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The newest election faultline isn't left versus right, it's young versus old -- and it's hardening

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In the field of tax, hard truths are playing out in this year’s election. The first is that special concessions that privilege older, wealthier voters have created a constituency very opposed to change.

The second is that the longer these settings are left in place, the harder it is becoming to change them.

Political science tells us that constituencies emerge around policy settings. The mushrooming of age-based constituencies is making tax reform difficult, with implications for intergenerational equity.

The more pressing that reining in generous and ever more expensive concessions grows, the easier it is becoming for political parties to use scare tactics about taking them away in order to muster support.

Tax measures get labels, like ‘retiree tax’

Hence, the Coalition’s use of the phrase “retiree tax” to describe Labor’s proposal to end cash payments of unused dividend imputation tax credits[1]. The payments were introduced by the Howard government, and allow share market investors to make use of credits for company tax paid in creating their dividends to receive the credits in cash.

It is a “retiree tax” only to the extent that self-managed superannuation funds that don’t pay tax in the retirement phase make use of them and superannuants who don’t pay tax because superannuation income is tax free make use of them.

Chair of the House Economics Committee, Liberal member of parliament Tim Wilson, has conducted hearings around the country on the “retiree tax”,[2] while operating a website entitled “stop the retirement tax[3]” that offers visitors draft submissions opposing the tax to send to his inquiry, a matter Labor wants taken up by the parliament’s privileges committee[4].

Policies get called ‘super lies’ and ‘death taxes’

There was Shorten’s “super lie” in the first week of the campaign. In response to a question about whether a Labor government would increase taxes on superannuation, Shorten said it would not. His statement was technically incorrect given that Labor has for a long time planned to further tighten some of the super tax concessions[5] tightened by the Turnbull government in 2016[6]. Labor isn’t proposing to go any further than it said it would in 2016[7].

A cynic could be forgiven for thinking that the first weeks of the campaign were so tepid that the media needed something with which to entertain itself. Shorten’s gaffe was the reason week one of the campaign was judged to have been won by the prime minister, who labelled Shorten a liar.

Now both sides[8] are accusing the other of planning a “death tax[9]”.

The reality is that neither side in planning one, despite it being an efficient and worthwhile addition to the tax system[10].

New political movements are growing

Outside of government, we now have the “Save our Super[11]” group, formed in opposition to the superannuation tax increases imposed by the Turnbull government, and this year a “Self Managed Super Fund Party[12]” which didn’t register in time to field candidates.

Each illustrates the power of age-based privilege.

The “retiree tax,” the “super lie,” “Save our Super” and the “SMSF Party” all coalesce around the same type of issue: the prospect of a largely aged-based tax concession being ended or reduced. In the case of the “death tax” it refers to the threat of new tax where none currently applies.

In a society where fewer people will be of working age and able to contribute to revenue through taxes on wages, the government will have two options: either increase taxes (on someone) or cut spending (on someone).

The 2009 Henry Tax Review pointed to another option[13]: increased private funding of retirement costs.

Exactly where Australia is going to strike a balance is an open question. It is a choice.

And age is becoming the ultimate political divide

The other choice is how about whether we manage the transition to an ageing society in a way that ensures the economic security of the young. The Coalition is banking on the broad appeal of its income tax cuts while at the same time getting stuck into Labor’s “retiree tax”.

Labor has set out an agenda of reducing tax concessions that it argues go to older, wealthier Australians and investing the proceees in childcare. But it can’t shake the “retiree tax” label. Its website[14] is fighting back, pointing to Tony Abbott’s attmept to cut payments to pensioners and Scott Morrision;s support of a pension age of 70.

Read more: Words that matter. What’s a franking credit? What’s dividend imputation? And what's 'retiree tax'?[15]

The “retiree tax” label is haunting Labor in a similar way that Prime Minister Theresa May in Britain was was haunted by talk of a “dementia tax’[16]” during the 2017 elections. It was a proposal to include the value of the family home in the means test for in-home care.

We are heading down the road of aged-based entitlement and political expediency. Whether it’s too late to turn back, time and this election will tell.

References

  1. ^ unused dividend imputation tax credits (theconversation.com)
  2. ^ has conducted hearings around the country on the “retiree tax”, (www.aph.gov.au)
  3. ^ stop the retirement tax (theconversation.com)
  4. ^ taken up by the parliament’s privileges committee (www.theguardian.com)
  5. ^ further tighten some of the super tax concessions (www.alp.org.au)
  6. ^ tightened by the Turnbull government in 2016 (kmo.ministers.treasury.gov.au)
  7. ^ than it said it would in 2016 (parlinfo.aph.gov.au)
  8. ^ both sides (thenewdaily.com.au)
  9. ^ death tax (theconversation.com)
  10. ^ worthwhile addition to the tax system (theconversation.com)
  11. ^ Save our Super (saveoursuper.org.au)
  12. ^ Self Managed Super Fund Party (www.afr.com)
  13. ^ pointed to another option (taxreview.treasury.gov.au)
  14. ^ Its website (www.alp.org.au)
  15. ^ Words that matter. What’s a franking credit? What’s dividend imputation? And what's 'retiree tax'? (theconversation.com)
  16. ^ dementia tax’ (www.businessinsider.com.au)

Authors: Emily Millane, Research Fellow and PhD Candidate, Crawford School of Public Policy, Australian National University

Read more http://theconversation.com/the-newest-election-faultline-isnt-left-versus-right-its-young-versus-old-and-its-hardening-116079

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