There’s been fierce action in the tax wars over the weekend – in the newspapers, anyway. The Government and good policy still seem AWOL.

The Australian – surprise, surprise – lead the way, charging in once more like Henry at Harfleur.

The Sunday Telegraph produced figures that show yet again how idiotically low our idiotically high top tax rate kicks in when it quoted the Real Estate Institute as saying the median house price in Australia’s main city, Sydney, is now half a million big ones.

And the Weekend Fin got into the game, looking at the impact of negative gearing in a cover story that asked if the traditional Australian home owner-occupier is becoming extinct.

But the icing on the cake – for what it says – was this single shot that came in from a subscriber:

“Given that so many people are paying off mortgages on their homes due to the Government’s First Home Owner Grant, I believe that Labor should consider adopting a policy that allows mortgage interest payments on the primary place of residence only to be tax deductible. This could be funded by reducing or eliminating negative gearing.

“At the end of the day, Labor needs to win back aspirational voters (‘Howard’s Battlers’) in order to form Government, and what better way to do so than giving them some tax relief on the mortgages that a lot of them got in to only because of the Howard Government’s FHOG? Very few aspirational voters would be able to take advantage of negative gearing while paying off their mortgage, and those who do would most likely never vote Labor anyway.

“I must say that I don’t think I could ever vote Labor, but I must admit that I am enjoying seeing Mark Latham put John Howard under some real and sustained pressure for a change. I just wonder how long before Howard gets a tap on the shoulder to stand aside for the best interests of the Liberal Party. That’s more likely to happen than a challenge by Costello; I don’t believe the Treasurer has the stomach (or heart) to do so.”

Coalition strategists – and we know you read Crikey, even if you won’t admit it – did you note that? Let’s have it again.

“I must say that I don’t think I could ever vote Labor, but I must admit that I am enjoying seeing Mark Latham put John Howard under some real and sustained pressure.”

Prime Minister, you’re useless.

“I just wonder how long before Howard gets a tap on the shoulder to stand aside for the best interests of the Liberal Party. That’s more likely to happen than a challenge by Costello; I don’t believe the Treasurer has the stomach (or heart) to do so.”

Mr Treasurer, you’re a wimp.

Your housing policy and the way you’ve linked it to tax certainly suggests so. All you’re doing is making housing less affordable – yet you don’t have the guts to admit it.

We won’t quote the Fin as it’s a rip off, online or in hard copy. Instead, let’s quote that newspaper of the aspirational classes, the Smellie. It shows the idiocy of Howard Government policy clearly enough:

“The average cost of a Sydney home has reached $500,000, according to exclusive figures obtained by The Sunday Telegraph.

“And the median price of a home in outer suburbs has risen to $300,000 for the first time, according to the NSW Real Estate Institute.

“With housing affordability at a record low, just one in 10 Sydney property purchases in the December quarter were made by first-home buyers.”

And how’s this for a doozy of a quote:

” ‘Half a million dollars is a benchmark, and the psychology of that is giving buyers more motivation to get into the market because their asset will grow,’ NSW REI president Rowen Kelly said.

” ‘There will be lulls and peaks in the market over the next decade, but in 10 years time, or even less, the median will hit $1 million.’ “

Thank you Mr Howard, Mr Costello.

Once someone earns a whisker over 60 grand, you declare them a high-income earner and make them pay a tax rate of almost 50 per cent.

And thanks to the cack-handed way in which you bought in tax “reform”, you pumped up the housing market in case other sectors of the economy slumped – making housing less affordable – and maintained negative gearing, making… well, you guessed it.

No wonder the Smellie reported:

“Experts warned first-home buyers were likely to be pushed from the market.

” ‘Half a million is certainly a daunting figure for first-home buyers,’ Macquarie Bank economist and property expert Rod Cornish said.”

Blud oath. And water’s wet and the sun rises in the east.

So no wonder The Australian were able to find a true-blue Liberal couple that are thinking of switching their vote, a copper and his wife.

Again, in case the wonks in the Min Wing and at Menzies House missed them, lets reiterate their comments:

“Policeman Craig Inglis may sit uncomfortably on the cusp of the highest tax bracket but he cannot believe anyone would imagine him to be wealthy,” the Oz reported.

” ‘At this stage the Government has got its cake and is eating it, too,’ Sergeant Inglis said. ‘Australians pay fairly high tax on a fairly low wage bracket, as well as GST on everything we eat and do, but our tax dollar is buying less…”

“One of the biggest problems for Sergeant Inglis as a PAYE taxpayer is bracket creep. Tax brackets are not adjusted to meet inflation, so every year more and more people pay the higher rates.

“An extra $1500 a year would catapult Sergeant Inglis into the highest tax bracket with a rate of 47c in the dollar, a fact that makes him think twice before accepting overtime shifts…

“Ms Inglis said she was surprised by the amount of time spent on paperwork to keep her small business GST-compliant.

“Before the GST was introduced she spent eight to 10 hours a week on paperwork, but now it was closer to 20 to 30 hours a week…

“Sergeant Inglis said he would take a tax cut over increased government spending because ‘that way you have the freedom to spend that extra money however you wish, whereas you may not get the benefit of the spending on services’.

“Both Sergeant Inglis and his wife consider themselves ‘consistent’ Liberal voters but would change their vote if there was good reason to do so.

” ‘There hasn’t been anyone in Labor who, until recently, I’ve seen as a viable alternative,’ Sergeant Inglis said.

” ‘That’s starting to change.’ “

The Weekend Australian’s fusillade wasn’t being direct by any grunt, either.

A master gunner, George Megalogenis, was directing the artillery – and he made sure the rounds found their target.

“John Howard owes voters a $3.8billion income tax cut in the May budget.

“This is the hard number behind bracket creep – the inflation tax sting that is punishing the low-paid and pushing middle Australia into the personal tax rates meant for the rich.

“Groundbreaking research commissioned by The Weekend Australian pinpoints 1.4million people taking home less than $39,000 a year as the biggest victims of the nation’s dysfunctional tax system.

“Located on the lower and middle rungs of the income ladder, these ordinary workers have seen inflation snatch back almost the entire value of two previous tax cuts from the Howard Government in just four years.

“In fact, they will pay a higher average income tax rate in the coming financial year than they did in the final year of the old tax system in 1999-2000 – unless the Government awards them a pre-election sweetener on July 1. However, the Government would need to hand back $2.8billion in bracket creep in 2004-05, and a further $1billion in 2005-06, merely to return voters to the same income tax position they enjoyed when the GST changes were first introduced in 2000-01.

“This $3.8 billion total is the sharp edge of a system that has been collecting record levels of tax from workers, and is now at breaking point.

“Over the past generation, the national tax take has grown from less than 20 per cent of national income in the mid-1960s to more than 30 per cent now to finance expanding government and various welfare payments…”

Megalogenis fired off too many salvoes to list here – but there are more cannonades than in the 1812 in his full report at http://theaustralian.news.com.au/common/story_page/0,5744,8744513%255E601,00.html.

But despite all this, tax didn’t get a look in when the Prime Minister appeared on Insiders on Sunday.

A case of “I have not yet begun to fight”?

Could be.

Here’s our final lot of quotes from the weekend press – Michelle Grattan in the Sunday Age:

“Chris Richardson of Access Economics says the Government will be in a better position for budget and election spending than the projected surpluses announced in the December mid-year review suggest. These were $4.6 billion for this financial year and $3.8 billion for 2004-05.

“The Government goes into budget planning ‘comfortably ahead’ of these figures, although not streets ahead, says Richardson, who gives two reasons. ‘The booming company profitability that Australia is experiencing has never been completely factored into the official figures, partly because the surge keeps getting better.’

“Also, the 2004-05 figures appear to be understated ‘because they don’t seem to account for the Treasurer holding over close to $1 billion in Reserve Bank dividend from this financial year to the next’.

“2001, Labor’s room to manoeuvre was greatly reduced by the Government’s spending splurge. The same Howard tactic will work against Labor this time, but maybe not quite so much because there is another element in the mix…”

So the Government is AWOL now – but wants to come charging in like the cavalry?

It mightn’t be that simple this time. More Grattan:

“Latham is selling himself as presenting a different, more community and relationships-based style of politics.

“The 2004 contest has a whiff of 1983, when Bob Hawke appealed by running on the idea of ‘reconciliation’, which captured public imagination.

“To maximise the advantage that access to the money gives it, the Government has to neutralise the impact of Latham’s pitch on ‘values’ issues (parenting, social capital, promotion of democratic dialogue, and the like) and put pressure on him (or have the media do so) over how this translates into substantive policies (which can cost a lot).

“The varied reactions to Latham’s National Press Club speech last week, which was big on values and the ‘new politics’ and short on conventional hard-edged policies, showed that he has shifted the debate on to his ground; but also that he will need to be convincing when he gets down to specifics.

“The issue, however, is the extent of the specifics that Latham needs. If he can fire the public’s imagination and keep attention on the big picture, while making sure that he has detailed policies that are attractive and convincing enough to cut off criticism without being mega-expensive, then Howard is in real trouble.”

If Howard only offers specifics on tax at the last moment – and when the timing looks more than a little cynical – he’ll be in equally big trouble, too.

If they continue to sit out the tax wars or only offer further fudged reform, John Howard and Peter Costello will be defeated.

Quite properly, too.

Hillary Bray can be contacted at [email protected]

Peter Fray

Fetch your first 12 weeks for $12

Here at Crikey, we saw a mighty surge in subscribers throughout 2020. Your support has been nothing short of amazing — we couldn’t have got through this year like no other without you, our readers.

If you haven’t joined us yet, fetch your first 12 weeks for $12 and start 2021 with the journalism you need to navigate whatever lies ahead.

Peter Fray
Editor-in-chief of Crikey

JOIN NOW