10-23-07, 10:59 am

The Liberal Party launched its official vote-buying election campaign with the promise of another $34 billion in income tax cuts over the next three years. These are in addition to the income tax cuts announced in the 2007 and 2006 federal budgets and the superannuation and allocated pension tax cuts that commenced on July 1, 2007. This brings the total tax cuts to more than $100 billion in just five years. And that’s not all! There were $4 billion of pre-election one-off payments thrown to carefully targeted groups in the May 2006-2007 budget. Add to that another $12.6 billion being announced during the official campaign.

So where did all these billions of dollars come from? Good economic management? Fiscal responsibility? From heaven? The answer to all these questions is NO!

The massive budget surpluses that fund the tax cuts and other handouts come from the direct theft of the working people of Australia and their families. The announcement in the federal budget this year of a budget surplus of $3.7 billion came mostly from massive government under-spending on services. It is theft through such means as cuts to social and infrastructure spending, through the sale of public assets that governments have no right to sell off, through the introduction of user-pays policies for basic and essential services that were once provided free or heavily subsidized. This apparent abundance of riches is the direct result of the scorched earth neo-liberal policies being forced on the people of Australia.


These tax cuts and other handouts are far more than a cynical exercise in vote-buying. The timing is certainly related to electioneering and so too is the targeting of some of the handouts. But these tax cuts are also part of an ongoing agenda which has far wider aims than just winning an election: the government wants to reduce the amount of tax paid by the wealthy and privatize completely the many services, infrastructure and the other aspects of government. At the same time it is phasing in the neo-liberal policy of “self-reliance,” where individuals take responsibility for providing their own income at times of sickness, unemployment or retirement. Individuals fund their own health services, education, and pay for whatever infrastructure or services they use.

Flat tax, flat earth policy

One of these aims is to transform what was once a relatively progressive income tax system into a highly regressive flat tax model. Under a progressive system those on higher incomes pay a higher percentage of their income in tax. Dating back to the time of the Keating Labor government there has been a gradual flattening of the taxation scales.

As with the Howard Government’s latest tax cuts, the amount of income at which each higher marginal rate kicks in has been raised and the amount of tax paid per dollar income at that marginal rate has been reduced. For example, the marginal tax rate is 40 cents in the dollar on income between $75,000 and $150,000 for the 2007-08 financial year ending June 30, 2008. From July 1, 2008 the 40 cent rate will not apply until $80,000 is reached, and remain the marginal rate up to $180,000. By 2010-2011 the 40 cent rate will have been reduced to 37 cents in the dollar. There are similar changes in other marginal rates.

The largest reductions apply to the highest incomes. Someone on the official minimum wage ($27,150 pa) will pocket an extra $8.65 per week – $450 a year. This will rise to $14.42 a week ($750 pa) in three years time. Consistent with the Howard Government’s treatment of the rich, the tax savings on a taxable income of $200,000 will be $50 a week next year, rising to $127.89 per week in 2010-11 – a cool $6,650 per annum.

These tax cuts are even more regressive and biased against the most needy than they first appear. The GST is a flat tax of 10 percent on the purchase of most goods and services. The wealthy pay a much smaller percentage of their income on goods and services that carry the GST. They are more likely to make investments and spend money overseas.

To meet mortgage payments and the higher grocery and petrol bills, the $450 or even $750 for low income earners is a joke. It is peanuts and will still leave families struggling.

Privatisation

When it comes to public education, health and housing, to social welfare, and infrastructure we are told time and again that there is not enough money for governments to meet the many pressing needs. The private sector is called in. Governments turn to what are called “public, private partnerships” (PPPs) and other forms of privatization. They cream off profits, fees increase, the quality of service deteriorates and quite often the government pays them a subsidy to ensure their profits are delivered.

They say there is not enough money for teachers or nurses to be paid more, for schools or hospitals to be adequately funded, for university fees to be abolished, childcare funding to be increased, for childcare, to increase the age pension and other welfare payments, provide new public housing, build tunnels, bridges, roads, maintain public transport, or provide all the other services and infrastructure.

These are all lies. There is clearly plenty of money – billions of dollars that could be put to good use, being thrown to the electorate. There are also many means by which more money could be raised for these pressing needs, such as by abolishing negative gearing, or raising tax rates on the very rich and the largest corporations with their multi-billion dollar profits.

The Federal Government is deliberately starving the states and public sector of funding, making cuts, introducing fees, forcing closures, bringing about the crises in public hospitals and other public services that hit media headlines on almost a daily basis.

So, many families are financially and socially stressed. Opinion poll after opinion poll confirms that the overwhelming majority of Australians would prefer government increases in spending on public health, education and other services to tax cuts. Yet it still has money for subsidies to the private sector, such as the $4 billion or more to private hospitals through the Private Health Insurance Rebate and other measures, and $60 billion a year on the military.

The Howard Government has no interest in spending more money on the public sector or helping the disadvantaged: their policies are aimed at doing exactly the opposite.

By throwing billions at tax cuts and strangling public welfare and infrastructure the Coalition Government aims to create failed services, failed departments, failed State governments and failed Municipal Councils. They will then use this to privatize or abolish even Municipal Councils and bring in the private sector. This process is well under way and the latest tax cuts take the process a bit further, as well as being a cynical vote-buying exercise.

From The Guardian