Australian Political Internet News ReviewMore Issues
Mark Latham’s idea of using taxpayer funds to subsidise people to buy shares is totally stupid.
There are far more important things that scarce taxpayers money could be spent on, like hospitals, nursing homes, schools and the alleviation of unemployment.
People on low and middle incomes are already perfectly capable of investing in the stock market if want to.
If money is going to be given to people on low incomes, it would be much better to give it in the form of tax cuts or tax credits. That way people could spend the money on what they actually need, like paying the rent! Most people on low incomes don’t even own their own homes, so what is the point in them buying shares?
In fact, a lot of people on low income wouldn’t be able to afford to buy shares even with a government subsidy, so they won’t benefit from the scheme. Only people who are well off enough to buy shares would benefit. And in most cases those people probably would have bought shares anyway. The scheme has marginal public benefit but a large cost to the taxpayer.
Also, if the proposed scheme was implemented a whole layer of bureaucracy would need to be created, and cost of administering the scheme would be substantial.
The Labor Party should ditch this hair-brained policy, and ditch Mark Latham along with it.
Australian Political Internet News Review
There is one thing which is consistent about the federal Coalition government*s agenda over its period of office - the transfer of income and wealth from the less well-off economically, to the economically well-off. And this comes at a time when it appears to many people that the gap betwen the rich and poor in society is widening. The effect of the governments policies is to exacerbate and widen that gap. The burden of the GST and industrial legislation has fallen the heaviest on the working poor, while the wealthy in society are relatively unaffected by these changes and also get the benefit of capital gains and company tax cuts which aelittle help at all to the poor, as most don*t own property or shares.
Policies include the introduction of mutual obligation and work-for-the-dole requirements for the unemployed, the introduction of the Youth Allowance, the GST (which penalizes poor people more than rich people because poor people spend (by necessity) a higher proportion of their income than do rich people, and is sending thousands of struggling but previously viable small businesses to the wall), cutting capital gains tax rate in half (a very large tax break to the very rich!), a large reduction of the company tax rate, legislation to restrict native title rights of Australian aborigines (to benefit wealthy landowners and mining interest), support for a new uranium mine in Jabaluka National Park (benefiting a company owned by the wealthy), the privatisation of Telstra (at a price significantly and deliberately below the market price in order to give a windfall profit/gain to the new, private owners), the governments greenhouse policy (or lack of it), (not wanting to reduce greenhouse gas emmissions at the expense of large companies, again mostly owned by the wealthy), cuts to the ABC budget (as a punishment for not advocating the advancement of the interests of the wealthy enough), and a large increase in HECS fees. The Coalitions industrial relations "reforms" aims to make the working conditions and pay of workers worse, while businesses will make more profits at their workers expense. One of the starkest distictions between the governments treatment of rich and poor is the crack down on welfare fraud and tax evasion by low income earners while turning a blind eye to, or even exacerbating, bilions of dollars worth of tax evasion by the well-off. LINKS
There are all sorts of arguments that the government uses to justify its policies, like being "good for the economy", they will "increase competitiveness" and "grow the economy", "fix the mess left by the previous government" (whatever those things mean actually!). In fact in relation to the governments current move to increase funding to the richest of Australia*s private schools, they have said that it is in order to make the system fairer! It is interesting that it never really admits or says that its intention is to benefit the rich at the expense of the poor, but that is nearly always the effect. Some of these policies in themselves may or may not seem to be reasonable, but when they are considered in their entirity, it becomes clear that this government stands wholeheartedly for the rich. As a very blatant example of this, recently the government attempted through the parliament to increase the level of income at which the top marginal rate of personal income tax cuts in up to \\$75,000, and the reason the treasurer, Peter Costello claimed was to encourage graduates to working in Australia and not leave Australia for higher salaries overseas. And this while most Australians earn below $35,000 per year and the minimum full-time adult wage is only about $20,000. While Costello*s purported reasoning is novel, it is also ridiculous, and the Senate appears to have reason because it blocked the legislation.
Even the dispute over petrol excise has a bias in favour of the rich over the poor. Petrol excise is a flat tax like the GST, (not progressive like the income tax system), but people on low incomes are just as likely as rich people to need to drive their cars, so they end up spending a higher proportion of their income on petrol tax than do high income earners.
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Two issues need to be seperated when considering this issue: (1) consideration of government finances and the management thereof and (2) government administration and regulation of Australia*s telephony, how the public*s demand for telephone services can be achieved, minimization of the cost and price of
such services.
It seems that the first consideration would be to simply determine the interest rate that the government pays on its debt to the rate of return the ownership of Telstra is likely to give the government and to compare the two. This of course means that the sale of 50% of Telstra by the government was very bad - a very bad deal for the government, the taxpayer and the community - and also very short-sighted (either that or a deliberate attempt by the government to rip billions of dollars off the public). The governmnet pays a fairly low interest rate, as it is a very secure debtor, probably about 6 to 7%. But the rate of return on investment in Australian companies on average is likely to be 10 to 15%, including dividends and increase in value of a company based on expectation of profit increases in the future. That means that if the government had retained ownership of Telstra they would have made a multi-billion dollar net profit (on both halves). An analogy to the governments sale of half of Telstra is "to sell-off the farm to pay the mortgage". If every individual in Australia followed the governments example the whole economy would collapse because no one would be able to buy a house or start a business. Furthermore, there is also the fact that the sale price the government got, particularly in the first sale, was about \\$20 billion or more less than what it was actually worth. (!!!). John Fahey the finance minister needs to be particularly thanked for this. Some this loss, of course, was a gift to wealthy Australians who bought large amounts at the bargain basement price, but foreign investors who bought shares also received a windfall gain of several billion dollars as a result of the low sale price. Some very wealthy foreign investors must think Howard and his government are pretty smash hot!
It should emphasized about the sale of Telstra that the result of the sale (in particular the first sale) was in effect a multi-billion dollar transfer of wealth from the 18 million about Australians who didn*t buy shares in the sale to the 2 million people and corporations (many of them from overseas) who did. The buyers made a very large profit (collectively about \\$20 billion!) for doing nothing, and this is at the expense of the public in general. While Fahey, Howard and Co. were celebrating the rising Telstra share price (not long after the sale), it was made apparent that the majority of Australians had been swindled.
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Evidence that the governments handling of the second issue is the shoddy phone lines which can make it hard to use the internet (or even use the phone), poor service from Telstra in rural and regional areas and long delays in getting new phone lines operational. It must be remembered that Telstra is still a monopoly, in which case it requires government regulation or ownership for consumers to be served adequately. The use of the telephone is also considered to be an essential service, and even more so in remote locations in rural Australia, and so further making it desirable and even necessary for the government to be pro-active in the telephony industry.
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The federal Coalition often has stated that they are interested in reforming the tax system in Australia because it is "is in a mess" and "in need of fundamental reform". If this were really so, why did they introduce the GST? It is regressive (both politically and economically) and it makes the tax system far more complicated than previously, not less, by simply adding an extra layer of complexity to the previous system. Currently, many small businesses are finding it very difficult to comply with the GST and possibly tens of thousands of small businesses are going out of business, or will in the near future as a result. It seems that a large number of small businesses were conned by the Howard government, but unfortunately it is now too late to go back.
Another backward, regressive and very unfair change to the tax system by the Howard government has been the cut in capital gains tax to half the comparable income tax rate. How is it fair that people will pay half as much tax on income earned through the value of their assets increasing compared to income they have to work 40 hours a week to earn? On one hand the government is introducing a tax (the GST) which hurts the poor the most and cutting a tax which benefits mainly the rich (capital gains tax)? The government also cut the company tax rate from 36% to 30%, which obviously benefits mainly the rich too because companies are mostly owned by the rich.
What about payroll tax (see PAYROLL TAX - THE HIDDEN TAX ON EMPLOYMENT) and death duties? The abolition of payroll tax should be a top priority because it discourages employment. Death duties would be a fairer tax than the GST because it requires more tax to be paid by the wealthy. What about the top marginal rate of income tax? In Australia it used to be 60% more than a decade ago but it has been lowered now to 47%. This change has of course benefitted the rich. Although 47% seems like a high rate, it is actually far lower than the effective marginal tax rate faced by people on low incomes. This comes about through the interaction between the welfare system and the taxation system - as more income is earned it is taxed plus welfare benefits phase out. The effective marginal tax rate can be actually over 100% in some cases. In fact, this really means that, although the income tax system alone is progressive, if the effect of loss of welfare benefits is taken in to account the tax system is regressive. Ideally, or optimistically, it would be desirable if at an income level of, say, 10,000 per annum, a marginal rate of income tax of, say, 55% would apply, and even a few higher rates at higher levels of income - say 65% at an income over 200,000. Another problem with the tax sytem that needs reform is tax avoidance and evasion by high income earners, which costs the government . LINKS
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