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Issue #1753      October 19, 2016

“Trickle-up” economics

Labor/Coalition in vote to increase inequality

Just four weeks ago the Labor Party lined up with the Coalition to vote for the Omnibus bill, with $5 billion in cuts over four years to social security and action on clean energy in the name of “budget repair”. Then last week, Labor again cooperated with the Turnbull government to support $4 billion over four years in tax cuts for the wealthy.

The outcome of these cuts will be to widen inequality even further.

These social security cuts and tax cuts come straight out of the 2014 Abbott/Hockey horror budget. The only thing that has changed since Abbott is that Labor is now supporting these elements of that budget.

They make a lie of Treasurer Scott Morrison’s rhetoric about the need for cuts to social security, health and education in the name of “budget repair”. The aim of these cuts is to slash and eventually eliminate personal and company taxation, leaving the GST as the main source of government income.

The government dishonestly claims the tax cuts will benefit middle-income Australians. Taxpayers on incomes over $80,000 a year will receive a tax cut of up to $315 a year or $6 a week. (The marginal rate on incomes between $80,001–$87,000 will be reduced from 37 cents to 32.5 cents in the dollar.)

The top 20 percent of income recipients will receive the tax cuts, not middle-income Australians. According to Australian Bureau of Statistics, median income (a true measure of middle income) for all Australian workers was $52,000 In 2014. It would not have risen much since then. Certainly not to $80,000 or more!

Tax cut recipients include bank, insurance, and resources sector executives on six and seven figure packages. Putting an extra $6 a week in their pockets will not result in job creation or economic growth as the government claims.

It is more likely to be added to a negatively geared investment property, gambled on the stock market or some other financial instrument or stowed away in superannuation to rort the taxation system.

The government tried to justify the cuts by dragging out the old “trickle-down” effect theory of Reagan and Thatcher days. The “trickle-down” myth goes along the lines of make the rich richer and the crumbs that fall from the table will feed the poor, create jobs and grow the economy.

“This is a step towards the modern tax system that Australians want and need, a system that will encourage Australians to work, not punish them for having a go or taking risks,” Treasurer Scott Morrison claimed in his Second Reading speech. As if an extra $6 a week would see an entrepreneur take risks or make childcare affordable for a single parent. Not that the average single parent is on more than $80,000 a year!

All it does it make the rich richer and the poor poorer.

Several Greens Senators spoke strongly against the bill. Senator Peter Whish-Wilson pointed out that while 28 percent of male workers are likely to receive the tax cut, only 13 percent of women will receive it.

Double Whammy

The 80 percent or so of workers on lower incomes who could benefit from an extra $6 a week, will receive nothing. The unemployed and students who are struggling on poverty- line incomes will receive nothing.

Worse than that, many of them will see their incomes shrink as a result of the cuts in the omnibus bill that was passed four weeks ago with the support of Labor.

The Greens, Nick Xenophon’s Team and Jacqui Lambie opposed the tax cuts. The Coalition, Labor and One Nation supported them.

During the Second Reading debate, Labor put up no arguments in defence of the tax cuts. In fact, much of Labor Senator Katy Gallagher’s would have made a strong contribution against the bill.

“Scott Morrison has offered up this modest tax cut for those on incomes over $80,000 as a crude cover for his cuts that have affected the cost of living of every single low- and middle-income Australian. The government’s double dealing in the budget cannot go unremarked upon,” Gallagher said.

“Labor does support the tax cut contained in this bill, but we acknowledge that three-quarters of Australian workers will receive no tax relief from the 2016 budget and that those same Australian workers who miss out will disproportionately bear the brunt of this government’s cuts to schools, hospitals and Medicare and to the family supports they rely upon.

“It is a simple truth that you do not create the jobs of the future by cutting education, making health care inaccessible and unaffordable, under-investing in infrastructure and making broadband slower,” Gallagher added, again providing a good argument to have opposed the spending cuts and tax cuts.

“Labor does believe in delivering a fair and sustainable tax system ... Maintaining public confidence in Australia’s tax system is critical and depends on simplicity, transparency and everyone paying their fair share – something this Treasurer and government have manifestly failed to grasp or deliver,” said Gallagher.

But there is nothing fair about these tax cuts.

So, why then is Labor voting to make the tax system less fair, less progressive? Why did Labor support taking money off students, single parents, families and the unemployed?

Gallagher also spent much of her speech in a paper tiger attack on the government for making a mess of the implementation of the tax cuts, resulting in a delay from the promised start of July 1 to October 1, 2016!

Perhaps it is not surprising that no one else from Labor rose to speak in the debate or that people are looking for an alternative to the major parties.

“I do agree with some of the things Senator Gallagher said today. The big things we do need to tackle in this parliament, like concessions of negative gearing, capital gains tax and proper superannuation concessions, are things we should work at together with Labor and with the Liberals to get some real economic reform done in this country,” Greens Senator Whish-Wilson said.

“That is what is going to raise revenue and tackle inequality.”

The Communist Party of Australia also strongly opposes the tax cuts, which are regressive. The budget could easily be met and social spending adequately funded by increasing the rate of taxation on high income earners and ensuring the large corporations pay taxes on their profits.

The CPA is also calling for an end to the billions of dollars in government subsidies to the resources sector and private hospitals through the private health insurance rebate. The most obscene budget item, which threatens regional security, including Australia’s, is the one trillion dollar offensive budget for military spending over the next 20 years. This could be slashed and still leave more than ample funds for defence.

The issue is not lack of money, but politics and ideology. Corporate profits versus the needs of people. This government is firmly on the side of corporate profits.

Next article – 1965 Indonesia bloodbath – A US/Australian coup

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