Talk about missing the point. The media spent all last week working themselves into a lather over Labor’s newly announced policy to abolish cash refunds for unused dividend imputation credits. (If you have no idea what that means, it probably wouldn’t affect you.)
By Ross Gittens
This promise would be terribly unfair to dirt-poor self-funded retirees, we were told. And it was utter stupidity for Bill Shorten to drop such a monumentally unpopular proposal in the last week of the Batman byelection, which he was now safe to lose.
Labor Leader Bill Shorten says he is on the side of retirees and fairness as he defends his party’s tax reform.
Except, of course, that Labor won comfortably, with little sign the policy had much effect.
The media smarties’ greater failure was their inability to see the bigger picture: the next federal election is shaping as a battle between the generations, with Labor championing the put-upon young and the Coalition defending the privileged old.
Those of retirement age (which includes me) have little more pressing to do than to worry incessantly about their finances, and have developed an unshakable sense of entitlement (“I’ve paid taxes all my life …”). Any concession they’ve been granted, no matter how unjustified or unaffordable, can’t be taken back, we’re assured.
Well, I’m not so sure.
As a political force, Grey Power has one huge weakness: of all the age groups, the over-65s are those least likely to change their vote. The great majority vote for the Coalition, so Labor doesn’t have a lot to lose.
It’s among the non-aged (sorry) that most swinging voters are found, and it’s by picking up enough swingers that a party wins.
Haven’t you noticed how, since 2013, the Coalition has been reacting to Labor’s pro-younger policies by flying to the defence of the better-off old? The conservatives are allowing themselves to be “wedged” – separated from the majority of voters.
The Canberra smarties also used to believe negative gearing was politically untouchable. But Labor went to the 2016 election promising to curtail it – while the Libs predicted it would send house prices crashing – and came within a whisker of winning. Labor’s persisting with the policy.
Labor went to that election with another pro-younger policy; cutting the tax breaks going to exceptionally well-off superannuants (including me). This time, Malcolm Turnbull, needing help to pay for his company tax cuts, produced his own, Treasury-crafted version of Labor’s idea.
The issue didn’t feature greatly in the election campaign, but after the Coalition had won, the exceptionally well-off superannuants in the Liberal heartland turned on Turnbull. This advantaged Labor by adding to the disunity in the Coalition’s ranks. Turnbull modified his super changes, but not greatly.
And now Labor is planning to remove another super tax concession that goes overwhelmingly, but not exclusively, to superannuants with large share portfolios. The Coalition hasn’t resisted the temptation to side with its well-off elderly heartland, nor have the media resisted the temptation to promote its (and the super industry’s) misrepresentation of the policy as an attack on struggling retirees (who just happen to own a lot of shares).
How is this another of Labor’s pro-younger policies? That will be easier seen if, as seems likely, Labor uses the saving to pay for a promise of income tax cuts for people earning less than $87,000 a year – few of which would go to the retired rather than to the workers who pay for the retired’s largely income tax-free status.
If you think an election campaign based on conflict between the generations is not a good thing, I agree. Unless what you mean by that is that the better-off aged should be allowed to retain their relatively recently conferred tax advantages, and the taxpaying non-old should continue to lump it.
It’s a pity John Howard and Peter Costello (the chap who kept issuing reports warning that population ageing would play merry hell with the budget) didn’t worry more about future generational conflict when they spent most of their 11 years in office slipping new benefits for the aged, particularly self-funded retirees, into the budget.
They started with the private health insurance tax rebate (the biggest users of private health insurance services are 60 to 79-year olds) and moved on to giving the alleged self-funded retirees the “seniors and pensioners tax offset”, also making it easier for them to get health cards and pay the pensioners’ rate for pharmaceuticals.
In 1999, they gave negative gearing a huge boost by introducing a 50 per cent discount on capital gains tax. And they decided that anyone who paid so little income tax they couldn’t take full advantage of their dividend imputation credits should be sent a refund for the balance.
On the younger side of the ledger, while they didn’t invent HECS debts for university students, they greatly increased them.
Then, in 2007, Costello introduced sweeping super changes, making super payouts completely tax-free for people over 60. He also made a lot of supposedly self-funded people eligible for a part pension.
Since this largesse was quite unaffordable, Labor and Coalition governments have been chipping it back ever since.
Even so, we retain an income tax system where how much you pay sometimes depends on the size of your income, but other times on how old you are. And that’s not going to lead to inter-generational conflict?