What took them so long? The Treasurer had a big weekend with all his meeja, but even his set piece talk on tax with Phillip Hudson for the Fairfax Sundays contained this concession:

People earning more than $63,000 a year will get another
tax cut on July 1. Will the 80% paying 30% or less get
some relief too?

“Well I don’t rule things in, I don’t rule things out. The only thing
I’d say is we have certainly reduced tax rates over the last ten years
and if we can do more we’ll try to do more. Always trying to do more.”

Yup. The Treasurer is just spending summer tinkering with tax. Yet it’s
decision makers, not dilettantes, who get made prime minister.


All we hear,
though, is that “a substantial increase in family tax benefits instead
of a tax cut is likely in the wake of comments by Treasurer Peter
Costello about the priorities for this year’s budget.”

No wonder The Australian‘s leader writers have given him both barrels this morning:

Master magician Peter Costello was up to his favourite
trick on the weekend – explaining how he will help families with
dependent children, come the budget. As usual, there was all sorts of
rhetorical smoke and mirrors. But there were no promises of tax cuts –
real tax cuts that would come from a reduction in the rates people pay,
not just increases in the threshold where higher payments kick in.
Instead, he said the Government would keep mortgage interest rates low
and invest in education and childcare. Just like he always does. And
when asked about tax cuts for middle-income earners, Mr Costello came
over coy, suggesting that everything he did was intended to help
“families.” At which point the second banana in this arthritic act, the
Australian Council of Social Service, in the form of director Andrew
Johnson, took over. Mr Johnson said “families” would not welcome tax
cuts – even though Mr Costello had not specifically promised any. What
they wanted, Mr Johnson said, was government spending on services –
ensuring he was on song with the Treasurer. Because while many in the
media decided Mr Costello was talking about tax, he actually emphasised
government spending on services. And anybody who has observed Mr
Costello’s political song and dance over the decade he has been
Treasurer will know tax cutting is not a technique he has ever appeared
interested in. In fact, the Treasurer, like the welfare lobby, appears
to prefer the public sector doling out payments to people, rather
individuals making up their minds what they spend their own money on.

The result of this unlikely alliance is an awful amalgam of welfare
rules and tax regulations, where people at all income levels pay tax,
and then get some back from the government. Certainly, it suits Mr
Costello and the welfare lobby’s act to argue against tax cuts for
upper-income earners, as if people paying 47c in the dollar on some of
their income are uniquely advantaged. When the new tax thresholds kick
in at the middle of the year, the top rate will slug only 3% or
so – people earning above $125,000 a year. But one million wage earners
pay the 42c rate, and a further 400,000 will join them as pay rises
take them into the second-highest tax bracket over the next three
years. It is hard to argue about equity with a straight face when the
top 3% of wage earners, people who cannot hide their income in
corporate structures, contribute 24% of all income tax. And
when about 1.5 million are slugged over 40%. The inevitable
outcome of Mr Costello’s refusal to tackle reform is the great
Australian game of tax avoidance…

It is all typical of a tax system where the only winner is the
government, which collects an unjust share of too many people’s pay and
then returns as little as it can get away with in selective deductions,
or proclaimed cuts that give them back only some of the money they lose
as rising incomes push them into higher brackets. It is a system that
empowers the welfare industry by creating vast amounts of public money
to distribute. And it delights politicians who try to trick us with
so-called tax cuts every election.

Mr Costello has been Treasurer for a decade now but has never updated
his act. Even the Government’s one major tax reform production, the
GST, was orchestrated by his boss.

Costello’s boss. Costello’s boss, who, in the absence of any real
reason to replace him, seems set to remain Costello’s boss for as long
as he wants.

The Treasurer doesn’t even seem to be able to come up with a phrase as
articulate as “the vision thing” as he stakes his claim to leadership.