Bill Shorten announced a bold new tax plan he was taking to the next election on Tuesday, that was removing the share dividend imputation franking credits that has been a feature of Australian tax law for nearly 20 years.
It was introduced to remove dividends being subjected to double taxation. This is when the dividends are first taxed at the company tax rate and then at a shareholder’s personal income tax rate. This however meant those who were paying lower personal income tax rates received a tax refund on their franked dividends.
It is a bit complicated to understand. But the fact that some taxpayers, mainly self funded retirees were receiving money back meant Labor and Bill Shorten saw money to be grabbed and could launch another front in their class warfare campaign. The plan aimed to use the estimated $59 billion collected to finance lower and middle income tax cuts during the next election campaign.
Shorten thought he was onto another winner, like his campaign against the government’s company tax cuts which he has described as tax cuts for millionaires. There was also probably an element of inter-generational warfare in his announcement with many young Australians believing that the nation’s riches are being horded by the baby boomers.
However such a wide ranging tax grab has not just upset those Shorten would consider class enemies, but those self funded retires who have sacrificed during their life into superannuation so they wouldn’t be a burden on the taxpayer by taking a full aged pension. Modelling from National Seniors Australia provided to the Australian states that part pensioners would be more that $900 worse off each financial year. Many of these part pensioners are Labor voters.
After appearing shocked by the backlash to his tax announcement Shorten is considering a supplement payment package for the estimated 250,000 pensioners who will be affected. Shorten also stated he would raise the part pension and asked voters to trust that he would take care of older Australians “We will make sure that pensioners are OK, full stop”. If most of the $59 billion estimated to be collected from this tax reform is simply redistributed to those who you took it from in another exercise of fiscal churn what is the point of the whole reform?
Bill Shorten’s backpedaling and lack of knowledge about the implications of his own policy could be his birthday cake moment. This refers to Liberal leader John Hewson during the 1993 federal election in what was considered the unloseable election for the Liberals where he was selling a Goods and Services Tax of 15% as part of his fightback economic plan.
Hewson decided after considerable backlash to exempt food from his GST. This led to Hewson being asked by Mike Willesee would a birthday cake cost more or less under the GST. Hewson’s response was cryptic ” To give you an accurate answer, I need to know exactly what type of cake to give a detailed answer. I mean if it’s just a cake from a cake shop that is not presently subject to sales tax, it will not attract the GST.”
The next election could certainly be described as the unloseable election for Labor and Bill Shorten. They have won the last 28 Newspolls by an average of 53-47 two party preferred. Everytime the Turnbull Government looks like it might be turning a new page there is another stuff up or scandal that arises.
But a massive new tax that strikes fear into a large segment of voting public, that you have already had to make concessions on and which you aren’t across the detail makes you very vulnerable in an election campaign. If the Coalition runs a more aggressive campaign than it did last election it could easily capitalize on this voter anxiety with targeted repeated attack ads.
Shorten would now have appeared to overplay his hand in his class warfare campaign. There are many holes in other Labor election commitments and flaws in Shorten’s character that have been overshadowed thanks to the antics of the Turnbull Government. But coupled with his Adani flip flopping last week the screws have certainly been turned Shorten.