone these days. :(

  4. October 15th, 2007 at 19:37 | #4

    If you consistently run vast surpluses you should cut taxes. You can’t do this all in one go because the economy is operating at full speed so you stagger the reductions. Sounds like intrinsically good policy to me.

    It is very interesting that the government is put in the position of not cutting taxes short-term because of the high level of private demand. But this is not a sustainable position.

  5. Paul Walter
    October 15th, 2007 at 21:46 | #5

    My economics is fairly mediocre, but I really got the impression that Glen Stevens’ recent comments about pre conditions for future interest rate rises indicated that he expected demand not to be encouraged, which seems opposite to what Howard has just done.
    Secondly, farming out for tax cuts seems to fly in the face of comments from the government over the year concerning shortcomings in education, health etc. Isn’t tax cut money money diverted away from productive and social infrastructure?
    The mortgage belters have beeen encouraged to go into debt for the sake of conspicuous consumption, yet are encouraged even further in reckless behaviours rather than being encouraged to learn to live soberly?
    It is disturbing that Howard seems so morally bankrupt and irresponsible as to encourage the victimhood/ entitlement mentality of the mortgage belt which must pit them inevitably against their fellow citizens creating deep antagonism and jeopardising the National Project.
    Surely we are witnessing a treasonous outbreak of “wedge” that can only direct money away from investment to consumption driving further inflation. And if the government grizzles about failing infrastructure and then refuses to ensure adequate funding, deliberately squandering the money on pork barrelling, doesn’t it lose the right to criticise strapped-for-funds state governments on the grounds of incompetence and irresponsibility?

  6. gerard
    October 15th, 2007 at 22:19 | #6

    I am looking at this table illustrating the proposed tax cuts.

    Taxable income from 0-6000 will remain at 0.

    The 6000-30,000 threshold will be raised to 34,000 in 2008, and raise by 1000 each year for the next two years after that. The tax rate on this income will remain 15 percent. The low income tax threshold that pays back any tax between 6000 and 11,000 will be raised to cover tax up to 16,000.

    The bottom of the next tax bracket will raise to 37,000 by 2010, the top will by raised from 75,000 to 80,000 and the rate will stay at 30 percent. The bracket above that will have its top raised from 150,000 to 180,000 and the rate will drop from 40 to 37 percent. Above that the rate will drop from 45 to 42 percent.

    I’m no accountant but according to my amateurish and probably incorrect calculations, somebody earning 45,000, will have their tax reduced by about 1000 dollars. (I’ve never really paid tax and I don’t know exactly how the low income tax threshold works but premusably raising it would add a bit to the cut).
    Somebody earning 90,000 will have their tax reduced by just under 2000. Somebody earning 135,000 will have their tax reduced by just over 3000. Someone earning 180,000 will have their tax reduced by 6000, and tax will be reduced by 3% on all income above that so someone earning 225,000 will have their tax reduced by about 8300, someone earning 270,000 will have their tax reduced by 10500.

    I’m sure there are some mistakes in there somewhere. Hopefully I will be corrected by someone that actually knows their stuff. But assuming this I’m not way off, the tax cuts seem fairly proportional to income until you get to about 150,000 when they suddenly take off.

    Earn twice as much and you get a tax cut twice as big, three times as much and its three times as big, but earn four times as much and you get a tax cut six times as big, earn six times as much and you get a tax cut ten times as big, earn ten times as much and it’s almost twenty times as big.

    If I were a paid-up member of the upper crust, these tax cuts would impress me greatly. But if I was earning a median Australian income it wouldn’t impress me nearly as much.

    P.S. does anyone know the exact figure of median annual income in Australia? I can’t find it on ABS but I think it’s around 45,000

  7. observa
    October 15th, 2007 at 22:21 | #7

    At last we’ve got a clear delineation between the parties unless Rudd comes out with more metoo. Given the inevitable push for raising carbon prices by both parties, the beginning of the end of income tax makes a lot of sense if we are to rely on resource and carbon taxing. I think we’ll have to rely on resource taxing fairly soon if the Chinese Govt move in on the likes of Woodside, BHP Billiton and Rio, which is almost a certainty. Only resource taxing could prevent the inevitable transfer pricing that will eventuate with these sorts of takeovers. Both parties need to come up to pace with this new challenge and quickly.

  8. observa
    October 15th, 2007 at 22:33 | #8

    I see Labor are studying the proposal carefully http://www.news.com.au/story/0,23599,22588490-29277,00.html

  9. gerard
    October 15th, 2007 at 22:54 | #9

    Without permission, I am going to quote Possum at pollbludger, who I think put it quite well.

    This a 34 billion dollar headline.That’s its purpose (if its not, these guys really are off with the fairies).

    Tell me this – if you are a second income earner in a 1.5 income household where you once earned $25,000 a year, but now earn $22,000 a year because of the loss of penalty rates and overtime due to Workchoices, would you change your vote *_BACK_* to the Coalition because they are promising you an extra $14 a week in 3 years time?

    Would you switch your vote back because the government has promised to give you back 25% of what you’ve lost because of Workchoices?

    Would your other half do the same?

    No.

    The problem with 34 billion dollar tax cuts is that when they breakdown to low and low-middle income earners, they mean jack sh*t when balanced against Workchoices, the fear of workchoices, the cost of childcare, increased housing costs (be they mortgage or rental costs) and how those things combine to reduce discretionary income which funds lifestyle and perceived standards of living.

    This isnt meant to buy votes, its meant to buy headlines, to change the media narrative and to give the government space to run other campaigns to buy votes.

    If the government and its advisors actually believe this will help them change votes over the full length of the campaign, Howard is eyeball deep in the brown stuff to a greater level than we’d all previously thought.

    Rudd doesnt need to change his plan and his policy release timing to deal with this.He certainly doesnt need to ‘me-too� $32 billion up the wall the to achieve three fifths of five eighths of sweet f**k all.

  10. observa
    October 15th, 2007 at 23:42 | #10

    Perhaps gerard all this election business is like choosing a wife-

    A man wanted to get married. He was having trouble choosing among three likely candidates. He gives each woman a present of $5,000 and watches to see what they do with the money.

    The first does a total makeover. She goes to a fancy beauty salon, gets her hair done, new makeup; buys several new outfits and dresses up very nicely for the man. She tells him that she has done this to be more attractive for him because she loves him so much.

    The man was impressed.

    The second goes shopping to buy the man gifts. She gets him a new set of golf clubs, some new gizmos for his computer, and some expensive clothes. As she presents these gifts, she tells him that she has spent all the money on him because she loves him so much.

    Again, the man is impressed.

    The third invests the money in the stock market. She earns several times the $5,000. She gives him back his $5,000 and reinvests the remainder in a joint account. She tells him that she wants to save for their future because she loves him so much.

    Obviously, the man was impressed.

    The man thought for a long time about what each woman had done with the money he’d given her.

    Then…………………..

    he married the one with the biggest tits.

  11. mugwump
    October 16th, 2007 at 05:58 | #11

    Tell me this – if you are a second income earner in a 1.5 income household where you once earned $25,000 a year, but now earn $22,000 a year because of the loss of penalty rates and overtime due to Workchoices

    How many people are we talking about here gerard?

    Let’s face it, those “0.5″ earners in 1.5 income households are overwhelmingly mothers who want to be home for their kids. They either work mornings so they can pick their kids up from school, or they work 9-5 two or three days a week and come home to cook dinner (apologies in advance to the PC police, but that’s the way it is out there in voterland).

    You don’t get overtime and penalty rates with those sorts of hours.

  12. observa
    October 16th, 2007 at 09:20 | #12

    True enough mugwump, but it probably is all about marrying the one with the biggest knockers, metaphorically speaking now. I was reminded of this the other night when I caught some ABC talkback when the election was called and the presenter was asking what listeners thought were the major issues for them. Now ABC audience bias aside, one woman’s comments in particular, seemed to represent a typical swinging voter. First up she said she thought Workchoices was an issue for her. She qualified it by saying ‘Workchoices personally doesn’t affect me but…” she basically thought we need to protect wages and conditions for those less well off and the kiddies starting out. Now short of closing the economy, erecting tariff walls, etc, unions can no longer do that. However my unionised PS teacher wife just gained a 4% pay rise and so the myth continues. Oh that I could raise my prices likewise, but it’s good the household having a foot in both camps. Now at the the first sign of a serious recession, we all know a Rudd Labor govt would trot out Accord MkII for the bleeding obvious in a globalised world.

    The presenter then chimed in with prompting her to think about her main 3 issues (which he further prompted callers for)she felt would impact her vote. Oh I guess I haven’t really thought about it like that says she. Well I guess climate change is important for me too. If ‘they’ can explain it carefully and bring us all along together that would be good. Basically ‘they’ need to get us onboard to change, and use more green technology, being careful not to raise electricity or perol prices, etc for families (good luck Kevin) She couldn’t get out a third issue so the presenter prompted with- So for you this election is largely about ‘tone’. Yes that’s it she agreed. And that’s what it’s all about now. Big tits, but as pollies well know, that beauty is transient and skin deep in Govt.

  13. swio
    October 16th, 2007 at 09:22 | #13

    In purely political terms $34 billion is a staggering amount of money to spend on one policy at the very start of an election. Even if it works it will have to be one of the worst value dollar per vote bribes of all time. It strikes me as either dumb or very very desperate.

    Think of all the projects you could undertake instead for that money. You could spend $4 billion and finally finish up the motor way system around Sydney. You could build and fund more than a dozen first class hospitals in marginal electorates and a world class university. Surely these sorts of projects would win more votes than blowing it all in a tax cut? It doesn’t really make sense.

  14. derrida derider
    October 16th, 2007 at 10:11 | #14

    There’s a simple political reason the govt wants to deliver low income tax cuts in the form of a LITO rather than the much simpler and more effective way of raising the tax free threshold (spog’s strictures on the LITO above are abolutely correct).

    Because of the extremely generous way the Seniors Tax Offset is calculated, raising the tax free threshold would cause many partnered seniors to pay more tax (the reduction in in their tax offset will outweigh their direct income tax reduction) and will deliver no net tax benefit to many other seniors (as well as working sole parents). Better-off retirees are part of Howard’s core support.

  15. James Haughton
    October 16th, 2007 at 10:43 | #15

    Why is it that higher wages (lower taxes at the low-medium end) are consistently said to be inflationary, but higher profits (= lower wages, lower taxes at top end) are not? Is there an assumption that higher profits are invested in productive infrastructure rather than consumer spending? Is this assumption backed by any evidence?

  16. mugwump
    October 16th, 2007 at 10:53 | #16

    dd, they could always change the way the seniors tax offset is calculated.

    I think Howard should go further. He should offer $70B in tax cuts, and claim he is relying on growth under a Liberal government to fund the shortfall. Then if Rudd tries to match him, Howard can claim it is unfunded, because Labor’s policies of reinstating wrongful dismissal laws and handing power back to the union thugs will put the brakes on growth.

  17. gerard
    October 16th, 2007 at 11:19 | #17

    Point is that it is an extra one or two grand for average people, but a jackpot bonanza for the ‘elites’ (by which I mean the real elites, not the absurd pejorative label applied to anyone interested in government ethics).

    The cost in 34 billion of foregone infrastructure and public services is enormous.

    However Labor would probably piss their pants at the thought of calling it a regressive tax cut disproportionately favoring the rich and being accused of ‘class warfare’ by Paul Kelly et al.

  18. mugwump
    October 16th, 2007 at 11:40 | #18

    Relatively speaking, this is no greater a bonanza for the real elites than for the rank-and-file (or the self-styled elites).

    Given that the real elites pay almost all the tax (after accounting for handouts), it is only fair that they get a break too.

  19. gerard
    October 16th, 2007 at 11:57 | #19

    Labor has two options I think.

    Option A is if Labor wanted to stake its chances on the intelligence and foresight of the electorate (a risky move) they could ask them to forego the tax cuts in exchange for 34 billion worth of improved health and education services and public infrastructure.

    Alternative they could take the cautious Option B in the knowledge that an extra 40-odd bucks a week instead of improved services and infrastructure (not to mention IR laws) will impress enough people to swing the election.

    Under Option B they could match the bracket changes in the lower 3 brackets and keep the rates as they are – just as the government is proposing. Keep the limit between the two brackets above that at 150,000 (or at least not raise it by so much), and keep the rates in the upper 2 brackets as they are now instead of reducing them (I would go one step further and introduce another bracket around 220,000 and slap it with a higher rate, but I’m sure they wouldn’t want to do that).

    For most people the tax cut would be the same – for those earning between 80,000 and 150,000 it would be a slighly smaller cut. The big difference would be for those earning more than 150,000 but they probably wouldn’t vote Labor anyway.

    There will be less money available for public projects still more than under Howard’s plan and at least the money won’t be going into new Volvos for Madison’s eighteenth birthday.

  20. gerard
    October 16th, 2007 at 12:07 | #20

    “Relatively speaking, this is no greater a bonanza for the real elites than for the rank-and-file (or the self-styled elites).

    Given that the real elites pay almost all the tax (after accounting for handouts), it is only fair that they get a break too.”

    I don’t know mugwump, according to what I have been able to work out, somebody earning 4 times the median income will get a tax cut 6 times what a median income earner would get, and the disparity increases from there. So relatively speaking it is a bigger cut for the elites. As I said, I’m not an accountant and my maths is poor, so you’re welcome to correct me if my sums are way off.

    As for what is ‘fair’, that’s a pretty subjective point. Some people think that all tax is theft, I’m not going to argue the point here.

  21. Razor
    October 16th, 2007 at 12:20 | #21

    swio – once you’ve built all your shiny new hospitals, who is going to staff them? They can’t get enough staff for the current ones.

  22. gerard
    October 16th, 2007 at 12:54 | #22

    Cuts show families have it tough: Rudd

    http://www.theaustralian.news.com.au/story/0,25197,22593949-5013871,00.html

    Can someone explain this line to me:

    the government has adopted an approach of addressing the inflation challenge from the supply side — lower taxes to stimulate labour force participation and ‘free up’ spare labour resources,’’ Mr Evans said.

  23. observa
    October 16th, 2007 at 13:19 | #23

    “Can someone explain this line to me:”
    Well gerard to take Razor’s point it might work by encouraging say stay at home nurses and doctors back into the paid workforce. It’s the middle class mums who take the greatest family sabbaticals in case you haven’t noticed. It might help overcome the significant financial childcare hurdle, but probably not the psychological one.

  24. mugwump
    October 16th, 2007 at 14:38 | #24

    gerard, if you take into account Family Tax Benefits, a median income household with two kids pays very little tax (if any), so I’d be surprised if they’re relatively worse off than a high-income household.

  25. BilB
    October 16th, 2007 at 14:58 | #25

    I’ve just been told that the 34 billion dollars is over 5 years, so you have to vote for Howard twice ot get it. That leaves open the door for a little bit in the first term and the bulk in the second term. Howard on form.

  26. gerard
    October 16th, 2007 at 15:25 | #26

    so the assumption is that this tax cut (20-50 odd a week on a middle class income) is significant enough relative to the cost of childcare that it will actually encourage a sizable number of middle class mums back into the workforce.

    I reckon if that was the goal they should just put part of the 34 billion directly into childcare subsidies.

    and what (or should I say who) are the ‘spare labour resources’ that this will ‘free up’?

  27. gerard
    October 16th, 2007 at 15:27 | #27

    mugwump, if a median income household with kids is already paying very little tax (if any) then their tax cuts will likewise be pretty insignificant. probably too little to make a difference. that’s my point – the main people to whom it will make a difference are the upper-class.

  28. Tom Davies
    October 16th, 2007 at 16:18 | #28

    I think mugwump meant that their net total tax is low, taking FTB into account, not that their marginal rate of income tax is low.

  29. gerard
    October 16th, 2007 at 16:27 | #29

    Of course, both are low relative to someone in the top tax bracket. The point is that the people in the top bracket will get a bigger tax-cut relative to income than people in the middle.

  30. m.p.
    October 16th, 2007 at 17:59 | #30

    Spog – the Coalition has announced that half of the LITO will be available as a reduction in the tax taken out of weekly tax packets, the other half will be available as a tax refund at the end of the year.
    Spog, gerard and others – the tax cuts should increase labour force participation. Modelling by Treasury and the Melbourne Institute both indicate that previous tax cuts have increased participation significantly. In yesterday’s announcement, it was argued that tax cuts since 2000 have increased participation by around 250,000 and yesteday’s announcement will add around an extra 60,000 to the labour force. This is unremarkable since there are over 1 million people who would like more work.
    If the previous tax cuts hadn’t happened, wage pressures would be much worse and hence inflation would have been much worse. The same thing goes for yesterday’s announcement.
    Paul Walter – it is not encouraging “the victimhood/ entitlement mentality� for the Government to take less money out of our paypackets. The money is ours after all, the Government is just taking less of it. In no way is the Government “entitled� to the money it is already taking.
    Some of the tax cuts at the top end will be invested, particularly by unincorporated businesses.
    Gerard – I think your calculations are wrong. The Treasurer’s press release has detailed tax cut numbers for people earning up to $200,000, see http://www.treasurer.gov.au/tsr/content/pressreleases/2007/108.asp
    I don’t see the evidence for wages falling since WorkChoices. Real wages are actually growing faster after WorkChoices than before. Wages for every industry, for every occupation and for every state grew since WorkChoices. It is illegal to force someone onto an AWA, including an AWA on lower pay.
    You can of course increase the top rate, if you want to stop skilled immigration and drive skilled people offshore, shut down investment by shareholders and unincorporated businesses and encourage tax avoidance by the wealthy (particularly by encouraging people to set up companies to avoid tax).
    Swio and others – the tax cuts do not preclude significant other investments; the Government has got vast surpluses which can be spent. Of course, it is a separate question of whether it should be spent. Note that much Government spending is inflationary too.
    It is wrong to argue that tax cuts to high income earners aren’t inflationary but paying salaries to doctors isn’t – they are the same group of people.
    In addition, as Razor points out, what is the value of new infrastructure investment if we can’t staff the infrastructure. One of the reasons for this may be because our tax rates are too high.

  31. gerard
    October 16th, 2007 at 18:39 | #31

    thanks mp that’s just the information I should have looked at initially. don’t know why I tried to work it out myself since I’ve never had a proper taxable income I’m the last person to know anything about the system. I’m still not sure how the family tax benefit will be adjusted to this new scheme, but according to the treasurers tables there is a a bulge in the size of the tax cut around the median salary which falls back above 60,000 only to increase again, not sure how this works simply according to the shifts in tax brackets but this might have something to do with the impact of the LITO, which I mentioned I hadn’t taken into account. At around 45,000 the tax you get back is about 1800 a year, at 90,000 it’s around the same, at 135,000 it rises to about 3000 and at 180,000 to about 6000 (the tables cut out after 200,000). It is still disproportionately favoring those in the highest bracket but I had underestimated the size of the break to people earning about 45,000 by 800 a year and overestimated it for those over 90,000 by 200 a year.

    I don’t know how the modeling regarding the impact of tax cuts on labor force participation works – it just seems odd to think that there are so many thousands of people out there who are currently not working by choice that will change their mind at the thought of an extra 20-40 bucks a week and go and get a job. I think that the Australia@Work report had found that workchoices has had a negative effect on wages in some sectors. There is certainly a huge backlog of cases for the fairness test.

  32. mugwump
    October 16th, 2007 at 19:08 | #32

    gerard, I meant the tax cut as a percentage of the total tax already paid, not as a percentage of income. You can’t complain that you didn’t get a tax cut when you’re already not paying any tax.

  33. m.p.
    October 16th, 2007 at 19:11 | #33

    Gerard – the A@W report does not show anything about the effect of WorkChoices on wages.

    People on AWAs may have lower wages; but we could equally note that people in public housing are on lower incomes. Public housing clearly doesn’t cause people to be poor; similarly being on an AWA may not cause people to be on low incomes.

    What A@W should show is that AWAs *cause* lower wages, which of course they did not. All they have shown is correlation, not causation.

  34. spog
    October 16th, 2007 at 19:13 | #34

    Hi m.p.

    The idea of being able to claim half the LITO via PAYG reductions is interesting. I’ve had a quick look via google but couldn’t spot the announcement you mentioned. What’s the link, if available?

    I didn’t doubt that tax cuts as such have had at least some impact on workforce participation. My doubts were how cuts delivered solely via the LITO could possibly have any effect. It probably reflects the circles in which I socialise, but I find that no-one other than sad souls like me has any interest/understanding of how the tax-transfer system operates, especially more obscure elements like the LITO. As a result I’ve always assumed that if a person does not know about the LITO and end of year delivery of tax cuts, and is not getting a tax cut in their pay (thus eliminating the simple hip pocket reflex) they would have nothing to increase their incentive to work. And if modelling showed that it did, I also assume that the only explanation for people responding to nothing at all was that merely announcing tax cuts has an incentive effect – a sort of incentive placebo effect. (Mind you, if the placebo effect was true, it would be a cheap way to provide incentives.)

    I’m speculating here, but my guess is that you’d find any modelling of the LITO’s impact did not incorporate the delivery mechanism effects. Everything I’ve seen on this treats it as if it was being delivered via PAYG.

  35. m.p.
    October 16th, 2007 at 20:21 | #35

    spog –
    go to http://www.budget.gov.au/2007-08/myefo/html/02_part_2.htm
    the second paragraph under table 3.

    The quote is: “Given the large increase in the amount of the offset, new withholding schedules will be created so that low and average income earners will receive half of the benefits of the LITO through their regular pay, rather than receiving the total as a lump sum when their income tax returns are assessed. This will bolster participation incentives by allowing people to realise sooner the benefits of working more.”

  36. spog
    October 16th, 2007 at 20:40 | #36

    Thanks for that m.p.

    Intriguing (to me) that they have this up on a Government website, and the budget one no less!

  37. observa
    October 17th, 2007 at 01:45 | #37

    A couple of points about the tax cut initiative now.
    “The obvious question is, how should Labor respond?”
    Clearly it has wrested the initiative from Rudd now. We’ve shown you our plan now show us yours. Rudd and Labor are on the back foot now, superficially at least. They do need time to look at Treasury estimates and reappraise their own plans in light of that. Actually they may have to do some very quick appraisal and major adjustments. Nevertheless, it may only be a small hiccup and quickly forgotten by the electorate. The Govt needs to focus on damage control, given the polls, but also it needs to contemplate life in Opposition, by the same token. The big tax plan is certainly a useful big stick to do that for a long time, given the tax and spend tag Labor attracts. Every time something like housing affordability, food prices or rising interest rates creates more calls for relief, the Opposition can trot out their big stick again to beat the Govt with and if it gets them over the line somehow, well and good. The party of low taxes again without the low taxes.

  38. BilB
    October 17th, 2007 at 05:27 | #38

    How should labour respond? By matching the gross amount, but making it bottom loaded rather than top loaded. More people benefit that way. The amount appears to be only 7 billion per year as Howard has made it over 5 years, not 3 (apparently). This can easily be covered by abandoning the 9 billion dollars per year free handout to the oil lobby. The other 2 billion can be put to work bolstering our national ethanol production to reduce the of running our cars. In the process they will improve our trade balance. It is a win, win, win policy. Even mugwump will benefit.

  39. observa
    October 17th, 2007 at 08:55 | #39

    Enlighten me as to the 9 billion dollars per year free handout to the oil lobby BilB? I know business gets the usual breaks, but I thought the all the oil cos got was excise on top of that for their troubles. As for ethanol I’m as skeptical about that as Mexicans with the price of corn. I’ve just noticed the first rumblings of that here too
    http://www.news.com.au/adelaidenow/story/0,22606,22588234-2682,00.html

  40. October 17th, 2007 at 09:29 | #40

    Tax cuts DO encourage free enterprise… but certainly not the sort we want:

    From today’s Australian:

    JUST 24 hours after Peter Costello promised us all tax cuts, the Nigerian scammers were at work with a novel twist on their get-rich-quick schemes.
    An email, ostensibly from the Australian Taxation Office that claimed the recipient was entitled to a tax refund of “270$” dropped into in-boxes across the country. “Please submit the tax refund request and allow us 15-30 days in order to process it,” the email said. Clicking the refund link brought up another very official-looking page that asked for all details about driver’s licence number, mother’s maiden name, birth date, address, telephone number, email address, credit card account, number, expiration date and the three-digit code on the signature panel. Acting tax commissioner Greg Farr says anyone who receives the email should delete it immediately. “The Tax Office will never send an email to people asking them to provide personal information or credit card details,” he says. Anyone who has responded to the scam is advised to immediately contact their credit card provider.

  41. BilB
    October 17th, 2007 at 17:15 | #41

    Observa,

    It is the figure I’ve seen quoted several times recently. You’re right to challenge, I do not know the specifics. I will have to find out.

    As for ethanol causing food shortages, your really stretching it there. I don’t know of anybody who chews on sugar cane as an important part of their diet. We used to occaisionally as kids growing up in the tropics, but I didn’t like it that much. Too chewey.

    Mexicans are in distress over sugar prices because it is a food item that is in massive surplus. They are now switching over to ethanol production and their fortunes will be reversed. Two million Mexicans rely on cane production, it is a very big deal for them. Sugar prices will rise as a result, but it is a minor part of peoples diets. Corn ethanol has a very short future as its viability will fade as world cane ethanol production increases and US subsidies become more difficult to justify. Corn prices will fall back to food levels.

  42. Paul Walter
    October 17th, 2007 at 17:41 | #42

    I think Observa’s pont is valuable. It is actually a vey defensive move, almost certainly forced upon the government by circumstances.
    What other moves have they and where is the surprise really with the current move? Union bashing?
    Was the ALP REALLY caught out by it?
    If so, they DESERVE to lose the initiative unless they thought that Glen Stevens’ interest rate comments would actually temper the Howard electoral rummage.
    But then again, it appears that the PM is not entirely conversant with interest rate levels, so the plot thickens…

  43. observa
    October 17th, 2007 at 17:59 | #43

    “As for ethanol causing food shortages, your really stretching it there.”
    I was largely referring to its impact on prices, ethanol on the demand side, whereas the drought has affected supply and they’re beginning to complain. Ethanol demand on top of increasing droughts might be even more interesting.

  44. melanie
    October 17th, 2007 at 18:47 | #44

    Wayne Swan says that Labor is studying the tax cut scheme. What he really means is that Labor is waiting for the first opinion poll to see whether or not they need to respond.

  45. Paul Walter
    October 18th, 2007 at 00:16 | #45

    Melanie, what do you think they will propose if its Labor that gets the spike?

  46. observa
    October 18th, 2007 at 11:48 | #46
  47. BilB
    October 18th, 2007 at 12:37 | #47

    So what is your point, Observa? Ihere is less butter because politicians have ignored global warming warnings for 30 years. There is no connection at all between butter and ethanol other than because there has been no ethanol usage over the last decades we have pushed rain fall downwards. Future ethanol production will improve butter delivery and reduce butter prices.

  48. gerard
    October 18th, 2007 at 14:13 | #48

    Howard’s tax cuts are not cuts at all

    http://www.theage.com.au/news/opinion/howards-tax-cuts-are-not-cuts-at-all/2007/10/17/1192300855733.html

    Indexed to inflation, the tax cuts deliver nothing to taxpayers.

    JOHN Howard’s $34 billion tax cut is neither a fistful of dollars nor tax reform. It is a chimera designed to give back to wage earners the growth in the tax burden as wages rise with inflation, pushing workers into higher tax brackets.

  49. observa
    October 18th, 2007 at 23:19 | #49

    BilB, turning agricultural land over to serious ethanol production volumes might eventually help to ameliorate GW. However the consequences of the food shortages arising might well make this cure worse than the disease. Whether we could/should have turned large tracts of arable land over to ethanol production say 30 years ago, may now be a moot point. We didn’t and we’re here now and there seems to be a rising price problem for nutritious food. Not for me perhaps, but for some of the potential victims of GW. To rephrase a famous lady- Let them drink ethanol eh?

  50. observa
    October 18th, 2007 at 23:20 | #50

    Or more’s to the point, let them breathe those nutrititious ethanol fumes.

  51. BilB
    October 19th, 2007 at 10:21 | #51

    Observa,

    By far, far, far, the biggest risk to food supplies is that farmers cannot make a living at it. Massively wealthy corporations such as woolworths stand between farmers and consumers with a mugwump style philosophy ripping the heart out of the food industry. There are mammoth tracts of unutilised land in this country that are rendered useless by the greed of merchants on the one hand, by the total misallocation for lifestyle change “residential”, and by mining operations such as the Hunter Valley open cut mine which now has an area of 600 square kilometres.

    To suggest that ethanol production is threatening our food supplies is stupid, and you are talking through your hat.

  52. Hughes
    October 19th, 2007 at 10:35 | #52

    I just want to take issue with hc’s comment (way back at the top of the comments list).

    It’s not good policy to collect huge surpluses and then stagger their return. Running balanced budgets is good policy.

  53. mugwump
    October 19th, 2007 at 17:05 | #53

    Boring policy response from Labor, although if you want to make some money on the policy buy ISP stocks. With a 50% rebate for internet for the “kids schooling”, every family will be signing up for broadband and claiming the discount.

    But I don’t know why the opposition thinks taxpayer-subsidized P2P piracy is a good idea.

  54. observa
    October 19th, 2007 at 23:03 | #54

    I’m talking through my hat am I BilB? This is an awful lot of ethanol http://www.news.com.au/adelaidenow/story/0,22606,22613465-5005962,00.html

    But I don’t know why the opposition thinks taxpayer-subsidized P2P piracy is a good idea.

    It’s to help the underprivileged mugwump and to do that you need to understand the makeup of the modern Labor party. I’ll let one of their own describe it for you. Here’s Kim Beasley Snr-

    “When I joined the Labor Party, it contained the cream of the working class. But as I look about me now all I see are the dregs of the middle class. And what I want to know is when you middle class perverts are going to stop using the Labor Party as a spiritual spitoon.”

  55. BilB
    October 20th, 2007 at 05:54 | #55

    Observa,
    clearly big numbers are not for you. But for our farmers, big numbers that pay well are a dream come true.

  56. observa
    October 20th, 2007 at 10:01 | #56

    Whilst I have enormous admiration for our farmers I do have trouble with the big numbers of their broad shoulders and acres needed. So we increased our fuel consumption by 3 bill litres over 5 years despite-
    “The average fuel efficiency for unleaded petrol-driven passenger vehicles in 2006 was 11.4 litres/100km, which was an 18 per cent decrease from 2005.”
    1990 consumption levels aside for the moment, to reduce fuel use to 40% of 2001 levels quoted, means a reduction of 18.5 bill litres pa, or 64% of 2006 levels. All I can say is, forget the weather and get planting chaps.

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