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Labor’s super tax backdown hints at the party’s hollow core

The way it ends… from the mining tax to super reform and now the Gonski plan, Labor has surrendered to sectional interests. AAP/Alan Porritt

This is the way the world ends This is the way the world ends This is the way the world ends Not with a bang but a whimper.

TS Eliot, The Hollow Men

The Labor government’s attack on universities to fund Gonski raises the question - could Labor have funded more spending on primary and secondary education in any other way? The answer to that is an unequivocal yes, but the degeneration of Labor is now so complete that these options - taxing the rich for example - are not on its agenda, because it rules for the 1%.

Thus the Gillard government recently announced it would tax at 15% earnings greater than $100,000 of superannuation funds paying pensions to tax exempt retirees. According to the government this will hit 16,000 people.

Working backwards, a fund would need an asset base of $2 million to earn income of $100,000, assuming a rate of return of 5%. This ignores one-off capital gains, but the point Labor is trying to make – that its superannuation reforms will only be a slight impost on the very, very rich – is valid. It is also a disgrace.

There are many canaries in the mine of social democracy in Australia today; all are decidedly unwell. To make a hardy joke, the dead canaries are many.

The surrender that was the Minerals Resource Rent Tax; the massive compensation to polluters under the carbon tax; the retreat on media reforms; the whimper of superannuation tax “reform”; raiding universities to fund Gonski; sending single parents into deeper poverty. There is a pattern here - Labor attacking its base, the poor and working class and at the first whiff of grapeshot from the bosses capitulating to capital.

The proposed “fabulously wealthy” superannuation tax [sarcasm alert] will have no real effect on the top 10%. They will receive, according to the Australia Institute director Richard Denniss, more than 31% of the benefits of the superannuation tax concessions. In dollar terms, by 2015-2016 over $15 billion in revenue will be foregone. By contrast the poorest 10% receive no benefits from the tax concessions. In dollar terms this is zero, zilch; nothing.

The government will also increase the concessional cap limit from $25,000 to $35,000 for those over 60 from 1 July this year and for those over 50 from 1 July next year, effectively encouraging older people (including the very rich) to put even more money into our biggest onshore tax haven.

How much do these tax concessions cost?

In its 2012 Tax Expenditure Statement, Treasury estimated the revenue forgone by the superannuation tax concessions this income year at $30 billion: $17 billion for the low superannuation fund earnings taxation and $13 billion for the employer contribution tax concessions. As the 9% superannuation guarantee begins its slow mandated climb to 12% over the coming years, paid for by workers through reduced wage increases, that figure will increase to almost $45 billion in 2015-16.

The original proposed Resource Super Profits Tax, as well as being used to cut company tax, was going to cover the loss in revenue this increase in superannaution guarantee will produce. That worked out well for Kevin Rudd didn’t it? It is a lesson Gillard took to heart. Don’t upset the rich and powerful. It is the signature theme for Labor today, an abandonment of its traditional scale democratic role of imposing solutions for the benefit of all capital that might impinge of sections of capital.

As every conservative commentator points out, revenue forgone is not the same as revenue collected. If the government were to abolish the state-sanctioned superannuation tax rorts, men and women will shift their investments from superannuation into other untaxed or low-tax investments such as the family home and negative gearing of rental properties.

Taking these behaviours into account, Treasury estimates that the revenue gain would be in the order of $23 billion today and almost $31 billion in 2015-16 if the superannuation tax concessions were abolished. Not quite the same as the revenue forgone figures, but still very very sizable.

But hang on — if the rich are going to shift their investments from one onshore tax haven to another, why doesn’t a social democratic government close down all the tax ratholes of the wealthy? Maybe the answer is that the ALP is no longer a social democratic party.

Any spending program benefiting the poor is subject to incredible scrutiny to see if it is worth the money spent. There are also often rigorous checks and quite draconian tests imposed to limit the reach of the program to the ‘deserving poor’.

The age pension has income and asset tests that knock out many hundreds of thousands of people of retirement age from any pension or benefits or reduce what they might otherwise receive.

Why isn’t there the same scrutiny into the efficacy of the billions the top 5% receive through the superannuation tax system and strict income and asset tests imposed to prevent the rich accessing the benefits?

Could it be one rule for the poor and working class and another for the rich and powerful? The tax system is the perfect tool for the ruling elite to disguise the government grants they receive. As the old song says, it’s the poor wot gets the blame; it’s the rich wot gets the gravy.

Labor’s changes to superannuation won’t address the “unsustainability” of the concessions. At the first threat from the superannuation industry and other rich bludgers against the Gillard government’s vague mutterings of taxing the fabulously wealthy, Labor surrendered.

The fabulously wealthy can sleep easy at night. The $11,000 a year that is the superannuation tax gift ordinary working Australians give to the super wealthy (bad pun intended) will continue. On top of that the rich can still pump some of the rest of their money into the family home and negatively geared rental properties. Nice work if you can get it.

I dream of an alternative where a left-wing government soaks the rich till their pips squeak. As the superannuation backdown shows, the reality however is that the ALP are the hollow men and women; they are the stuffed men and women. That is Labor’s epithet and epitaph.

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