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May 14, 2014

The vindictive budget: how the fiscal burden is loaded on low-income earners

The burden of reducing the deficit in last night's budget falls disproportionately on low- and middle-income earners -- while companies and high-income earners will come out ahead.


In contrast to federal government claims that all Australians are sharing the fiscal burden, more than 60% of the spending cuts and revenue measures revealed last night will be borne by low- and middle-income earners or are regressive in nature, while corporate Australia will enjoy a multibillion-dollar windfall courtesy of an array of Coalition commitments.

Of the $36 billion in high-profile spending cuts in the budget, low- and middle-income earners, the unemployed or students, and people in developing countries, will wear $20 billion of them, with another $4.7 billion in regressive measures, like the GP co-payment, across the whole community. Of the $7 billion in new revenue measures, the $2.2 billion fuel excise is regressive, while the $3.1 billion deficit levy, aimed only at people earning over $180,000 — or more correctly those unable to structure their tax affairs to get their taxable income below $180,000 — is the sole measure aimed at high-income earners.

And while the budget papers were less forthcoming on the details relating to corporate tax changes, we know from the Parliamentary Budget Office that the corporate tax levy on large corporations — which will raise nearly $13 billion over forward estimates — will be offset by $19 billion via the Coalition’s planned company tax cut and removal of the carbon price, plus whatever revenue the mining tax would have raised.

The government will give a $200 million handout to the business welfare outlet Export Finance and Insurance Corporation (instead of following the Commission of Audit’s recommendation to shut it down). Large United States defence contractors were also big winners last night, with the government bringing forward $1.5 billion in defence capital spending from 2017-18 across the next three years. The only substantial area where corporate assistance was cut was — you’ll be astonished to learn — in renewable energy, with the Australian Renewable Energy Agency abolished, as part of the government’s ongoing war on renewables and climate change.

And last night’s budget also revealed the latest Treasury projections for the cost of superannuation tax concessions, which in total will exceed $50 billion in 2017-18. That’s not the amount of revenue that could be obtained from removing those concessions, but Treasury estimates in its annual Tax Expenditures Statement suggest 90-95% of that foregone revenue could be obtained through their removal.

The bulk of that $50 billion in 2017-18 will flow to high income earners — and the higher your income, the more you will get. The Australia Institute showed in 2009 that the top 5% of income earners obtain 37% of all superannuation tax concessions. The multibillion-dollar rise in superannuation tax concessions — which cost “just” $30 billion this financial year — is thus primarily a multibillion-dollar handout to high-income earners, primarily those above $180,000 a year. In fact, the cost of the deficit levy to people on those incomes and above — just over $3 billion — will be entirely swamped by the increase in tax concessions on superannuation from this year ($30 billion) to next alone ($36 billion).

None of those concessions were touched last night by the government; Treasurer Joe Hockey’s only move on superannuation has been to abandon a Labor plan to tax super earnings over $100,000 per annum.

This is the true nature of last night’s budget: low- and middle-income earners are bearing the burden, while corporations and high income earners will not merely not share it, but will come out better off. The path back to surplus laid out by Hockey could have been considerably shortened with a willingness to require corporations and high-income earners to contribute as much as low- and middle-income earners, students and the unemployed. Such groups, of course, are more effective at fighting back than, say, poor people in Asia-Pacific countries, who will miss out on $8 billion of aid, or the unemployed, who will have to spend six months at a time relying on charity rather than obtaining Newstart, saving $300 million a year.

And while the government has shown some courage in being willing to reintroduce petrol excise indexation and reduce indexation of the pension, the courage needed to take on corporate Australia and high-income earners is entirely missing. We were promised a hard budget, a tough budget in the tradition of 1996, but it is the budget of a bully, who prefers targeting the weak rather than matching it with someone able to inflict some real hurt, the budget of the vindictive, that of a party that has stored up grievances in opposition and has finally had the opportunity to give vent to them.



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31 thoughts on “The vindictive budget: how the fiscal burden is loaded on low-income earners


    Its about time that these lazy fat cat:
    young people, students, working families, pensioners, indigenous and disabled, “leaners” along with those indolent state funded health and education systems, corpulent public broadcasters, leftist CSIRO, bleeding heart humanitarian foreign aid and the arts all did their fair share of the heavy lifting. How else would it be possible to give Australias true battlers Gina Reinhardt and Twiggy Forrest the carbon and mineral resources tax cuts totaling 3.4 billion that they so desperately need along with the diesel fuel excise rebate. Those doing the heavy lifting will be content in the knowledge that their sacrifice is making Australia a fairer and better place for struggling mining magnates, media moguls and all other assortment of multi millionaires and billionaires. Australia, the worlds most egalitarian country…………for the rich and super rich.

  2. cairns50

    totally agree with you bernard this is the budget of bas….tds what they are doing is imposing thatherite and reagonomics on aust even if it is 20 years late

    time for a peaceful peoples revolution

  3. Alex

    This budget looks like it’s straight from the Fox’s mouth.

  4. Recalcitrant.Rick

    Love that last paragraph! This budget has nothing to do with economics! It’s ideology, pure and simple, and it’s flawed ideology! Show me where it works?

  5. MJPC

    Thank you BK, finally a commentator has stated the bleedingly obvious about the levy…tax…levy:
    “or more correctly those unable to structure their tax affairs to get their taxable income below $180,000 ”.
    In 12 months time please present a report with names of those within the Federal Parliament LNP who have paid the levies, being a hotbed of family trusts, negative gearing and free enterprise rorting of the tax system the proletariat don’t have access to.
    Carins50…I am with you: peaceful revolution now!

  6. gypsy

    A vision for the nation’s future …or a vision for political survival beyond the next three years ….

  7. Electric Lardyland

    Well, Rick, the most committed rightard would probably claim Chile. But’s that’s only if you ignore the murder of an elected president, the torture, the union busting, the death squads, the years of recession, the plundering of the national wealth by foreign multinationals and the fact that the economy didn’t improve until most of the ‘reforms’ were overturned. Strangely, many neo-cons do ignore that list and use the example of Pinochet’s Chile, as a demonstration of why their fundamentally flawed economic extremism works.

  8. Chris Hartwell

    At least in all of this, the claim that Medicare is inefficient or that it’s not cost-effective has been shown to be a bunch of hooey (a bunch of Hockey?) as demonstrated by the hypothecation of the majority of the GP tax to research rather than covering expenses. Some benefit at least!

  9. David Hand

    You can have your peaceful people’s revolution in 2016. It’s called a federal election.

  10. taciturn

    But David, Abbott expects that you have forgotten by 2016 …

  11. Electric Lardyland

    I don’t know David? You don’t reckon that Abbott will call an early election if he can’t get chunks of his agenda through the Senate? Yes, maybe he’s not so keen on early elections now.

  12. Zeke

    David Hand:
    “You can have your peaceful people’s revolution in 2016. It’s called a federal election.”

    Oh great! Another Murdoch bought election, after the “pork barrel” budget, and announcements of even more cruelty to be inflicted on asylum seekers… an appeal to Western Sydney xenophobes will get you over the line.

    As As former GLC mayor Ken Livingstone wrote: “If voting changed anything they’d abolish it.”

  13. @chrispydog

    Did anyone seriously expect anything different after watching the howler monkeys in the last parliament?

    Spiteful, cowardly, and madly ideological in everything they said.

    Finally, the political wing of the IPA has shown itself, and hurled its own brown stuff into the crowd.

    Australia, you’re standing in it.

  14. fractious

    “You can have your peaceful people’s revolution in 2016. It’s called a federal election.”

    Says David Hand, better known as I’m Alright Jack.

  15. Robert Brown

    David Hand has a point. There’s no point getting pissed off at the government – we (in the larger sense) voted for them. We’ve now got what we asked for.

    Better to have a serious chat with your friends and relatives who voted for these clowns sometime between now and 2016….

  16. mikehilliard

    Why do the Tories hate 95% of Australians?

  17. burnmuthaburn

    the meek shall inherit the earth!……..

    (…..helps me sleep at nite as a low income earner)

  18. Kevin_T

    Bernard suggests: “the government’s ongoing war on renewables and climate change.”

    I would suggest that this is no war on climate change, only a war on those who want to take action to reduce or mitigate it.

    It appears that in this Government’s view, human contribution to climate change either doesn’t exist or just doesn’t matter, and scientists should be punished for suggesting otherwise.

  19. beachcomber

    Strange that the groups that fund the Liberal Party benefited (big companies, billionaires) and everyone else suffers. I guess stocks of Grange from 1957 (Abbott) and 1965 (Hockey) are seriously depleted.

  20. TheFamousEccles

    a “peaceful peoples revolution”? I am disinclined – but espousing regime change and civil dissobedience via a public forum is illegal, AFAIK. Pity, it would be the only thing that would get the rightards attention. Rigid ideology is everything to a rightard, even to the poor sods who aren’t rich but still back LNP, in the mistaken belief that it’s character-building.

    Make no mistake Robert Brown – I did not vote for this crowd (as didn’t a good many of us Australians), and I am increasingly dissatisfied with the blinkered stoicism expected of the voting public.

  21. Ted Jackson

    A very eloquent report BK.
    Cairns50, another volunteer for the front ranks of the (peacefull) revolution .. to the trenches !!!

  22. Patriot

    Low income earners don’t bear any fiscal burden. They don’t pay any net tax. They’re just getting less handouts today for their kids to repay tomorrow. If their kids end up paying net tax, that is. Apple never falls far from the tree.

  23. Patriot

    Peaceful people’s revolution. Ha! You tried that already. Forgotten about Occupy, have we? Can’t blame you.

  24. Bill Gates

    Abbot & Costello alias (Tony Abbot & Joe Hocking) are a joke! We are not a State of the USA! We are Australians! It’s is the Yanks that say “I’m alright bugger you!”….We are Anzacs….remember….Less We Forget!…. We stand by our Mates when they are Old, We stand by them when they are Unemployed, and most of all….We never believe in kicking a Mate when he is Vulnerable!
    Abbot & Costello committed Political Suicide attacking the Pensioners, The Ill and the Unemployed!
    They have forgetting that those 3 Sections of our Community all have Families, Relatives, and Friends who VOTE! Unless they reverse those changes….they will be POLITICIANS in Opposition come next election. From over 60 and Not Senile Yet! Watch out for the Grey Army of educated Baby Boomers you 2!

  25. Bill Gates

    Crikey Mate! Who the hell believes the Bastards will actually allocate that any of that money to medical research? It will disappear down the Big Black Hole that all the other taxes disappear into. I remember being sold on an extra 4% tax to provide myself with a pension when I retire at 65 that is now 67 and will become 70 for some. Seem to remember some Liberal Government confiscating that accrued tax nest egg in the name of balancing the deficit!
    Now they keep taking the extra tax and have indexed it! They are incapable of fairness to all and honesty. Then they wonder why people try cheat on their tax returns and lie to them about their finances when reporting to the Government. Wisdom is about leading by example with honest and fair intentions. These two need letters sent to the only people they answer to…..their Wives….enough letters and maybe if they can’t perform with honour…..their partners will divorce them! Nobody wants to be married to a Bully who hits the Pensioners, the Sick or the Unfortunate Unemployed!

  26. klewso

    These Shonkey Brothers can try to spin it any way they like, but along with employers wanting to screw down wages and conditions – to improve profits, there’s this, their government’s push to increase the GST – with that impact on the far less $discretionary at the disposal of the less affluent.
    Plus the co-payment, plus the increases in education costs?
    Who’s picking up the heavy end of this Shonkey economic cadaver?

  27. Bob's Uncle

    Labor’s last deficit was $18.9billion. Hockey’s first (full) deficit is forecast to be a tick over $30billion.

    This is “cutting Labor’s waste”?

    The truth is that the Coalition destroyed the budget position by massive cuts to revenue (company tax cut, mining tax removal, carbon price removal, more FBT exemptions, no tax on high income earnt on Super), massive new non-targeted entitlements such as gold-plated PPL.

    It amazes me that all the “tough but fair” cuts (most of which see the Feds simply shift responsibility to the States) don’t see any overall reduction of government spending, which remains roughly equal to the last 3 years of Labor.

    This is a not a “deficit reduction” budget. It is simply another redistributive cost-shifting budget.

    Any widespread public realisation of this would be horrific for the government.

  28. David Hand

    It’s kind of quaint that you are all full of apoplectic rage at the budget but seem to lack confidence that the Coalition will be a one term government.

    I reckon in your hearts you doubt that the country shares your rage. Trust your hearts guys.

  29. taciturn

    I just wish that Labor could present me with a decent candidate …. no union hack, no political staffer & no no-hoper.

  30. Michieux

    Oligarchy, anyone?

    Don’t blame me, I didn’t vote for these obscene cretins.

  31. taciturn

    Well, well. After prancing around the stage shadow boxing, Shorten now has an opportunity to demonstrate if he has the wherewithall to win back the middle class.

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