Most of the political commentariat were convinced that Bill Shorten had got things badly wrong by announcing his policy on dividend imputation immediately before the Batman by-election. It was even more striking that, despite the pressure, Shorten didn’t cave into demands for changes to the policy. Michelle Grattan, for example, described the policy as an “own goal“. After Labor’s easy win, she backed off a little bit, but still claimed that Labor “has a selling job“. M
Maybe so, but I’d say the government is the one that has scored goals for the other side.
(Update 27/3) As predicted, Labor has tweaked the policy to exclude pensioners. That blunts the remaining lines of attack, but doesn’t cost much money, since the benefits go primarily to high-wealth self-funded (but massively tax-subsidised) retirees. By waiting until after the Batman by-election and the latest Newspoll, Labor looks gutsy (even Dennis Shanahan in the Oz conceded this) and Turnbull looks even weaker than before
Immediately after Labor’s announcement, the government’s preferred media outlet ran with a Treasury analysis showing that most of the losers were people with a taxable income of less than $18200 and the observation that Labor had supported the original decision to refund imputation credits to people who didn’t pay tax.
The trick was that the analysis ignored one of the many timebombs Peter Costello left in the budget (after the 1999 change to dividend imputation). By extending tax concessions on income from superannuation, Costello created a large class of retirees who had relatively high incomes, but little or no taxable income. These are the big beneficiaries of the current system. This point has already been discussed a fair bit in our comments thread. This <a href="http://Grattan“>explanation from Brendan Coates & Danielle Wood of Grattan sums up the key points.
The other line of political attack is the discovery of some deserving voter who will lose from the tax change (there are always some losers). The Oz managed, at very short notice to find a self-proclaimed lifelong Labor voter who was going to switch sides as a result.
People like this can’t be very numerous however. Self-funded retirees mostly vote conservative and LNP governments have given them big handouts. The fury with which they greeted recent attempts to scale back some of the biggest Costello handouts reflected a genuine feeling of betrayal from a core component of the LNP base. Conversely, if a self-funded retiree is a lifelong Labor voter, it’s likely that they are not driven primarily by hip-pocket concerns.
Putting all that to one side, the government has already used up its best opportunities for a scare campaign. Having been caught out cheating with its initial analysis, it will face a lot more scepticism next time around. Meanwhile, Labor has plenty of time to make tweaks to the policy if they are needed.