Fraud is behind tax cut pledges

GOOD news: the next election will be a battle between Labor and the Liberals to cut your taxes. Just don’t let those promised cuts — maybe $10 a week or more — blind you to some fraud here. But let’s start positive.

For the first time in years the big two parties are trying to outbid each other in cutting income tax.

Already last week both announced a Clayton’s cut: they won’t raise your taxes as promised just last year.

Still, that tells you how far we’ve come. In last year’s Budget, the Turnbull Government actually promised to increase your Medicare levy by 0.5 per cent.

Treasurer Scott Morrison even brought out his brother-in-law, Gary Warren, who has multiple sclerosis, to tearfully ask you to accept this $4 billion-a-year tax hit.

It would help pay for the new National Disability Insurance Scheme to help people just like Gary, Morrison said, and surely you’d “chip in for this compassionate cause”.

But then Labor said it would block this rise for people on under $87,000, which left the government looking like it wanted to raise taxes on battlers while cutting them on business.

Awkward. So now the government says it doesn’t need the levy after all.

“Our economy is now stronger,” said Morrison, and an increase in tax revenue meant that the NDIS was “fully funded” already.

The election now was about cutting taxes, and “under Labor, Australians will pay more in higher taxes”.

Within hours, Labor said it would also drop its own rise in the Medicare levy. The war is on.

But here’s some fact-checking. Fact check No.1: “The economy is stronger.”

Yes, the government’s tax take in the nine months to March was $7.2 billion more than expected. Prices for coal and iron ore are up, and we have more people in jobs, albeit mostly immigrants.

But will those prices stay higher? Is this huge immigration intake healthy?

And more urgent for voters: is this economic growth leaving you much better off? In fact, unemployment is stuck at 5.5 per cent, and real wage growth remains at record lows, barely above inflation.

Fact check No.2: The NDIS is now “fully funded”.

Nothing is “fully funded” when the Government will next week post our 10th straight Budget deficit.

And that points to another problem: the Government says it doesn’t need the Medicare levy rise not because it is spending less but taking more.

Department of Finance estimates show its revenue jumped a huge 9.3 per cent last year.

Spending was, mercifully, more restrained, but still went up 2.6 per cent — well above inflation.

We just cannot control spending, which is why we keep posting deficits despite high prices for minerals and a record run of economic growth.

Fact check No.3: “Chip in for this compassionate cause.”

The NDIS demonstrates our spending problem.

It is meant to get specialist care and tailored help to Australians with a permanent and significant disability.

The Productivity Commission first reckoned it would eventually help 411,000 Australians and cost $14 billion a year. But now it reckons it must help 475,000 and cost $22 billion when fully operational.

Who’s surprised, when doctors are under pressure to certify a patient as severely disabled to qualify for this funding, and when governments are under pressure to include more categories of disability?

Already the mentally ill and those who are educationally disabled have been added, blowing out costs.

Then there’s the strain to find the estimated 300,000 workers the NDIS will need. Last month, the NDIS agreed to pay more for administration, highly skilled carers and travel expenses for rural helpers. Bang: another

$420 million a year.

Fact check No.4: “Under Labor, Australians will pay more in higher taxes.”

Yes, Labor wants to bring back a 2 per cent wealth tax on the rich, and opposes the Liberals’ tax cut for big business. It also plans to hit superannuation, negative gearing and capital gains.

True, Labor will probably tax more than the Liberals, overall.

But those hits give Labor

$200 billion to promise away over the next 10 years, so expect this: the Liberals will promise personal tax cuts, and Labor will then offer much bigger ones and win this battle for the hip pocket.

So, yes, be grateful that both sides are now in a battle to cut your taxes.

But know that they’re still living on the credit card, and your wages are still refusing to rise.

Don’t let them off the hook just for a few bucks of your own cash back.