I seem to be caught up in a variety of conversations and readings that focus on the sort of society we actually have in Australia. An artist preparing a large piece for the Sydney Biennale said, if I remember his words correctly, that our policy with respect to asylum seekers gave ‘Australia a bad image internationally’. In comparison to which country, I wondered (there is more below). Dick Smith wants us to stop immigration entirely, or almost entirely. Another speaker described Australia as one of the last outposts of ‘capitalism’. Again, I wondered where the other outposts were. I came across an interesting essay elsewhere whose point was that pessimism was taking over — that no one much seemed to realise just how much Australia had improved in the last half century or so. I rather agreed with him. In each case ‘Australia’ was used as though we all knew what was meant, and other words like ‘capitalism’, ‘socialism’, ‘immigration’, ‘asylum seekers’, and so on, are usually put forward as though there is clear understanding of what is meant, and that we all have the same meanings. It is plain, at least to me, that we don’t.

At the same time I am helping a grand-daughter in a podcast she is preparing on taxes and transfers as the key elements in Australian government budgets, and that provides a place to start. About two dollars in three of all the money raised through taxation go out to recipients in one form or another, education, health and social welfare being the main categories. Raising sufficient money to provide these transfers is perhaps the key problem for every Australian government. Like citizens of all countries, most Australians are likely to think that they pay too much in taxation and receive too little in the form of benefits. Most of us probably don’t have a good sense of how the taxation and transfer system actually works. There’s a good reason: it is highly complicated.

At the heart of it is the notion that we Australians have a civilised and therefore compassionate society. It can seem wrong that there should be beggars or homeless people, or that needed surgical operations can’t be done for months, or that it seems to take years for urgent infrastructure to be undertaken. We are a rich country, compared to other countries and compared to our own past. So, why isn’t something being done about [insert your favourite issue]? All government battle against these demands, finding placatory messages to soothe the questioners, and wrestling with the intractable problem of finding more revenue or reducing transfers without offending the electorate too badly.

As I’ve written in past essays, for example here, the modern social welfare system was invented by conservatives like Bismarck in Germany and later in Great Britain by the Marquess of Salisbury. They did so with an understanding of the appeal of Karl Marx’s ‘socialism’ to the large and growing industrial workforce, and a recognition that if they didn’t do something to bring the poor and disadvantaged in to a share of the new wealth created by technology and the Industrial Revolution, the society of which they were privileged members might suffer its own revolution. All Western developed countries made ‘social welfare’ a key part of national identity during the 20th century, and especially after the end of World War II. Given the great productivity of these societies over that time it has become possible to try to deal with every kind of disadvantage, and there are lobby groups in their thousands who seek to influence governments to do so. What we have is, if not a form of ‘socialism’, at least an aspect of what was seen in the past as the virtue of socialism. And in material terms our citizens are much better off than their counterparts in so-called ‘socialist’ societies.

At the same time, the system remains resolutely private, or ‘capitalist’, if you want to use that term, in most forms of production. Private mining companies, banks, insurance companies, oil companies and so on occupy the peaks of  enterprise. Private property is guaranteed, at least to a degree. Yet the system is not a capitalist one. No Western country has a ‘free market’. There are all kinds of rules about what can be legally bought and sold, how the stock exchange system is to operate, how banks are to work, the responsibility of employers not just in occupational health and safety but in all manner of other areas of work — you name it. Australia’s is a highly regulated economy, and we have a highly regulated market. The battle of ideas between ‘capitalism’ and ‘socialism’ has produced a synthesis — the welfare state, which we take for granted. In Australia much of it is more than half a century old, some of it more than a century.

These key aspects of our system are not the ones that are subjects of much public discussion. Our politics is about what happens at the margin. A Royal Commission is currently looking at aspects of the banking system but not, I think, at  whether we should have private banks at all. The ALP is proposing to change what is a small aspect of the tax system, to do with the notion of double taxation of company earnings. If you have shares — we have a few — and the company makes a profit then these profits are taxed. When you received your dividends they used to be taxed again, now as your income rather than the company’s. There is an unfairness about this, which is why, finally, that kind of double taxation was ended. There are arguments both ways, and it is not the subject of this essay. We need to remember, however, that in a properly ‘socialist’ economy there wouldn’t be private companies or dividends at all.

Let us move to immigration. Does the notion that we should care for one another, and do so through taxation and transfers, apply to immigrants? Whatever you think, we actually do so, and we do so to refugees too. Can we afford to do so, especially when these newcomers are not yet Australian citizens, and may not become citizens? Well, we are in debt, but we keep doing it. It would be much easier to fund such care properly if our population were steady, and not growing. It actually grows every year, by about a quarter of a million people, and mostly through immigration. If population increase were left to Australians making babies, our population would actually decline over time.

How well do we do in taking in immigrants and ‘asylum seekers’? Very generally, we take in about 200,000 migrants a year (I say ‘very generally’ because counting in this area is not straightforward, as you can see in the diagram below, where NOM means ‘net overseas migration’, and learn more about here.) We choose who comes, according to some rules, designed to help keep our capacity for welcoming new settlers at an effective level.

There are more than 40 million displaced person in the world, and most of them would like to go home rather than go somewhere else. Australia’s refugee policy is based largely on the UNHCR programs, and we take in 10,000 refugees or so for resettlement every year. They are all without doubt seeking asylum, and many have been in resettlement camps for years. Where that placed us in 2014 can be seen in the table below.

Both in terms of GDP and population size we are quite generous, indeed the world leader in 2014. We are less welcoming with respect to people who want to arrive here on their own initiative by boat or plane, bypassing the UNHCR system. There is a good reason for the difference, which has been spelled out by successive Australian governments: if we allow all ‘boat people’ in there will be no end to it. Australia takes in refugees through the UNHCR system, and does that well. In Europe, with all respect to the artist whose large work is featured in the Biennale, Australia’s tough border system for refugees is seen as effective, against the open border policy, largely articulated by Germany’s Angela Merkel, which has caused large social problems in most European countries, and led to some of them simply closing their borders to would–be settlers.

It is best to be clear about what we mean when we use words, especially when the words are much used in political debate. I finish with ‘Australia’, which can mean everyone living here at a given time, everyone who is a citizen or has been born here, all of them plus ‘permanent residents’, adults but not children, and so on. A million or so Australian passport-holders are overseas at any given time. It gets complicated, but it is important to be clear also about what the name of our country means when we use it in debate.

 

 

Join the discussion 63 Comments

  • IRFM says:

    A well reasoned article. What you did not mention is the huge gap between Australia’s number 1 ranking and the next level. Clearly far more generous than our next ranked Canada with a similar economy. Two stand outs in this regard.
    On the subject of welfare, I remember as a school child, the first time a family living entirely on welfare came into the small community in northern NSW. It would have been in the late 1950’s. It was a ‘hot’ topic in the community. At the time, periods of unemployment were eased by the ‘kerbing and guttering program’ run by the then local Tamarang Shire. Times have changed.

  • PeterE says:

    It is vital that immigration be controlled, that there is a policy. The settings should be variable and just now there ought to be a slow-down for a time.

  • spangled drongo says:

    These are, I suppose, “official” migration figures but unofficially, as we know, we are small compared with the USA and Germany and even for the most immigrants per capita, Italy would probably be more but that is due to the fact that, luckily, people can’t get here easily.

    If only migrants were chosen on the basis of those most likely to integrate into our culture and support themselves more it would work better.

    Our present system is crazy and needs to be cut back whereas, after the big WW2 influx that enriched our country considerably, the present system is heading us into many social problems.

    And Bill Shorten’s proposal on imputation tax is so unlike the soundness of previous govts of both persuasions’ logic on this issue as to amount to a very shallow and silly policy. With probably little net benefit.

  • spangled drongo says:

    I see BS has now seen the error of his ways:

    “Bill Shorten is considering a supplement payment package for up to 250,000 pensioners to make up for annual cash refunds they stand to lose, as the Opposition Leader comes under mounting pressure over Labor’s plan to scrap $59 billion in refundable tax credits on share dividends:

    https://www.theaustralian.com.au/news/shorten-in-scramble-to-fix-flaws-in-tax-plan/news-story/dd4ce8a39c52e3f835063cb8ff8f7041?login=1

    • Bryan Roberts says:

      The people who will get hit are those on tax-free pensions, but who receive dividends from shares, on which they pay tax. Will dividend imputation cancel some of those liabilities? Will it be carried forward, like a capital loss? Whatever, it will be a typical Labor mess. How Shorten can declare, with a straight face, that no-one will pay more tax is really quite astounding, when people’s rights to dividends ON WHICH TAX HAS ALREADY BEEN PAID will have been taken away.

  • Chris Warren says:

    Don

    You use the phrase “Given the great productivity” …. but this is an example of people using words without everyone having the same meaning.

    As an example, if a capitalist invests $1000 and employs 1 person to style the hair of a dozen rich folks and makes a profit of 12%

    but another capitalist invests $1000 and employs 4 people to make 1000 loaves of bread, but only makes 8% profits …

    which is the more productive? according to your usage?

    Which outcome is the more socially desirable?

    • Bryan Roberts says:

      A sort of amusing problem. I am paid $1000 because I make my employer a $120 profit. My neighbour pays his 4 employees $250 each, to make him a profit of $20 each. Which employer would you rather be, and which employee would you rather be?

      • Chris Warren says:

        Bryan

        What sort of society would you prefer;

        – well styled hair for a few and hungry masses, or

        – happy masses and everyone fixing their own hair?

        • spangled drongo says:

          Use ur brains, blith.

          Society will always have bakers making 8% return long before it will have hairstylists making 12%.

          But when society gets wealthy and things get more competitive you will have both working happily side by side.

          Even bakers making 4%, hairstylists making 24% and vice versa if the market allows.

          What you prefer should have nothing to do with it unless a govt chooses to mindlessly regulate what should be a free market.

        • Bryan Roberts says:

          As I said, an amusing problem. You obviously prefer the proles to have access to bread, but not to ambition. Fair enough. Many people in the former Stalingrad would agree wth you. Ambition requires both work and talent, neither of which are rewarded under your preferred scenario. Am I rewarded for making 110 loaves? Not likely.
          Can I be a hairdresser to the stars? Unlikely but certainly possible, and maybe a goal worth working towards.

    • Don Aitkin says:

      Chris, the usual measure of a nation’s productivity is gross domestic product, which in Australia increased by an average of 3.4 per cent per year over the 20th century. Your comment is irrelevant to the issue.

      • Chris Warren says:

        Don

        If you want to proceed on the basis that words are used when people do not have the same meaning – and choose your examples, then precisely the same issue arises when you use words such as “productivity”.

        Hand waving “Your comment is irrelevant to the issue” avoids the point.

        Gross domestic product is a market measure, and the same problems arise.

        If in a favourable season 100 workers produce 100 bags of flour at $10 but
        in an unfavourable season 100 workers produce 90 bags of flour at $12 then

        production has gone down, but productivity has gone up.

        So when people champion “great productivity” this may not be such a good thing.

        US colonial “great productivity” was based on obnoxious slave labour and exporting subsequent cheap products to Europe – exactly the same dynamic as China is doing today.

        • Don Aitkin says:

          Chris, this is still irrelevant unless you can show real examples in Australian economic history. While there have been lean years among the much more numerous strong years, Australia’s GDP has grown and grown over the last century and a sixth. If you think otherwise, you have a mountain of work to do to show that you are right. Hypotheticals don’t do it.

          • Chris Warren says:

            Don

            I assume your ” average of 3.4 per cent per year over the 20th century. ” is from Aust Bureau of Statistics and is current dollars – not constant dollars.

            As a market measure – GDP has grown, but so has hours worked, debt and money supply.

            However more importantly – such productivity goes up, merely if local wages go down (for the same output) and the product is sold overseas.

            If I produce 100 tons rice for $1000 in costs, then someone who produces 100 tons for $500 in costs is “more productive”.

            So in Australia real-wages (ie share of GDP) have been falling since the 1970’s giving this artificial boost to so-called productivity.

            Falling wages also assists selling products so this also boosts market GDP.

            According to the ABS (5206.0 table 24) – wages have fallen from over 60% of GDP (1970’s) to under 55% (2017). In other words workers’ ” share of the new wealth created by technology and the Industrial Revolution” is falling.

            There are other ways of boosting productivity measures. For example selling goods on credit if the amount of credit expands each year.

            What has changed over the years has been technology, the labour force, debt and the money supply. These things in combination artificially boost market GDP – a dollar measure.

            However it is possible to have great leaps in living standards with zero growth in GDP and zero productivity but only if, in any period:

            wages (workforce) paid constant
            money supply constant
            turnover time constant

            Improved technology is the key. Competition will still produce innovation and increase output but the measure of market GDP will be fixed ie with zero growth.

            I would not use productivity as a useful concept as its meaning is exgtremely unclear and is more of a economic platitude than a useful rigorous tool.

          • Don Aitkin says:

            What metric would you use instead of GDP, Chris?

          • Chris Warren says:

            Don

            There is only one alternative metric – David Ricardo’s “use value” with exchange based on real physical money.

            Keynesians have stuffed everything up good and proper.

          • Don Aitkin says:

            And what does it show, when applied to Australian economic history?

          • spangled drongo says:

            Poor ol blith conveniently forgets when Labor govts took over in 1972 and we had crazy inflation from Gough doubling the basic wage overnight, plus other “productivity” policies.

            At one period we were getting 100% inflation per month in basic items.

            It was only the already rich and cunning that did well out of that little fiasco.

            Does this represent the true productivity you seek?

          • Chris Warren says:

            Don

            Economic history is wild terrain.

            However if you look through history of money you will see that money as a “use value” is very different to money as debt generated paper. Consequently productivity measured by each is very different. You can have 10% growth in market GDP if money is paper, but if money is hard commodities (or a proxy – rum, tobacco notes, specie etc) GDP measurement will be entirely different.

            The UK went off the gold standard in 1931, and USA in 1971.

            In Australia, if you could get a labourer to plough an acre for 2 bottles of rum, then productivity does not go up if the supply of rum increases and labourers plough an acre for 4 bottles of rum.

            Similarly if rum becomes scarce, labourers will plough the same for 1 bottle of rum.

            This mismatch between (now) variable money and real production means that usage of “productivity” as a market measure of GDP is not an acceptable meaning.

            Real productivity is something else.

          • spangled drongo says:

            “Real productivity is something else.”

            You got it, blith.

            Real increase in GDP is based on improved methods, ideas and technology.

      • David says:

        Don

        Chris’s point is not irrelevant at all!

        His anecdote incorporates a concept of “consumer surplus.” GPD is the aggregate of the average price that all goods and services are sold for. But their value to the consumer’s who purchase these goods and services is something more than the market price.

        The expression “knows the price of everything but the value of nothing” speaks to this distinction.

  • spangled drongo says:

    White farmers in South Africa are being dispossessed with no compensation. These are the sort of migrants we want, who would assimilate, populate the bush, produce food and prosper. Win/win/win/win:

    “Fear has South African farmers fleeing from land grab terror.

    What happened to fellow farmer and friend Thys Boshoff gave him second thoughts.

    “The people just got into the place and got some money, and when he didn’t open the safe, they just shot him dead,” Mr du Plessis said. “Then they ordered his wife to open the safe, but she didn’t have a key, so they shot her hand off and left.”

    Mr du Plessis and his family moved to Australia three years ago to avoid the fate of the Boshoffs — getting out ahead of the terror now being exacted on white farmers at an alarming rate. One or two are reportedly being murdered every week.”

    https://www.theaustralian.com.au/national-affairs/foreign-affairs/fear-has-south-african-farmers-fleeing-from-land-grab-terror/news-story/6cc10a937e6cf0489dec1cba1aa80e22?link=TD_www.theaustralian_news_junky_.c7be842c3dd77352&utm_source=www.theaustralian_news_junky_.c7be842c3dd77352&utm_campaign=circular&utm_medium=THEAUSTRALIAN

  • Bazza says:

    http://www.tai.org.au/node/4139

    Tax reform is needed in Australia.

    • spangled drongo says:

      Don’t believe everything TAI tells you, Bazza. Dennis and Oquist who write this both used to work for Bob Brown, ex Greens leader, and they have a particular barrow to push.

      They don’t mention, eg, that people in that position are required to dispose of large portions of their super once they reach 65.

    • Don Aitkin says:

      Bazza, I was a small boy when I first heard the cry that tax reform was needed in Australia, and Russell Mathews, whom I knew well, talked about it incessantly until he was given the chance in the early 1970s to prepare a plan. Not much notice was taken of it. The recent Henry report, which was certainly sensible, has likewise been ignored by the current government. Alas, it is really hard to make fundamental changes to the tax system, since it fundamentally affects what the government of the day can do. It needs a bi-partisan approach…

      • Bryan Roberts says:

        In Australia, only Pauline Hansen elicits a bipartisan approach.

      • Bazza says:

        Whether TAI or van Onselen there’s a fair bit of agreement on this.

        “There will be many opportuni­ties to pick over the policy details of Labor’s announcement, but let me leave you with the following as the central reason more has to be done to spread the taxation load across demographic cohorts. It is why tax reform is so important.

        At present a retired couple can own a multi-million-dollar home (pick your price tag) and pay no tax on it, and it won’t affect their eligibility for the pension or any other benefits. Their children won’t pay tax on it when they inherit it. The couple can have $3.2 million in super and pay zero tax on both the principal and whatever interest it earns each year. They will pay only 15 per cent tax on earnings after that.

        Such cashed-up multi-millionaire couples are classified as “low income” and can live in retirement for as long as they worked, paying absolutely no tax.

        If you think that’s sustainable and doesn’t need reforming, you are either self-interested in making that assessment or puddle-deep in your understanding of the fiscal challenges our ageing society faces in the years ahead.“

        Peter van Onselen in the Weekend Australian

        • spangled drongo says:

          Bazza, learn about pension taper rates and how much pension you would be getting with those assets.

        • Don Aitkin says:

          Bazza,

          We own a home worth perhaps $1.75 million, but are not entitled to the pension at all. Nor would I want to be so entitled. I think the OAP is for people who have no other resource. Our children will not inherit the home, which will buy our way into a facility where there is a dementia unit. I pay about $30,000 in tax on my superannuation pension. I don’t know who these people are whom Peter v.o. refers to, but they don’t sound real to me.

        • JimboR says:

          They’re definitely real, they just didn’t work in the public sector. Don, it sounds like yours is a public sector fund from an untaxed source. They’re one of the few funds not covered by Costello’s “no more tax once you turn 60” benefit for super funds in the draw-down (aka pension) phase.

          Look on the bright side… even if Shorten does get in and implements his changes, you pay plenty of income tax so will still benefit from imputation credits. Shorten’s changes only impact those who don’t pay enough income tax to be able to use the credits. They’ll no longer get a cash refund if they can’t spend them against tax owing.

          • spangled drongo says:

            “They’re definitely real, they just didn’t work in the public sector”

            I bet you don’t know any, Jimb.

            Do you really believe that anyone with the ability to put together those sorts of assets is going to spend their retirement on such limited income just to avoid paying tax?

            Private sector retirees in that bracket of home ownership are amongst the biggest individual tax payers of all.

          • Don Aitkin says:

            Jimbo, my pension is from the CSS, and taxed, though there is now a smaller offset than there once was (I know, I’m helping the economy, and as the Toyota ad says, ‘I’m still feeling it…’).

          • JimboR says:

            Yes, good to see some over 60’s paying tax, you’re a rare group, although probably not so rare around Canberra. And with a $30K annual income tax bill, you’ll have nothing to fear about Shorten’s changes… unless you have an awful lot of shares.

            Costello’s get-out-of-tax free once you turn 60 applies to superannuation funds. Your CSS pension stream (or at least the part of it that’s taxable) is not strictly one of those, even though it looks and smells a lot like one. For at least _that part_ of your income stream, there is no fund behind it… i.e. no account with your name against it, no daily balance that fluctuates based on how much you draw out and how much income the fund makes, and no risk that it will potentially run out if you live too long. It’s actually a promise by the Commonwealth to pay you a certain amount for the rest of your life, and even the rest of your spouse’s life (at a reduced rate) if you go first. As such, it’s not covered by Costello’s generosity but rather is deemed ordinary income (albeit with a 10% tax credit). In addition to that, you may have an account based pension as well, which does have a balance etc. but it will be tax free just like everyone else over 60.

            Those of us in the private sector can accumulate extremely large balances in our Super funds. At age 60 we can transfer 1.6 million out of that into a draw down account and leave the rest behind in the accumulation account. Both continue to earn income. The millions left behind in the accumulation fund continues to get taxed at 15% (paid by the Super fund), the income earned by the 1.6 million in the draw down account is tax free. We have to draw down at least 4%, from the draw down account (so we get a pension of at least $64,000 per year there) and provided we’ve reached our preservation age, we can draw money out of the bigger account whenever we like, to top up the $64,000. While doing all of that, our taxable income is $0, and we’re deemed “low income” because our tax return says $0.

            Then if we own some CBA shares and they send us some franked dividends we’ve got a problem because unlike you, we’ve got no tax liability to book them against. Howard fixed that by letting us turn those credits into cold hard cash. We get a cash tax refund even though our taxable income is $0 and our tax paid is $0. If Shorten has his way, we won’t be able to do that anymore.

          • Don Aitkin says:

            Jimbo, for the record I don’t have another pension, but we have some money in a wrap. Maybe the Labor propose will affect what happens there. As for the rest, your hypothetical is interesting, but how many people are we talking about? My circle of acquaintances is large, and certainly includes a few rich people, who presumably have lawyers working for them. But the generality is people who are rather like us — we started with nothing, and rose to comfortable existence through the growth in the Australian economy, and our tendency to save rather than spend. Our principal asset is our house, plus a pension of some kind.

            If I am to become exercised about this issue (that is, about the problem of the rich) I’d need to have some sense of how many we are talking about. Just as there will always be the poor, there will always be the rich. No one has found an effective way to tax them, not here or anywhere. You just do the best you can. But Australia has a large middle class, and I’m part of it. I would be opposed to any measure that, while ostensibly designed to soak the rich, in fact screws most of its receipts from those who are not rich.

          • JimboR says:

            “I’d need to have some sense of how many we are talking about. ”

            The Grattan Institute have crunched the numbers and claim that one half of the $ value of the cash refunds on franking credits goes to people with assets in excess of 2.4 million (not including their family home).

            http://www.abc.net.au/7.30/malcolm-turnbull-attacks-bill-shorten-on-his/9573694

          • margaret says:

            I expect the middle class has to be further stratified into upper, middle and lower … or is it more than how much wealth you have?

          • Chris Warren says:

            I would be more concerned about any tendency for the rich to get richer and the poor to get poorer.

            Some middle class elements may deserve their gains due to their individual productivity, but this does not apply to all of the so-called middle class.

            In particular I would be concerned about middle-class who base themselves on monopoly rents or on streams of incomes that, “to remain competitive”, need to reduce the share of wealth going to others.

    • Chris Warren says:

      It is a bit peculiar that the funds that should go to labour are taxed three times – payroll tax, PAYE tax, and then when wages are spent through GST.

      Business incomes are never taxed unless they make a profit.

      Foreign exchange transactions are not taxed, but workers purchasing transactions are taxed.

      Capitalists buying assets such as shares are not taxed, but workers buying household goods or other valuables are taxed.

      Businesses having lunches can deduct from income tax liability – workers cannot deduct the same meal from their tax liability.

      • spangled drongo says:

        What about workers buying shares and capitalists buying household goods, etc. blith?

        15% GST the answer?

        For a short while anyway.

        Then 20%?

  • bryan roberts says:

    “assets such as shares are not taxed”
    What world are you living in? Dividends count as income, and are taxed as such. Why do you think Labor want to drop dividend imputation? It wouldn’t be to increase the tax take, would it?
    Where do you think the 5.9 billion is going to come from? Not from the wealthy, mate. They’re going to bolt. So are the superannuation funds. Mum and Dad? They’ve lost their rebate, if they sell their shares, they pay capital gains. And “Businesses having lunches can deduct from income tax liability”, but the average tradie can also write off the wife’s shopping trips. How do you feel about the government disallowing all work-related deductions? That would save tens of billions. Chris, honestly, your ideas are simply fatuous.

    • Chris Warren says:

      Bryan

      That was a very silly confused rant.

      You have confused taxing dividends from taxing the purchasing of the asset they are derived from.

      You have either confused capital gains with taxation of the purchase, or deliberately launched a wild diversionary tirade of irrelevant trash.

      You obviously know nothing about the GST which, in various forms, is a transactions/consumption/value-added tax NOT capital gains or income tax. Got it.

      If I buy anything and pay GST, I still have to pay both income tax (if I earn income from it) and capital gains (if I sell it) although there are some exceptions.

      Also when businesses purchase and maintain assets they use before-tax dollars, when workers purchase and maintain assets they use after-tax dollars.

      If a business buys a vehicle to use as a taxi (an asset) they pay GST and tax on revenue earned, and tax on any capital gains on it. Financial assets should be viewed in the same light.

      So it is you who is the fatuous fool.

  • JimboR says:

    I think a lot of this comes down to whether or not you believe companies should be taxable entities. There is a serious school of thought out there that says if it doesn’t have a pulse it shouldn’t be taxed; instead, find the owners and tax them. That’s roughly how it works for sole traders and trusts, but for big publicly listed companies the current model, at least in Australia, is that the company should pay tax on their profits.

    It was Hawke/Keating who recognised that if those post-company-tax profits were then distributed to shareholders those shareholders had to pay income tax on the distributions. It was widely accepted by both sides that double taxing that profit was unfair, and hence dividend imputation was created. It ensured that profits made by a company were only taxed once, either at the company rate or the shareholder’s marginal rate, whichever is _higher-. None of that is up for review. Shorten is proposing that we return to that system. So claims that “Labor want to drop dividend imputation” are a beat up.

    Howard/Costello changed it such that those profits are taxed either at the company rate or the shareholder’s marginal rate, whichever is _lower_ (by introducing a cash payment for unspent credits). It didn’t take long for people to realise that means those company profits can go completely untaxed, provided they’re dished out to people with a marginal tax rate of 0. So it went from making sure we don’t tax it twice to not taxing it all (at least for some), which somewhat violates the spirit of companies being a taxable entity. It’s that change that Shorten is proposing be reversed.

    The socialist in me is conflicted between…. “all company profits should be taxed” and “is it the end of the world if we give low income shareholders a break”, and at the time Howard/Costello introduced it, that’s pretty much all it was. These days though, a lot of low income shareholders are really just low _taxable_ income shareholders, their actual income is quite substantial. It really comes down to this question: Should we forego collecting tax revenue from some of CBA profits because some of their shareholders have managed to arrange things such that their taxable income is 0?

    If he’s really worried about the pensioners then Shorten could just means-test the cash rebates. It could be as simple as only those eligible for the age old pension are eligible for the cash rebates. From the numbers I’ve heard bandied about, that will put almost no dent in the expected savings this policy makes. By and large, this perk isn’t going to the pensioners (obviously it is, but only in very small amounts – hence the low cost of excluding them from the change). And as usual, those who will really be hit hard by the change are bringing out their classic “won’t somebody think of the pensioners” line.

    • spangled drongo says:

      Jimb, you forgot to mention that the Howard/Costello sweetener was accompanied by the GST.

      How does that affect the socialist in you?

  • bryan roberts says:

    Jimbo, nobody, not even Chris, I suspect, would disagree with the late Kerry Packer, who opined that “anyone who didn’t do everything legal to reduce their tax bill wanted their head read”. Your argument seems to me to revolve around the definition of ‘low income’, and whether this is real or manufactured. The Shorten proposal is not going to catch the rich, who pay very clever accountants a lot of money to enable them to avoid these nuisances. It will only marginally affect pensioners, most of whom probably inherited a few Telstra or CBA shares from their parents. The people it will affect are those not dependent on the public purse; who are not, by any definition, rich, but who have reasonable assets, on which they depend to keep them off the government tit. Means test if you will, but outright confiscation is an assault on the middle class, supposedly assuaged by giving more money to pensioners, who are not the group most affected by the measure.

  • JimboR says:

    I heard some policy wonk from the IPA declare it a retrospective change. It seems any changes to the tax system that make somebody’s earlier planning less effective into the future, is now deemed retrospective. I’m guessing that when a dole-bludging Byron Bay hippy’s retirement plans get interrupted by the need to work for the dole, the IPA don’t consider that a retrospective change. One man’s retrospective change is another man’s long-overdue crack down on a rort. Everyone can spot the entitlement mentality except in their own circumstances.

    Now if Shorten were to backdate his changes to the year 2000 and require everyone to pay back all the refunded unused franking credits paid over the last 18 years, that would be retrospective change…. and the IPA might have a point.

    • spangled drongo says:

      “I’m guessing that when a dole-bludging Byron Bay hippy’s retirement plans get interrupted by the need to work for the dole, the IPA don’t consider that a retrospective change.”

      Jimb, how about more police to stop daylight robberies?

  • Chris Warren says:

    Don

    What does this mean???

    “… in a properly ‘socialist’ economy there wouldn’t be private companies “?

    Practically every sizeable company under socialism or capitalism is under some form of group private ownership.

    Under socialism, group ownership, was/is variously, enterprise “Soviets”, trade union ownership, cooperatives, collectives, kibbutz etc.

    Under capitalism companies usually also have group “private” ownership, from the smallest – partnership up to ASX companies.

    I cannot see how socialism excludes sole-traders? This does not convert socialism into capitalism.

    Both under capitalism and socialism you get public provision of transport, law enforcement, emergency services, education and municipal health and welfare services etc. But these do not convert capitalism into socialism.

    There are so many different versions of socialism that I have no idea what “proper socialism” is?

    • spangled drongo says:

      “Practically every sizeable company under socialism or capitalism is under some form of group private ownership.”

      Confused again, hey, blith?

      You are confusing part socialist countries, like Sweden, with full blown socialism where “companies” are owned and controlled by the state or the so-called “people” and the “people” distribute the “wealth” to the people.

      As they do in Cuba and Venezuela.

    • Don Aitkin says:

      Chris, in the former USSR there were no private companies and no dividends. State enterprises were state entities. There was a ‘free market’ for food items in the big cities, but at least officially, the sellers were sole traders. Trade unions in the USSR were not like ours, but were again state entities. Perhaps I should have used the phrase ‘really exisiting socialism’. See http://donaitkin.com/really-existing-research/

      • Don Aitkin says:

        For more on the ‘informal’ Soviet economy, or what was called also ‘the second economy’, see the entry in Wikipedia:
        https://en.wikipedia.org/wiki/Second_economy_of_the_Soviet_Union. It was informal because the state did not recognise private groupings of producers unless they were part of the state system.

        • Chris Warren says:

          Don

          State enterprises, state entities are still companies and in some cases – private companies. Socialism, even really existing socialism cannot be reduced to the Soviet Union economy.

          I assume that in USSR trade union resorts along the Black Sea were not public facilities. In other words they were owned by the respective enterprise or collective and therefore private. I also assume they paid funds and received subsidies fom the State as in Australia.

          Similarly with kibbutz and Mondragon forms of cooperatives. These are also forms of private companies.

          I cannot see any reason why sole traders cannot exist under socialism. In fact smaller enterprises will have greener pastures if there is no capitalist drive to economic monopolisation.

          The real difference between most “really existing socialism” was in Eastern Europe central planning and who received profits elsewhere around the world, not the form of ownership. Although it is possible to conceive of centrally planned capitalism.

          If the London tube paid its profits to the government or to its customers and workers – this would be socialism. If the London tube paid profits to a hedge fund, outside owners or other investors, this would be capitalism as commonly understood within a classical framework..

          It would not be capitalism based on a Marxist definition.

  • Bazza says:

    Does anyone really believe in trickle-down anymore? I don’t. I don’t think most big business is interested in investing in Australia either.

    https://thenewdaily.com.au/money/finance-news/2018/03/22/big-business-empty-promise-invest-australia-exposed/

    “Capital expenditure and job creation are the main ways companies can use earnings to “invest in Australia”. The alternative is to return profits to shareholders, which is regarded as the opposite of investing.
    Critics of the Turnbull government’s tax cuts have warned the proceeds will end up in the pockets of shareholders, most of whom are wealthier Australians or overseas investors. The letter to the Senate was an attempt to allay those concerns.”

    • Bazza says:

      So for now Turnbull and ScoMo are thwarted -either way it’s not going to make a scrap of difference to anyone working a regular or gig job, or anyone on Newstart but the pockets of the wealthy retired shareholders won’t be quite as stuffed full.

      • Bazza says:

        I would introduce myself to this forum as a bloke who is woke. I’m retired and in my seventies. Definitely with socialist leanings as opposed to capitalist. I’m one of the one third of Australians who believe that the age pension was, up to this point in time, a rite of passage at age 65 for Australians who had had working lives that didn’t match the high-flyers or those with secure career paths or desk jobs that came with an office view.

  • Bazza says:

    Good to see a new senator like Storer as part of the unrepresentative swill. Storer thinks the government should cast its net wider in tax reform and revisit the 2010 Henry Report.

  • Tax reform – yes stop the transfer of money from the private sector to the govt sector and not for profits. Stop the spending on rubbish – go ski nbn all of it. Grace Collier on Anglicare in last weekends Weekend Oz is spot on. A CEO of a socially unproductive Non For Profit alleviating poverty is able to be paid $400k . A CEO of a private business is on $200k. I still recall Tim Cos.tellos son in the weekend Oz – a trained liquidator who gave it up to follow in da,dis footsteps – it’s fun less work and pays better. Useless, like the pretentoius twats who flew to Paris when an Islamist kills a dozen gay people but no one did a thing for those poor Catholic girls kidnapped in Nigeria by Islamic fundamentalist.

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