Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please. If you would like to receive my (hopefully) regular email news, please sign up using the following link
http://eepurl.com/dAv6sX You can also follow me on Twitter @JohnQuiggin, at my Facebook public page and at my Economics in Two Lessons page
John Quiggin 
An interesting article about CO2 as a renewable feedstock for common chemical synthesis https://blogs.sciencemag.org/pipeline/archives/2019/05/06/switching-out-of-fossil-fuel-feedstocks
Albo to dump Labor’s franking credits policy. It seems it hits the non-wealthy unfairly. Where have I heard that before? Didn’t take long did it?
https://www.theaustralian.com.au/nation/politics/albanese-looks-set-to-dump-franking-credits-reforms-if-he-leads-labor/news-story/bc4e9f37f7864e8d6ac81d06a58af86f
Harry
Of course Albo is saying that. His next trick will be to bring a lump of coal into Parliament and taunt Adam Bandt with it.
Australian politics follows Marx’s dictum that history repeats first as tragedy then as farce, only we skip the tragedy and move straight to the farce.
Australia came 9th in this year’s Eurovision Song Contest. National shame is in order, though it’s a matter of taste whether the shame is for doing so badly or so well in this strange festival of pop kitsch.
Since the songs are to a first approximation equally worthless, the voting can be read as a proxy for a generic approval rating of the country. The UK came last, but unlike Germany avoided the humiliation of nul points in the popular vote.
The competition was invented in the 1950s by bored telecoms engineers whose real job was arranging international TV coverage of football matches. The dire quality of the music fits oddly with the flawless technical sophistication of the online voting. They tabulated millions of votes from about 25 countries, in three streams (phone, SMS, app), in half an hour. If the FSB hacked it, they failed to get North Macedonia ahead of the Netherlands. But honestly, why bother.
Harry, two points
No-one but no-one can explain the result on Saturday given the state of polling.
two Albo ( and perhaps you as well) need to examine all the evidence on franking credits. IT is middle to upper class welfare
Albo (a point not denied by a single member of the ALP cabinet interviewed in MSM) is just conceding the point that it’s not just wealthy people affected by this policy proposal. This is an obvious point that nobody can deny, This whole scheme was implemented to assist those genuine low income earners (under the threshold) to avoid paying tax on their income – this *WAS* the point of it.
how were low income types affected by the franking credits?
If you did have low income you would not have a super pension, you would have taken a lump sum .
such people would be on a pension. The only shares they would have would be CBA or IAG because of the change in the ownership of said companies.
Only people with substantial savings could salary sacrifice into super, the most tax effective investment and then if they still had savings over invest in a share portfolio that only had companies that had fully franked dividends. That would need substantial financial advice.
you can have a share portfolio of over $330k and still get the franking credits assuming a 5% rate of return which could well be too large!
I have yet to be shown an example of a low income person being affected by franking credits.
nottrampis
“how were low income types affected by the franking credits?”
They probably would not have been, since, as you say, people on the age pension were exempt. (Although it’s possible that some people with just enough assets not to qualify for an age pension might not have much of an income.)
But politics, especially in an election campaign, is about perceptions, not policy details. The perception was that it was a ‘retiree tax’; and That’s All Folks.
nottrampis,
We’re not talking about “Franking Credits” here (as a broad policy) – we are talking about the *refund* offered for low income earners (or low *nett* income earners to be more precise)
Me (working full time, paying an avg marginal tax rate) can invest in a stock that offers fully franked dividends. With those dividends, I can claim whatever company tax has already been paid (on those dividends) against my income tax obligation to avoid being taxed twice. ie. the company offering the dividends has already been taxed on the profits.
If I was on a nett income that was below the $20K (or thereabouts) tax free threshold, and invested the same shares, I have no income tax obligation to claim against, so the company tax on *my* dividends has been paid by the company and under the ALP proposals, I have to live with that with no recourse to claim it back. Under the existing system, I *can* claim a cash refund of that tax that’s been paid – before I received my dividends.
No, I’m not an accountant or expert so this is just *my* understanding of how it generally works.
My parents get franking credits and they dont need the money. One voted Labor the other Liberal ,as they have always done .I am finding that some people who I would have assumed to vote Labor did not do it .When asked why not they repeat Murdochs talking points and dont know or care much beyond that .Overall I think the most powerful explanation for what happened is just to see it as in line with what is going on in the Western world in general .I thought we might have a Jacinda Ardern moment but we had a Trump one instead, I thought Abbott may have been our Trump.
There are a lot of parallels, not just the fact that the polls were wrong. It is Fascist politics caused by inequality. This gets dangerous when mainstream center right parties begin to accommodate the extreme right. Features of Fascist politics (from Jason Stanley) ;- the mythic past ,propaganda ,anti intellectualism, conspiracy theory ,hierarchy, the out group, victim hood ,law and order, urban sinners and rural purity, sexual anxiety, and work will set you free.
Troy Prideaux
you’re understanding is 100% correct. The practical question is (or was) how many people with income below $20K have a share portfolio. If you’ve got an income at that level because you’re a part-time shelf stacker at Coles, then it’s unlikely but not impossible that you’ve ever saved up enough to buy any shares. On the other hand, and this was the Labor Party’s assumption, if your taxable income is at that level because you don’t work but you get $20k as a distribution from a family trust, then you’re not really low income at all.
If the Labor Party had waited until they got into government then they could have got Treasury to do a proper analysis of the ATO data and they would have found out precisely how many part-time shelf stackers and how many family trust distribution recipients were getting cash back from franking dividends. But they did it from opposition, based only on the publicly available data, and they couldn’t nail their case.
I am underwhelmed by the choice of Bowen or Albo as the nest Leader.
I think the ALP is in the boxseat to win the nest election because of the budget time bomb we saw in the last budget.
Me thinks Tony Burke would prosecute a case far beet than either. If one wants a new generation then Jim Chalmers.
Revenue problems means franking credits and negative gearing will eventually come on board
@sunshine
This drift into fascism meme is absurdly overblown (at least in Australia). The country, including Queensland, voted overwhelmingly to approve gay marriage as recently as late 2017. Fraser Anning got very few votes, in Queensland, even with name recognition. Tony Abbott, conspicuously, got booted out on his ear. Yes, the major party that sits on the right wing part of the spectrum got re-elected. That was a big disappointment to many people given the expectations but it’s not like they won in a landslide. The House of Reps is virtually 50:50 as it was before the election. And Scott Morrison for all his faults (where do you begin?) is not the second coming of Pinochet. Have some perspective, please.
Smith,
You can’t do much tax minimisation with family trusts. You can *only* divide income with your spouse. Yes, people were using their children and whatnot, but that’s no longer allowed as of quite recently.
How many fall into the category of genuine low income, low asset holding people who utilise this refund – I don’t know, but personally I know at least 1.
If it was a trivial percentile, why was the facility introduced in the 1st place?
Troy Prideaux
it’s not true that a family trust can only distribute income to a spouse. If your accountant has told you that you should get a better accountant. People can and do distribute to their adult children, their parents, you name it. What you can’t do effectively is distribute income to minor children because these distributions (apart from a small amount) are taxed at the highest personal rate This was brought in by John Howard when he was Treasurer in 1981 or thereabouts.
I don’t get your second question. Cash back from franking credits wasn’t introduced to help genuinely low income, low asset people. It was introduced because the previous, original franking credit tax regime was thought to be incomplete because it excluded cash back, at the time the government was awash with money and didn’t cost much anyway, unlike now. The difference between then and now is that then income from super pensions was taxed at 15% and now it is not taxed at all. This makes a huge difference to the amount of unused franking credits and so a huge difference to the cost of the policy.
Smith, it wasn’t our tax agent who told us that – it was the *TAX OFFICE* directly.
Apologies. I was refering to minors without TFNs. Was too quick to respond. I take your point.
Then I am afraid to say you’ve struck someone in the ATO who doesn’t know what they are talking about.
Hewson says the LNP were working on reigning in franking credits until the ALP announced their proposal.
If I lost my job I would be hurt by the suggest change to franking credits. My assets are too high for me to get the dole (and even if they weren’t I doubt I could hack the job search requirements). This means I’d be living off my share income and that would be reduced. I’m all for soaking the rich — just ones who are richer than I am.
“I’m all for soaking the rich — just ones who are richer than I am.”
Aren’t we all?
“Hewson says the LNP were working on reigning in franking credits until the ALP announced their proposal.”
I am sure this is true. Franking credits cash back is the kind of thing that Treasury hates, a policy that was brought in at a different time under different circumstances which then cost very little but which now costs a motza and counting and is out of control.
Ronny,
you would have plenty of taxable income from your previous job. .
What you are saying is you would have no taxable income until you put your tax return in.
Are you saying whilst you look for full-time work you could not find any part-time or even casual work at all? you would sell any assets?
Well, nottrampis, if I got sacked in the end of June and then only worked part time for $20 an hour for the next year I would be affected. Or if I worked full time for the same pay but it took me 6 months to find a job. Sure, there wouldn’t have been many people affected by the change, but it did seem odd to me that the moderately well off could be affected while the well off generally wouldn’t be.
I figure Labor was looking for a way to sure up finances that the Coalition wouldn’t be able to spin as “A Big New Tax On Everything!” But I don’t think there was ever any hope of that as even fuel efficiency standards were spun as “A Big New Tax!” when it was the opposite as it would have reduced government revenue. This country really needs political advertising to be held to the same standards as conventional advertising.
@ smith
I dont want to sound like I think Australia is about to fall into full blown fascist rule anytime soon .However the study of the features of fascist politics is well established and our Coalition government is clearly on the spectrum. History shows that a bad turning point is when the centre right embraces the extreme right, as has been happening here. Fascist politics is more standardised as a way of getting ,or keeping ,power rather than as one of actually governing. Once in power local conditions can produce a variety of outcomes. Compared to other countries we are doing ok ,but increasingly governmental attitudes are having negative real world consequences for many of us. If economic times get tougher things might move faster ,it would be a mistake to think Australians are special so we dont have to worry.
nottrampis said;
“No-one but no-one can explain the result on Saturday given the state of polling.”
Yes, someone can explain Qid at least:
https://en.wikipedia.org/wiki/Maslow's_hierarchy_of_needs