I spent the weekend in Sydney at the 4th Annual Friedman Conference talking to a lot people – but mostly about just one thing. Just how bad the Turnbull government’s retrospective superannuation changes were.
Opinion varied from: “Yes, it is retrospective but Super is still a good thing” to “It is retrospective, but the government should get away with because Labor’s negative gearing policy is even worse for the economy”. Nobody I spoke to denied the retrospectivity, or claimed it to be a good policy.
Now there are two issues here:
- Is the policy retrospective: Yes? or No?
- Is the policy good: Yes? or No?
The government has to mount an argument as to why changing the Super rules may be good policy. Apart from needing the money now – which is NOT a good argument – I haven’t seen or heard that argument (I have an idea what that argument might be and hopefully will have time to write that up in the next few days). The government cannot credibly claim that the policy is not retrospective – because nobody believes them – so they need to argue why the policy can only be good if it is retrospective. I cannot imagine how such an argument would play out, but let’s rather hear that argument than the flat out denials.
That simply doesn’t work. See, for example, our fellow Cat contributor Henry Ergas in the Australian this morning:
The government’s changes to superannuation, whatever one may think of them, are not retroactive: they do not seek to alter the state of the law at a time prior to their announcement.
Rather, what the superannuation changes have is an element of retrospectivity: that is, although they only operate prospectively, they alter the future consequences of events that took place in the past.
So they’re not retrospective, they just have an element of retrospectivity.
It is true that the tax rate will be imposed going forward, but it will be imposed on a tax base that has been defined backwards.
Where I do agree with Henry is his view that we deserve better than this – the Turnbull government is engaged in a tax grab and hopes that fiscal illusion and rational ignorance will let them get away with it.