Peter Boyle
On budget night last year, federal treasurer Peter Costello said that he hadn't cut the top marginal income tax rate for individuals because "only 3% cent of Australians will be on that top rate.
"For 97% of Australians, that top rate won't affect them. Now, you could argue, well why don't you cut the top rate and that would produce huge tax cuts for millionaires, multi-millionaires? I thought the most important thing was to increase the threshold because that just makes the top rate quite irrelevant for most Australians."
If you think Costello delivered generous tax cuts for ordinary folk in his 2005 budget, think again. Individuals on $125,000 or more per year received an $86.50 per week tax cut, compared to a $6 per week tax cut for people on $25,000-$55,000 a year (most workers are in this bracket).
But that wasn't fair enough on the rich, squealed multi-millionaire Malcolm Turnbull. That's right, agreed PM John Howard.
And so the filthy rich began their campaign to have the top marginal rate slashed. Rupert Murdoch's Australian ran a few attacks on Costello and he took the warning to heart. The government set up an inquiry to allow the filthy rich to tell them just how to do it. And they did.
The Business Council of Australia's (BCA) submission seems to have been duly incorporated into the 2006 budget by a chastened Costello:
1. "Reduce ... highest rate from 47 to 45 per cent as part of 2006 7 Budget." Costello delivered that.
2. "Reduce top rate to 40 per cent in 2007-8 Budget." Costello promised more tax cuts next year.
The BCA costed this tax cut as $1.45 billion in 2006-7, rising to $5.16 billion in 2008-9 when both tax cuts take full effect.
The result, in the 2006 budget, is that if you earn $30,000-$60,000 per year, you get a $9.80 per week tax cut, but if you earn $150,000 (that puts you in the top 2%), you get a weekly tax cut of $119. ALP opposition leader Kim Beazley welcomed these tax cuts.
The 2006 budget papers do not calculate the tax cut beyond $150,000, perhaps because no sane millionaire, with an army of tax evasion specialists at their beck and call, would declare an income much more than that. The specialists would ensure that they reaped the full benefit of other generous tax cuts in the budget for companies, trusts and people with large superannuation savings.
So Costello and Howard are the servants of the filthy rich — what's new?
How about a trade union leader called Bill Shorten whose aspirations to become leader of the ALP were hooked onto media coverage of the rescue of the Beaconsfield miners? He wants the top marginal tax rate to be lowered to 30%, outflanking the BCA from the right. Another brilliant ALP re-election strategy in the making?
In parliament, only Greens Senator Christine Milne offered some sanity in her budget response:
"The budget message was that the Howard government had perfected the Midas touch, and people were prompted to rejoice and be glad to spend, spend, spend — for the vision and values of Prime Minister Howard and his Treasurer, the Hon. Peter Costello, would guarantee that the only direction for the Australian economy was up, and, on that assumption, the tax revenue base could be permanently narrowed. In the next four years, $45 billion will be forgone in tax cuts, as if there were no national imperatives to fund nor any global responsibilities, as if an ecological deficit did not exist, as if the nation's health and education systems were already world class and as if the $2.6 billion required to address Indigenous health and housing were not a priority ...
"Our children are our future, and if you had an eye to the future you would not reduce education spending as a proportion of government outlays, as has occurred in this budget. Would most Australians choose a tax cut if they realised that their children would have to borrow as much for their university fees as they had to borrow for their first home? The tax cuts could make tertiary education free again. In the Howard government's values system, this is a lesser priority than increasing the ability to consume for people who are earning over $100,000."
From Green Left Weekly, May 24, 2006.
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