Following up on last night’s post, let’s look at tonight’s budget. First off, that tax cut.
What a load of bollocks. The cuts for this year are basically petty cash – a sweetener that is nice but unnecessary. But the cuts coming five years down the line are just insane! On top of a $40bn worth of company tax cuts, we’re now going to see $140 billion in income tax cuts, all aimed at the top 10% and higher income earners, with the bulk of the benefits going to less than 3%. These are people who already pay far less tax, as a % of their income, than they did 10 years ago. They (we – I fall into the $100,000-$200,000 salary range) do not need these cuts.
The Howard/Costello government, in their death throes, decided to drop income tax massively. They looked at a temporary windfall of revenue and said “That will last forever – let’s cut taxes”. Yes, they’d used the extra revenue – as well as massive asset sales – to reduce government debt until it was net positive (not eliminated), but they squandered the opportunity to build up any sort of buffer. Thus we sailed into the GFC, and saw a massive drop in government revenue that we never recovered from. Federal revenue dropped from being consistently in the 25%-26% range between 2000 and 2007, down to only 22% before recovering to just shy of 24% (Morrison’s magic 23.9% target).
Treasury is forecasting extra revenue next year and the year after. They’ve done that before, as well – usually with poor results. Morrison is using these forecasts of riches tomorrow to lock in tax cuts now. That’s a huge mistake, especially with the “debt-and-deficit disaster” we supposedly had (after all, if $250bn debt 5 years ago was a disaster, more than twice that now is worse). How about we actually see the extra revenue come in, run a few years of $10bn+ surpluses, and pay that debt down first?