As if public funding of political parties isn’t bad enough, the Howard
Government is now considering increasing the threshhold for the tax
deductibility of political donations, according to a
front page story in today’s Fin Review.

Political welfare is already costing taxpayers almost $30 million
each federal election because every candidate who polls more than 4% gets $2
per vote out of the public purse. Australia has long been a welfare
state (Centrelink has 6.5 million
“customers”), but Australia is out on its own in the democracy club
when it comes to this sort of direct subsidy.

To fund all this welfare we have to have some of the highest and most
punitive personal income tax rates in the world, even after Peter
Costello’s latest tax cuts. But now, according to the Fin Review,
the wealthy are going to receive an incentive to donate to political
parties because they will be able to deduct up to $5,000 from their tax
each year. The current maximum deduction is only $100.

Even worse, a $5,000 donation will be secret because Special Minister
of State Eric Abetz is also proposing to increase the dislosure limit
from
$1,500 to $5,000.

Under the current system, a farmer that received a huge handout after
bleating about the drought could only secretly donate $1,499 of this
back to the National Party without disclosing it. And only $100 of this
could be tax deducted. Under the retrograde plans outlined by Senator
Abetz to the Fin Review, this subsidised farmer could secretly
donate $4,999 to the National Party and then save $2,350 in tax, assuming
he or she was on the top marginal rate of 47%.

The hypocrisy of this proposal is astounding. At a time when the Howard
Government is demanding better corporate governance and disclosure from
publicly listed companies, it wants to move in the other direction on
its own disclosure.

This might be an example of Senate control being an awkward thing for
the governnment as Labor would equally benefit from the changes, but
they can keep a clear conscience by voting against it. As they should.

The disclosure of political donations is already ridiculously slow. A
cheque handed over on 1 July last year will not be publicly revealed
until February next year – a 19-month delay. Now this already slow
system will be far less comprehensive as well.