So both The Australian and the Australian Financial Review have published an AAP story today about the Gonski reforms. Its to be financed out of ‘savings’. That’s been code for tax increases since the Rudd-Gillard government came to office.
But this bit caught my eye:
Mr Swan again attacked the opposition for its plans to roll back income tax cuts linked to the carbon tax if elected in September.
“Under the Liberals’ changes, seven million Australians will have their taxes hiked up,” he said in a statement.
“For a mum and dad earning $65,000 each, the Liberals’ tax hike would mean their family would pay $600 more a year in income tax alone, while Tony Abbott himself would only pay an extra $3.”
There’s just one small problem. This stuff is so misleading as to be quite dishonest.
Yes. That is Ross Gittins calling the Swan statement misleading and dishonest.
The most glaring omission from Labor’s calculation of the hip-pocket effect of all this is its failure to acknowledge the saving households would make from the abolition of the carbon tax.
Based on Treasury’s original calculations, this should be worth about $515 a year per household, including $172 a year from lower electricity prices and $78 a year from lower gas prices.
Some Labor supporters argue that even if the carbon tax is abolished, prices won’t fall. This is highly unlikely. The state government tribunals that regulate electricity and gas prices would insist on it. And a Coalition government would no doubt instruct the Australian Competition and Consumer Commission to police the wider price decrease.
Labor’s repeated claim to have tripled the tax-free threshold from $6000 to $18,200 a year has always been literally true, but highly misleading. That’s because it conveniently ignores the complex operation of the low-income tax offset.
When you allow for this offset, which Labor has reduced and changed without removing, the effective tax-free threshold has increased by a much smaller $4500-odd from $16,000 to $20,542. This explains why the tax cut arising from the seemingly huge increase in the threshold is so modest (for many, $5.80 a week) and also why the move yields no saving to anyone earning more than $80,000 a year. For them, the threshold increase has been ”clawed back”.
And income tax rates for low-income have increased.
Now when even Ross Gittins is launching into the government on this point, you’d expect that everyone would sit up and take notice.