Bowen should know better

I wonder whether Bowen has narrowed his options by declaring that age pensions are sustainable but superannuation tax concessions are not.

Let me be very clear, when Joe Hockey says the Age Pension is not sustainable, he’s wrong — it is,’’ [Labor Treasury spokesman Chris] Bowen told the National Press Club yesterday. “We spend half the OECD average on old-age pensions.’’

imageThe trouble with using OECD comparisons is two-fold:

  • These countries, by and large, run social insurance models.  People contribute a certain percentage of their wage (the employer does too) to their social insurance accounts and their pensions (and other entitlements, such as unemployment insurance) are paid from this fund and are earnings-related.
  • The pension arrangements in most OECD countries are completely unsustainable.  In fact, Greece did change some of the parameters of its scheme and it is still unsustainable.   Why would we want to compare ourselves with countries that are in secular decline?

Australia  have a retirements policy based on two components:

  • The safety net of the age pension (although when 80 per cent of those aged 65 and over are on the age pension, full or part, it’s perhaps stretching a point to call it a safety net – which is why it has to be changed);
  • The compulsory system of superannuation which is clearly earnings related – and is intended to be.

There is no point making international comparisons if the two components are not taken into account.

When it comes to Bowen, he is simply playing politics and ignoring good policy (which is complicated and hard when it comes to retirement incomes and must take place over a long time frame):

  • There are very many age pensioners and more coming down the pike – and they vote;
  • There are many fewer people with large superannuation accounts (based on hard work and savings, but who cares?) – they vote, but probably not for Labor and there aren’t very many of them.  (Bear in mind, the plan is to nab more and more of them over time by failing to index the $75,000 figure.)

The fact that imposing a 15 per cent tax surcharge on superannuation pensions above $75,000 per year (less than average weekly earnings) involves massive compliance costs will not bother Labor a jot.

And don’t think there will be even treatment of people on generous government defined benefit schemes, including the longer-serving politicians; there won’t be – and Bowen knows this.  Taking away the 10 percentage point rebate does not get you there.

Posted in Uncategorized | 31 Comments

The Kluka Klan

This is Rush Limbaugh going after those who perpetrated the home invasions in the name of the law in Wisconsin in 2013. He wishes to ensure their names are known to one and all, and I am happy to assist. At the centre of it was “the judge, without whom this case could not have happened, Barbara Kluka, K-l-u-k-a“.

She came along in the second John Doe investigation, and she approved every petition, every subpoena, every search warrant in the whole case in less than one day’s work. She enabled law enforcement to raid these innocent citizens’ homes. She’s since recused herself from this, but not before she enabled all of this to happen in the second phase of the John Doe 2 case here.

In the second John Doe case, the DA, John Chisholm, had no real evidence of wrongdoing by anybody. It didn’t stop him. Conservative groups were active in issue advocacy, which is protected by the First Amendment. It didn’t violate any campaign finance laws. Issue advocacy is politics 101. These people were targeted because they’re conservatives and liberals. As I say, what happened here in not only the treatment Scott Walker got, but everybody else, this is liberalism run amok without any checks, without any opposition, without anybody pushing back, and in its own way California is the same example.

Despite the fact that there were no violations of the law in any away, the DA, Chisholm, convinced “prosecutors in four other counties to launch their own John Does, with Judge Kluka overseeing all of them. Empowered by a rubber-stamp judge, partisan investigators ran amok. They subpoenaed and obtained (without the conservative targets’ knowledge) massive amounts of electronic data, including virtually all the targets’ personal e-mails and other electronic messages from outside e-mail vendors and communications companies. The investigations exploded into the open with a coordinated series of raids on October 3, 2013. These were home invasions,” including the ones that I have detailed previously in this half hour.

They are true fascists and totalitarians, in the exact mould of people who think of themselves as good and decent. Instead they are vicious cowards who use force to terrorise those whom they cannot convince by their words and argument. The totalitarian temptation is ever-present and is almost invariably associated with the left.

Posted in American politics, Hypocrisy of progressives | 31 Comments

UK election poster

Tax the rich

Communist Party policy in the UK is bipartisan policy in Australia.

Posted in International | 73 Comments

An important sentence

The Climate Change Authority have released a draft report recommending:

A CCA report recommends cutting greenhouse gas emissions by 30 per cent by 2025 based on Australia’s emissions from the year 2000.

This would require significant emissions cuts beyond the current 2020 target of 5 per cent.

Okay – so how much is that going to cost?

As noted earlier, the Authority is not in a position to prepare meaningful estimates of the costs of meeting its recommended target, primarily because many of these costs will depend on the policies adopted.

Wow. Really wow. Let’s adopt a policy even though we have absolutely no idea how much it will cost.

So how did the Climate Change Authority come up with its recommendation?

The recommended 2030 range appears consistent with international benchmarks of the action required to limit warming to 2 degrees. Höhne et al. (Höhne et al. 2014), for example, reviewed over 40 studies of global emissions reduction pathways.

They follow a single survey article that reviewed 40 other articles. So I went and had a look at that article. Of the 40 studies that they reviewed, only 4 refer to “Cost-effectiveness” and none of those 4 include Australia.

Update: John Quiggin of the CCA responds here:

Since we don’t know what policy this, or a future government, might adopt, we can’t estimate the cost. So, to rephrase Davidson “Let’s propose a target even though we don’t know how the government, should they adopt it, will choose to achieve it”. That is, of course, exactly what the government asked the CCA to do in this report.

Posted in Global warming and climate change policy | 35 Comments

Childcare fee relief: it pays for itself

Whenever anyone says that government spending on a particular program or activity pays for itself, believe me it doesn’t.

Here we go with Jessica Irvine trying to make the case for taxpayers subsidising childcare fees.  (If she felt she didn’t need the Childcare Rebate, she didn’t have to apply for it, by the way.  She could have even saved the taxpayer some money.)

It seems to me the only case for the taxpayer picking up the tab, or some of the tab, for childcare costs is so children from disadvantaged backgrounds can attend childcare because their welfare is enhanced relative to being ‘cared’ for by the parents.  Their lifetime prospects may improve too.

Mind you, this may well be a case for taking the children away from the parents and allowing them to be adopted into loving families. But that is not going to happen in the short term, so the case stands – in theory.

But heres’s the real rub: the take-up of subsidised childcare places by children from disadvantaged backgrounds is extremely low.  The places and subsidies are snaffled by middle class families with most of the benefits passing through to the childcare workers and the centre owners.

My solution is to have a program specifically targetting children from disadvantaged backgrounds and leave everyone to their own unsubsidised arrangements in a much more flexible, deregulated childcare space.

And note that the argument for the government subsidising 15 hours of pre-school for all 4 years olds is not an issue related to subsidising childcare.  It is about helping 4 year olds prepare for school whether or not they attend childcare.

Believe me, spending $7 billion plus of taxpayer funds on childcare fee relief will never pay for itself.  And if the fee relief is more tilted to low income families, then there will be little by way of a return in revenue because these families pay no net tax.  And let’s not forget about the impact of the excess burden of collecting the tax in the first place.

Here is the piece by Jessica Irvine:

Libertarian Senator David Leyonhjelm poked a hornets nest this week by suggesting childless Australians should not be forced to subsidise childcare.

“Having kids is not a social service that governments should subsidise, it is a choice,” he said.

Courageous man. He is right in one sense, and wrong in another.

Leyonhjelm is right that parenthood is a personal choice.

“Big benefits, but big costs” is how one economist neatly summed up parenthood when I spoke to him last week for the first time since I returned to work after the birth of my first child nearly seven months ago.

Economists are right that the decision to have children, or not, is an intensely personal one and one that should ideally be made after full consideration of the potential costs and benefits. However, real life observation suggests it’s a decision parents-to-be often make with an excessive focus on the benefits and little appreciation of the costs.

Nothing can quite prepare you for the pain and physical toll of childbirth, not to mention your immediate introduction to a form of sleep deprivation that would seem cruel in a gulag. I’ve been so tired, I can almost almost taste it. Surely, parents are due some sort of help for all those sleepless nights?

Well, no.

I didn’t give birth because I wanted to reproduce the workforce or create the next generation of taxpayers (although I did do that). I selfishly wanted a family, some extra people to hang out with when I’m old.

For all the upfront costs, I’m confident this is an investment that will yield ever greater benefits over time. (Although a particularly honest mother recently confided to me this “break even” point may be closer to the two-year mark.) So too with my decision to return to work. It still makes sense financially for me to work, even after deducting tax and the cost of childcare. Not to mention, I enjoy it.

I almost felt embarrassed heading into Centrelink to register for the non-means tested Child Care Rebate – which pays parents 50 per cent of their out-of-pocket childcare costs, up to an annual cap of $7,500. I don’t need it. I would work anyway. I agree with Leyonhjelm that it’s unfair of me to effectively ask my childless friends to subsidise a choice I made freely and can fully afford.

But it’s a different story for low income women and their families. This is where Leyonhjelm is wrong.

Australia’s family payments system, including childcare subsidies, is there for a very good reason: to protect against child poverty and disadvantage. We all – parents and childless – benefit from the happier, healthier children that grow up in homes untouched by poverty, through reduced crime and less reliance on welfare.

Forget the warm fuzzies, as self-interested taxpayers, we should all be happy to fund services that help those less well off.

And studies suggest there are enormous benefits from early care, not only for parents but for children.

Because most of our brain development occurs in the first four years of life, children who go to childcare can get a head start that yields dividends for life. This is particularly true for low income children who not only get the benefits of early education, but may also escape an unstable home environment.

Subsidising childcare also helps vulnerable mothers. Becoming a mother is a life-changing event, and one in which, sadly, women still bear a disproportionate burden of those “big costs”: physical, mental and financial.

Keeping a foothold in the workforce after the birth of her child is the most important thing a woman can do to boost her financial security. Even a relatively a small gap can inhibit career advancement and take a hefty toll on retirement savings.

And yet, low income women face punitive effective tax rates when they go back to work. Not only do they pay taxes, they also suffer the withdrawal of benefits. Some extra money for childcare may well tip the scales in favour of returning to work and create a safer financial future for those women.

However, there do need to be changes to the way we subsidise childcare. As the government prepares to release its childcare and families package, most observers accept the current system is overly complex and ineffective. The childcare rebate and benefit should be rolled into one single payment, and this new payment should be denied to high income families.

The payment should also be based on a new funding formula to reflect the actual cost of providing care. And it should be recognised that subsidies which do nothing to address the supply side of the equation end up doing little but pushing up prices – just like the first home buyers grant.

So, let’s argue about how to subsidise childcare and for whom. But as citizens who care about creating an equal society for women and their children, let’s not question the value of childcare itself.

By boosting the human capital of at-risk children and the workforce skills of women, childcare assistance helps to pay for itself.

Posted in Uncategorized | 61 Comments

Just keep repeating the lie

I don’t know how many times it has been pointed out that the tax expenditure estimates related to superannuation tax concessions are complete bunkum – even the head of revenue in Treasury says so.

But journalists, be they gullible, lazy or only too happy to be sucked in, just keep repeating the $30 billion + figure.

So here’s what Labor is proposing – to impose an effective tax of much more than 50 per cent on high income earners who are compelled to save through superannuation.  We will be one of the few countries that has an TTt model of taxing superannuation.

And for those with incomes now above $250,000 per year, the model is even more punitive: 30 per cent on contributions, 15 per cent on earnings and now 15 per cent on incomes greater than $75,000, which is lower than Average Weekly Earnings by the way. Note that Labor does not intend to index either the $250,000 or $75,000 figure.

Now anyone with a brain will be retreating from superannuation as quickly as possible and move their funds to more tax-effective vehicles with fewer regulatory risks, including overseas investment.

Moreover, when this was proposed earlier, it turned out to be essentially unworkable because of the complication of unrealised capital gains in most unitised products.  But I guess workability is the last thing on the minds of Bowen and Shorten.

The addition to revenue of the Labor measure of $1.4 billion average will in all likelihood be a gross overestimate and sane (the villified ‘rich’) move their funds elsewhere.

Here is Mark Kenny from whom we would expect no less:

Labor’s superannuation tax changes unveiled on Wednesday lay down some important markers about its intended presentation to voters in 2016 – specifically in terms of super but more broadly in terms of the equity ground on which it wants to fight.

There’s a 15 per cent rate of taxation on annual superannuation income above $75,000 in the retirement phase, and a lowered income trigger for the application of a 30 per cent rate on payments on the way in during the contribution phase – it would cut in at $250,000 in income instead of the current $300,000. Neither margin is indexed for inflation, meaning they will become tougher over time. Because of this aspect, this is a stronger policy than it first appears and stronger than the one Labor took to the last election,

Still, the changes have been criticised as incremental given the sheer generosity of the tax treatment of superannuation compared to other income. This favourable treatment costs the budget around $35 billion per year in revenue foregone.

The politics and the economics are crucial here. Awake to the fact that governments of both stripes have been marked down for tinkering with the complex web of superannuation arrangements for decades, Tony Abbott has promised no negative changes to the system during this term.

For seniors and prospective retirees, that has no doubt been welcomed.

So Labor’s move is not without risk. While its measures taken together will claw back around $14 billion over the next decade, out of a concession pool of more like $350 billion, the impact would grow over time. More money for the budget means less money in superannuation accounts. In other words, there will be losers.

Bill Shorten however, believes these are few in number, wagering that the vast majority of voters regard generous tax concessions for the genuinely wealthy, as unfair – especially in light of the government’s alternative plan to erode the age pension from 2017 through lower indexation. Self-evidently, the poor have no excess income with which to take advantage of better tax rates.

It’s an assessment Shorten arrived at after Joe Hockey’s first budget, and has parlayed effectively ever since.

Labor’s market research supports the conclusion, with the word “budget” becoming a negative term for many voters, thus emboldening Shorten to press the advantage and go more directly after the rich. Even that comes with risks, with critics already noting the class envy aspects of Labor’s approach.

“Everyone knows you can’t sustain these mega concessions when in fact what we have got to do is make sure that the great bulk of Australians get to a comfortable level of retirement,” Shorten said.

“It’s just a matter of what are your priorities. We’re saying to Tony Abbott, there is a better way of then cutting the pensions for fixed income recipients, we’re saying let’s look at this very small group who receive a high degree of taxpayer-funded largesse.”

Yet the proposed changes make sense. The whole point of tax concessions on superannuation is to encourage ordinary people to save for retirement, thereby taking pressure off the age pension. It was not intended as a device to be used by those with large surpluses of disposable income to park that wealth and therein avoid the normal income marginal rate.

Shorten says he wants the government to adopt the changes, offering bipartisan support if it does. Yet given Abbott’s no-change-to-super pledge, that would constitute another broken promise. And Labor would not let that go unnoticed either.

Posted in Uncategorized | 42 Comments

Wednesday Forum: April 22, 2015

Posted in Open Forum | 1,511 Comments

But it did change our attitude to gun ownership

From Andrew Bolt, Of all the absurd analogies offered by the wilfully blind:

George Megalogenis, who has written a book and produced a documentary linking Australia’s economic success to its immigration program, said … the recent spate of terrorism-related arrests should not affect Australia’s attitudes to Muslim migration any more than the Martin Bryant massacre should affect mainland attitudes towards Tasmania.

It truly is an absurd analogy. Rightly or wrongly, we completely changed our gun ownership laws because of this one unique instance. Whether it did or did not make us safer, that was the premise of these changes. Our immigration program ought to at least not make us less safe on our streets, or when we go off to an ANZAC Day parade.

And for what it’s worth, the article Andrew was referencing was titled, Five million visas into Australia this year likely to set new records. Immigration is a good thing, generally agreed upon by all, if the numbers are increasing at a moderate rate so that migrants can be assimilated into our way of life. These are the necessary characteristics of migrants that we can agree on:

“If a nation’s immigration programme is well crafted and targeted, and migrants enjoy high levels of economic participation, as distinct from high levels of social exclusion and welfare-dependency, immigration has beneficial impacts in terms of growth in the demand for goods and services; increases in national income, and living standards; improved labour participation; expansion of the economy’s productive capacity; and growth in household consumption and public revenues.”

Every migrant comes at a substantial cost to the economy which is only repaid slowly over time and will only do so if they are productively employed. The kinds of migrants we should do everything we can to keep out are precisely those with “high levels of social exclusion and welfare-dependency”.

The question comes down to this. If they do not become us, then why should we let them in?

MORE IN IMMIGRATION: From John Hinderaker at Powerline on AMERICANS DON’T WANT MORE IMMIGRATION…AND THEY’RE RIGHT. The heading to the article states: “This comes from Republican Senate staff”. Here is the opening para.

The level of immigration in total numerical terms is currently at an all-time high, compressing wages and reducing employment (for both US-born and immigrant workers). Immigration levels have quadrupled from less than 10 million in 1970 to more than 40 million today – a period of long-term wage stagnation (real wages are lower today than in 1973). As a share of the population, the percentage of foreign-born will exceed all historical records beginning in eight years’ time and will keep exceeding all historical records every subsequent decade. (By contrast, after the last peak year in 1910, the foreign-born share fell for the ensuing six decades).

Posted in Cultural Issues | 51 Comments

We shall nobly save, or meanly lose, the last best hope of earth

julie bishop he drew first

From The Age.

A new cartoon sits on the crowded walls of Charlie Hebdo’s offices in Paris.

The image will be familiar to many Australians who followed the aftermath of the terrorist attack on the satirical magazine in January.

Canberra Times cartoonist David Pope’s stark, confronting “He drew first” pencil sketch, drawn while watching TV reports late at night after the shooting, went viral on social media within hours.

It was instantly, instinctively familiar to the staff at Charlie Hebdo, too.

Any of them could have drawn this, cartoonist and managing editor Riss said on Monday. “This is exactly how we felt and how we feel.”

The sketch, signed and framed, was presented to the staff of Charlie on Monday by foreign minister Julie Bishop, as a gesture of Australia’s sympathy and support.

Posted in Cultural Issues, Ethics and morality | 35 Comments

It’s not “sad”, it’s terrifying

There is the IRS which is a scandal that is now just seen as part of the American way of life and has been part of the background scene in the US for almost two years. And there is a president who is doing everything he can to allow Iran to build nuclear weapons. And now there is this:

“It’s a matter of life or death.”

That was the first thought of “Anne” (not her real name). Someone was pounding at her front door. It was early in the morning — very early — and it was the kind of heavy pounding that meant someone was either fleeing from — or bringing — trouble.

“It was so hard. I’d never heard anything like it. I thought someone was dying outside.”

She ran to the door, opened it, and then chaos. “People came pouring in. For a second I thought it was a home invasion. It was terrifying. They were yelling and running, into every room in the house. One of the men was in my face, yelling at me over and over and over.”

It was indeed a home invasion, but the people who were pouring in were Wisconsin law-enforcement officers. Armed, uniformed police swarmed into the house. Plainclothes investigators cornered her and her newly awakened family. Soon, state officials were seizing the family’s personal property, including each person’s computer and smartphone, filled with the most intimate family information.

Why were the police at Anne’s home? She had no answers. The police were treating them the way they’d seen police treat drug dealers on television.

In fact, TV or movies were their only points of reference, because they weren’t criminals. They were law-abiding. They didn’t buy or sell drugs. They weren’t violent. They weren’t a danger to anyone. Yet there were cops — surrounding their house on the outside, swarming the house on the inside. They even taunted the family as if they were mere “perps.”

As if the home invasion, the appropriation of private property, and the verbal abuse weren’t enough, next came ominous warnings.

Don’t call your lawyer.

Don’t tell anyone about this raid. Not even your mother, your father, or your closest friends.

The entire neighborhood could see the police around their house, but they had to remain silent. This was not the “right to remain silent” as uttered by every cop on every legal drama on television — the right against self-incrimination. They couldn’t mount a public defense if they wanted — or even offer an explanation to family and friends.

Yet no one in this family was a “perp.” Instead, like Cindy, they were American citizens guilty of nothing more than exercising their First Amendment rights to support Act 10 and other conservative causes in Wisconsin. Sitting there shocked and terrified, this citizen — who is still too intimidated to speak on the record — kept thinking, “Is this America?”

No, it’s Nazi Germany or Soviet Russia or any common garden totalitarian regime. But on Instapundit, where I found this, the comment begins:

Sadly, it is America, as controlled by a liberal/progressive agenda that inanely believes that conservatives who “coordinate” their political messages are somehow subverting the democratic process (rather than actually furthering it). [My bolding]

This is not “sad”. It is terrifying.

Posted in American politics | 49 Comments