Don’t be fooled by the turn – Tuesday’s budget will be political and ideological | Greg Jericho
Tits Tuesday budget will, as always, be a very political document. Yes, some economics will be used to frame the rotation, and there will even be an attempt at modeling, but overall it will be a policy and ideology document.
Scott Morrison and his government have been hyper-ideological throughout the response to the coronavirus. This, of course, comes as no real shock as Scott Morrison has been hyper-ideological since taking over as Prime Minister.
He’s the kind of politician who talks a lot about being pragmatic, and then invariably finds a pragmatic solution which is to promote his ideological agenda.
The response to the crisis has seen this ideology shift into overdrive.
They resisted providing a salary guarantee through the job guard (which now takes all the credit for), then ensured that universities (at least public) were ineligible – even amended legislation to ensure universities are not eligible.
Aid to the arts sector has been delayed. They cut payment for job seekers even as Victoria was still operating under foreclosure measures and came back quickly to talk about the unemployed not wanting to work. They undermined the pension sector and shifted the burden of the pandemic onto young people while allowing access to retirement, stacked the Covid coordination commission with business and fossil fuel executives, and then adopted a “gas-centric” recovery strategy.
Universities, the arts, the unemployed, retirement pensions and climate change. Slap, slap, slap, slap, slap.
And now we’ll hear about jobs.
There will be all kinds of manufacturing rumors designed to distract the easily duped.
Like the monthly Nick Feik rated this week, the government loves making almost monthly announcements about how it is helping the manufacturing sector, including this week’s one that it will “transform” Australia’s manufacturing sector.
Wow. Transform an industry that has an annual output of around 105 billion dollars? How will this massive undertaking be carried out?
Well, the government has allocated $ 1.5 billion … over four years. So $ 375 million per year.
Small beer. And even smaller if you compare it to what will likely be the centerpiece of the budget – highlighting the tax cuts currently in law for 2022 and 2024.
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These reductions are called Steps 2 and 3 of the government’s tax plan.
Step 2 is to increase the upper threshold of the 19% tax bracket from $ 41,000 to $ 45,000, increase the low income tax compensation from $ 645 to $ 700, and then increase the upper threshold the 32.5% tax bracket of $ 90,000 to $ 120,000.
These changes will provide a 0.5% tax reduction for someone earning $ 45,000 and 1.9% for someone with $ 120,000.
Not bad for someone who earns double the median taxable income, I guess they do tough things. Such pragmatism.
The Parliamentary Budget Office estimated that this step would cost around $ 27 billion in the first two years.
The worst will happen if the government decides to propose the Step 3 cuts, which will reduce the marginal rate from 32.5% to 30% and lower the threshold from $ 120,000 to $ 45,000 and increase the upper threshold by 180 $ 000 to $ 200,000.
Such a move, the PBO estimated, would reduce annual government revenues by about $ 26 billion by the end of this decade.
And that would give the rich an absolute motza – a 4.5% tax cut for someone making $ 200,000.
The benefits for high-income earners are so huge that, although they only make up about 5% of all taxpayers, the PBO has estimated that those earning more than $ 180,000 will receive about 31% of that $ 26 billion. dollars per year.
Feel the pragmatism.
People with such wealth will save money largely, use it to increase their wealth, but make little additional spending that would improve economic growth or anyone else’s wealth.
Such tax cuts are not made for economic reasons but for an ideology – the ideology of benefiting the rich and pushing for a smaller government.
And the government is now in a position to use the pandemic as a cover for the fact that it never actually budgeted for the cut in revenues that tax cuts will bring. It can also use ongoing revenue cuts to justify cuts in services and benefits once the pandemic is over.
Even more pragmatism, I guess.
This Tuesday will be very political and, if the past year has been something to watch, ideologically. Don’t be fooled by the turn and the talk about the economy.