Four Simple Things Joe Hockey Could Put In MYEFO To Balance The Budget (But Probably Won’t)
$40 billion deficit? We got your $40 billion right here, Joe.
While Australians were glued to their screens watching the Martin Place siege unfold on Monday, the federal government attempted to continue with “business as usual”, leading to Joe Hockey making his Mid-year Economic and Fiscal Outlook (MYEFO) announcement in an awkward television split-screen alongside the live, counter-terrorism operation.
MYEFO is essentially like a mid-financial year mini-budget and financial update, and this year’s numbers weren’t good: the deficit is set to blow out by a further $10 billion to a cool $40 billion.
Treasurer Joe Hockey and Finance Minister Mathias Cormann are still desperately clinging to the illusion that they can somehow magically “cut” their way back to a surplus, which is now not predicted until the 2019-20 financial year, which will be in Tony Abbott’s third term. Indeed, Hockey used the MYEFO announcement to flag a further $3.7 billion in cuts to foreign aid and a $539 million saving from the shutting of 175 government agencies.
While this is all meant to sound deadly necessary given the current economic outlook, it doesn’t take much research to discover there’s four vastly bigger things the government could be doing to raise revenue, without firing public servants, raising the GST, cutting foreign aid or increasing the cost of Joe’s cigars.
End superannuation tax breaks
Saving: $171 billion over three years.
According to the Australian Financial Review, superannuation tax breaks will cost the government $36.25 billion in forgone revenue this financial year (almost enough to wipe out the huge $40 billion deficit, and almost as much as the $39 billion we spend on aged pensions). On top of that, about half of these super concessions go to the wealthiest 20 percent of Australians. The need for change is so obvious that even Liberal veterans John Hewson and Peter Costello have recently started calling out for long-overdue reform.
However, given these tax breaks mostly affect baby boomers nearing retirement age, this has pretty much turned into a sacred cow amongst the two major political parties, unlikely to change any time soon.
2. End capital gains tax exemptions and negative gearing
Saving: up to $155.8 billion over three years.
The AFR has also pointed out that capital gains tax exemptions are costing the government hundreds of billions in potential lost revenues. Obviously a capital gains tax on the family home definitely wouldn’t be a vote winner amongst those ageing boomers, but the government is losing out on $57 billion over the next three years by not trying it, with other capital gains discounts (including the 50% discount used by negative gearers) costing us $98.8 billion. Again, the sacred cows of negative gearing and the inheritable family home seem to live on forever like some kind of zombie twins.
3. Scrap the Diesel Fuel rebate
Saving: around $5.5 billion a year.
According to the ABC, the diesel tax rebate (which refunds non-road users 38 cents a litre in the fuel excise tax normally used to fund roads) cost the Australian government $5.5 billion in 2011-12, with around $2 billion going to miners and $700 million to farmers.
Given the political sensitivity of the Liberals and Nationals to do anything impacting Aussie farmers, combined with the hard-nosed vengefulness of the mining lobby, I think it’s fair to say this will never happen either.
4. Wind back the 2007 Howard/Rudd income tax cuts
Saving: possibly up to $11 billion a year.
On the eve of the 2007 federal election, John Howard announced his vote-winning campaign centrepiece: $34 billion in income tax cuts over three years, a ploy so attractive to the average self-interested Aussie voter that Kevin Rudd seemingly had no choice but to go along with it. These tax cuts were not only implemented assuming the good times would go on forever, but they were also largely meaningless to the average income tax payer. As Fairfax economist Ross Gittins pointed out: “Most of the 90 per cent of workers on incomes less than $80,000 a year will be getting a cut of just $2.88 a week – not even enough for a milkshake, let alone a sandwich.”
Meanwhile, someone making $180,000 last financial year paid $6,800 LESS in tax than they would’ve in 2006-07 thanks to this Rudd/Howard love-in, so it’s obvious we’re missing out on a tonne of money we used to get from high flyers. And if you think Abbott’s 2% temporary budget repair levy has restored some sanity, it only kicks in on income earned OVER $180,000, meaning someone making $185,000 next year will only pay an extra $100. Some heavy lifting, huh? Again, the Liberals pride themselves on being the party of lower taxation, so income tax rises are indefinitely off the table no matter how big the deficit gets.
So if the Abbott government was serious about getting rid of the deficit and getting us back to surplus, they only have to piss off the farmers, the miners, the bankers, the baby boomers and rich people. Joe Hockey definitely won’t be doing any of that, but wouldn’t it be nice if we had a politician who had the balls to admit we can’t go on taxing and exempting at current levels if we ever want to pay off the debt and see a surplus again?
Dylan Behan is a Sydney-based freelance video editor and political junkie. He tweets from @dylanbehan