Turnbull’s tax train wreck

In what seemed like a thought bubble in a doorstop at Penrith Panthers Football Club, Turnbull announced handing back income tax powers to the states.

Julia Gillard left the Australian government with a few time bombs. The vision for schools contained in Gonski was fine and good, it just had to be paid for. So too the National Disability Insurance Scheme and the funding of decent hospitals as we age and get sicker.

It was too hard for Joe Hockey and Tony Abbott, so they snipped $80 billion over 10 years off the budget in the out-years. Turnbull agrees and wants to hand access to income tax back to the states.

Shorten says it’s a funding issue which Turnbull has squibbed and doesn’t deserve to be PM. Turnbull has made it an issue of federation, about functions appropriate to levels of government.

Turnbull is suggesting that the Commonwealth get out of funding state schools completely, but keep the funding of non-government schools. He’s been hammered over that one.

Ben Eltham says it’s a train wreck. Greg Jericho thinks it’s a plan to force the cutting of services.

Eltham talks mainly of the complexities of different tax rates for national firms, and people who work across borders, also the inequities between rich and poor states. Turnbull says poor states would be compensated, meaning the “begging bowl” activity together with complaints about unfairness would continue.

In recent years we have been moving towards individual institutions, eg hospitals and schools, taking responsibility for service delivery according to national standards. They don’t much care where the money comes from.

Central to Turnbull’s argument is that states will have incentives to become more efficient. Jericho says those incentives are already there:

    As I noted, the states already have budgets, credit ratings and elections. The incentive to deliver health and education as efficiently as possible is there because state governments also spend money on other areas, infrastructure, for one. They also know that if they can somehow deliver services more efficiently they can deliver lower taxes that they already raise, such as payroll tax rates and stamp duties.

Peter Lewis thinks Tunbull’s proposals will help Labor by eroding the LNP’s natural advantage in economic credibility. It’s about the Fingerhut Effect. If you ask people anywhere “Which party is better at managing the economy”, right-of-centre parties tend to enjoy a significant advantage.

    But when you bring people into the equation and ask, “Which party is better at managing the economy for ordinary people like you”, the advantage slips away and the result sees an advantage to the party to the Left of centre.

Turnbull is linking Labor’s strengths in health and education to the issue of economic credibility. Add in talk of tax cuts for business and the election becomes an issue of interests rather than competence.

    Labor has the opportunity to construct a winning campaign around Turnbull’s modern Prometheus, based on the simple questions: Whose side is he on? Who is he managing the economy for? Who do you trust to represent your interests?

In context, Lenore Taylor is right, it’s a distraction, one designed to get Turnbull through the election. The premiers say there has been no discussion, they read it in the paper along with everyone else earlier this week. It’s not how a mature and competent government would go about changing how the federation works.

This man is erratic and dangerous.

An adult nation should have a coherent social and economic vision for education and health. Turnbull is taking us back a hundred years.

I should mention that Peter Martin likes the idea. Economists sometimes have strange views. As one radio call back person said last night, it sounds wonderful until you come to implement it. Another with a Canadian accent warned against using Canada as a model for anything.

31 thoughts on “Turnbull’s tax train wreck”

  1. I wish I knew that he was there, I would have gone and booooooo’ed toooo. Let me put this link here to remind everyone why we make such shite aweful decisions.


    The problem is that we have no real mental image of what the real situation on what …….anything…….is. It is not that there is no way to understand, as Hans Rosling clearly demonstrates, it is that we are almost intentionally kept in the dark by those who use the confusion of information to blind us.

  2. “It was revealed in a government survey published today that the Prime Minister is doing the work of two men, Laurel and Hardy.”

    RIP Ronnie Corbett

  3. The proposal is now withdrawn.
    Mr Turnbull is looking as accident-prone as Mr Abbott was.

    There were so many reasons to doubt that this one could work. States competing in a “race to the bottom” was one. Some of us recall a Qld Premier’s abolition of death duties. Wealthy old Victorians headed north to save their childrens’ inheritances.

    Other States followed suit, abolishing death duties too.
    So a progressive tax was removed by the actions of one Premier, don’t you worry about that, we’ll we’ll yes of course but you never mind that I see what no no no….

    Many old, lonely ex-Victorians later moved back south.

    At least with Mr Turnbull’s blunders, most get disposed of quickly. This one must be vying for the record of briefest shelf-life.

    Whereas Mr Abbott let Speaker Bishop hang on for weeks, had his 2014 Budget hanging around his neck for 15 months, stopped weeks of BBQs with the Prince Philip knighthood, never lanced the Peta boil, and kept bumbling Joe Hockey with him as if Joe was entitled to the position.

    I’m puzzled that a PM wanted to take the Federation back to pre-1942. Why? WW2 nostalgia? Depression nostalgia? Gold Standard?

    Doesn’t seem “nimble” or “innovative”.

    Hang on, I think I’ve got it: we have to accept that start-ups can fail. We have to be more tolerant of business bankruptcies.

    Does Mr Turnbull see the nation as a start-up?

  4. Not sure what’s going on.
    I wrote “2014 Budget” and “15 months” in previous post.

  5. The State Premiers want Bill so he can spent like a drunken sailor.
    I don’t like Mal, at all, but the media narrative flipped overnight from policy desert to flood of thought bubbles is not how it happened in reality, rather it just mirrors ALPs changing attack strategy.
    Only the most one eyed can’t see that.

    I supported the proposal ( if designed and implemented properly, big IF ) because it’ll be better for our economy. Countries with better economies have better health and education, in the long run, as a rule.
    Simple as that.

  6. Difficult to see how a partial transfer of taxation powers to the states would make any significant difference to the rate of economic growth

  7. It is pretty obvious by now that neither Turnbull nor his Treasury mandarins understand why governments continue to exist and why we willingly allow them to take away part of our earnings, either directly or indirectly.

    My initial response to the states’ income tax thought bubble and similar “it-seemed-like-a-good-idea-at-the-time” fantasies was that random breath-tests and drug-screens should be conducted among politicians and senior public servants.

    Then, when my amazement and anger settled down, I realized that two ways of gaining a whopping big pot of revenue were:

    (1) Making major corporations and filthy rich tax-dodgers pay their fair share of tax, and,

    (2) Stop wasting our treasure on absolute follies such as the F-35 flying goldbricks, which have a combat life of only a few minutes now that half the planet has already hacked into the fine details of how they work, or rather, how they don’t work.

  8. I had the same thought, Douglas H.

    What we are seeing in the LNP is lazy leadership, on a grand scale. Where there are many practical measures that government can take to really make a difference for all, Turnbull is obsessed with making things better for the people he relates to, richer people.

    Some tax changes that I would like to see.

    * Britain has shown some real leadership with their sugar tax. We should do the same straight away. People and the health system win from this.
    * I would like to see South Australia’s Container deposit scheme made a national project. Everybody wins from this.
    * A Financial transaction tax should be implemented.
    * A fast food levy. Within 5 minutes walking distance of my factory front door there is a Macdonalds, a KFC, a Domino’s Pizza, a Red Rooster Chicken, a Greek Style takeaway, two service stations and a vacant section ready for another franchise of some kind. All this and we are virtually in the bush here. Fast food is just way too easy and can cope with a little taxing.
    * An environment degradation tax. This would take some thought as to how to implement it, but there are plenty in the greens who would be up to the task.

  9. Douglas Hind is right.

    What’s more schooling should be seen as an investment rather than an expense. A good health infrastructure is also an economic plus.

    Amongst it all it’s clear Turnbull is walking away from the full Gonski, bleating that what we need is better teachers. There are things we could do to improve teachers. They would also cost a bit, but not much. However, our big failing with the academically less able was identified by Gonski and the means for good opportunities for all.

    jumpy, talk of Shorten spending like a drunken sailor is rubbish. They are committed to about 26% of GDP, as was Swan after the GFC. My fear is that he too won’t spend enough.

    BTW $80 billion over 10 years is only $8 billion a year. Not a lot in a budget which is heading for half a trillion.

  10. (1) Making major corporations and filthy rich tax-dodgers pay their fair share of tax, and,

    From what I read, the top 25% of income earners pay over 65% of net income tax.

  11. Turnbull has shown himself as quite politically inept. Contrast Bill Shorten who negotiated the NDIS, and the last few recalcitrant states on Gonski, which exists as a signed agreement, except WA, I think.

    He’s also clearly not working closely with his treasurer, which is a worry.

  12. From what I read, the top 25% of income earners pay over 65% of net income tax.

    And what is their percentage share of income?

  13. zoot

    And what is their percentage share of income?

    You tell me.
    Im guessing less than 65%. More around 50%.
    If I’m correct, they pay far more then their ” fair share ”

    Incidentally, while your looking, how much net income tax is payed by the bottom 50%. Im sayin zero.

    Then we can discuss our definitions of ” fair share “.
    Should be fun.

  14. That said its tricky when different analysis of ABS and ATO data results in differing percentage groups for their summary. Some 1/4, others 1/3 or 1/5 or even 1/20 or 1/00.

    Can get confusing for a dummy like me.

  15. Jumpy at 11.28am.

    Please note that the point (1) you referred to, mentioned “filthy rich tax dodgers.

    As I read it, the writer was concerned that tax dodgers should pay the correct amount of tax (presumably income tax).

    Have you heard of tax evasion and tax avoidance? Have you heard of “artificial schemes”?

    The other group mentioned was “major corporations”. I took that to refer to notorious cases, which had quite a public airing several months ago, where large corporations paid a (derisory) low rate of company tax on large turnovers and/or large profits. Do you recall that public discussion?

    Do you think the current arrangements, under which both of these types of under-payment occur, are OK? Are you open to any changes in these aspects of taxation in Australia?

    I think there are potential economic and social benefits in lowering those underpayments. What say you?

  16. On the evening of April 1st, Jumpy wrote inter alia that I supported the proposal ( if designed and implemented properly, big IF ) because it’ll be better for our economy.

    I would like to ask, how transfer of some income taxing power to the States and Territories, might be better for our economy?

    I can’t see how any positive economic changes would result. [Not that it’s going to proceed, just yet…..] I can only see: higher compliance costs, taxpayer confusion, States (still) at loggerheads, and another barrier to national cooperation.

    Although Paul Kelly thinks Mr Turnbull has dodged a bullet (albeit his own bullet), I’d like to know how this fiasco fits into the suggestion that we need calm, adult, well-thought-out policy discussions and that the nation will see such, now that Mr Turnbull is in charge?

    It seems there was very little detail worked out or discussed with the States and Territories before the COAG meeting yesterday. Then, no detailed proposals put before the meeting. Then a cave-in by 10.30am.

    Contrast this with the long, careful, expert investigation carried out for Ken Henry’s report on taxation to the federal government only a few years ago. YES: very little was implemented; YES you can conclude it was a waste of time. But the process was analytical, statistical, guided by economic theory; carried out by persons well suited to the tasks involved.

    That’s what I call an adult approach.

    Was the lack of implementation a failure by the then PM? Did Cabinet take fright? Did lobby groups weigh in? I don’t know, but the Premiers and Chief Ministers weren’t the only Australians flabbergasted by the very different modus operandi this week.

    Some of the electors must have scratched their heads too, I think.

  17. Ambigulous

    Top 10% of income earners pay 50% of income tax ( that’s gross ), as Smokin Joe said.
    Who are these “filthy rich tax dodgers”, certainly not the filthy richest ? Or is it just bullshit trotted out by jealous people that want more money earned by someone else ?

    On company tax, the ATO are not fools that confuse revenue and profit. 30% is applied to profit and the ATO forensically audit any company they want.

    On State income tax, give 100% back to them and abolish health and education portfolios and departments in Canberra.
    I realise competition frightens some folk but it reduces cost, gives choice and promotes innovation.

    ( You won’t find any of this information in the Labor Herald that Brian links to on the open thread, or anything zoot reads )

  18. And the Henry Tax Review was published 3 years before even Abbott was elected.
    Every Government does tax enquiries and white papers too.
    Always the same and result though, bigger sin taxes, soak the successful more and spend bigger.

  19. Jumpy, we’ve got a population less than Texas. There are some things we don’t need to do eight times over.

    We used to have different starting ages, different curricula. It drove people moving interstate mad, especially the influential defence forces lobby.

    However, the big costs in schooling are in frontline salaries.

    It’s a complex area and nostrums like “competition … reduces cost, gives choice and promotes innovation” don’t get you far.

  20. Brian,
    The States don’t need to have totally different curricula, there are not patent laws to stop each one stealing the best strategies they observe from others to replace the ones less efficient.
    The ” one size fits all ” from Canberra, seems to me, wrong headed.

    Also the Charter Schools in NZ are having brilliant results in low socioeconomic areas where the State has repeatedly failed, despite the ” more money, more money ” approach of the Teachers Union in decades past.

    If we must accept occasional mediocre or negative approaches in teaching, and we must because it’s happening now, I prefer only a small portion of our kids affected for a short time that gets corrected quickly due to pressure from the public that see better outcomes just up the road. Not all the kids in the nation till the next Fed election.

    Pretty sure we both want the same thing, just disagree on the method. Test as many methods as we can I say and let winning ones prevail.

  21. Jumpy “fact” X-0035

    “Charter Schools in NZ are having brilliant results”

    Wikipaedia says

    “One of the first charters school started in New Zealand was in serious trouble within two weeks of starting, a secret Government report stated. The school in Whangaruru had about 20% of its students missing shortly after opening. There was strong disagreement between the two related business managers who ran the school. The school does not have a principal. The school, which receives 500% more funding than a state school, spent half its income buying a farm. The Ministry of Education carried out a secret inquiry and immediately installed its own manager. One of the two original managers left hurriedly. Problems first arose in 2013 when it was claimed that the school had been set up in a paddock using portaloos for toilets. It was reported that drugs were a problem in the school and some students had been removed to an unknown place. The school has only one teacher with a current practicing certificate. The original management has now been replaced by an executive manager from Child, Youth and Family. The school receives $27,000 per student compared to $6,000 per student in a state school.[12][13] However Ministry of Education figures have shown the above funding to be inaccurate.[14][clarification needed]

    In a charter school the school keeps the money even when pupils leave or are expelled. State schools are only paid for students actually present on the roll.”

    Who to believe?

  22. Jumpy, when states were developing their curricula entirely independently of each other back in the 1980s the first thing they would do was look at what all the other states were doing.

    The value of/need for co-operation in various areas had been recognised in the early 1980s and I was involved in it. So too in the late 1980s in curriculum development, although it’s not my field and I didn’t contribute much. The states were resistant to going beyond a certain point, but Gillard crashed through with national testing, the MySchool data base and formulating a national curriculum.

    At the same time there was a countervailing trend to giving schools greater autonomy in how they managed themselves.

    When I worked in education I found that every taxi driver, every dentist, hairdresser of whatever had a definite view on what should be done to fix schooling, so you’re in good company. I’ve been out of the business for 25 years, and have had no regular direct contact with people working in schools for the last three. So I’m not so sure any more.

    Generally speaking, though, the formal curriculum should be flexible enough so that teachers can adapt it to the specific kids in their classroom. You’ll always hear stories about teachers, schools, systems, that work brilliantly, but often all is not gold that glitters and methodologies etc are not always transportable. The processes used in the classroom are more important than the curriculum as such. A teacher must ultimately find their own way, with the advantages and constraints of their own abilities and personality.

    Generally speaking, though, what Gillard did on a national scale impinged negatively on the classroom. Too much testing, measurement and public accountability. And I suspect the national curriculum is too crowded, too prescriptive and too academic, but I don’t know.

    You might be interested in this article by GS Stroud who says standardised testing dominates Australian classrooms and has corrupted the foundations of education. After writing the article, there was a brilliant interview with Richard Fidler.

    Other Fidler interviews with David Gillespie, Chris Sarra and Paul Thompson linked on that page would also be worth the effort.

    The current issue is basically about funding. The Commonwealth has typically given tied specific purpose grants in areas of identified need. There were always issues of unmet needs and fairness with funding of the non-government schools.

    Gonski as I understand him looked at a comprehensive needs-based funding model, suitable for each school and fair across schools. Most experts seem to think he did a brilliant job.

    The result, as I understand it, would give schools greater autonomy to allocate their funds internally.

    In Queensland we have no zoning and schools compete with each other. Generally speaking I think that’s good. But elsewhere schools do affect real estate prices as parents move to get in the zone.

    Turnbull has latched onto the fact that we are spending more money and sliding in the international assessment stakes. He might look at the negative effects of NAPLAN and all that other stuff.

    Turnbull says states rejected the means to raise extra revenue. They didn’t, they knocked back the specific option that was given to them in the income tax area.

    Turnbull’s analysis is superficial and wrong-headed. People will just have to vote Labor if they want all kids to get a fair go.

  23. Not finished, Jumpy.

    Remember though, Jumpy, that the Charter schools are exempt from the Freedom of Information Act, and are only partially affected by the education Ombudsman. So obtaining information about their operation is very difficult and only information, true or false, that the schools want to release, ie the good news you are hearing, is all that is known so far.

    I would have thought that a Libertarian such as yourself would be reeling at the 5 to 1 cost per child of the charter schools, but it seems that Libertarian principles are as abhorrent as government regulation. Here is an information resource…


    Here is a concer on performance reports

    “The Green Party is calling on the Government to stop plans to open another round of charter schools after documents reveal existing charters are failing to achieve agreed targets for NCEA Level 2.

    Budget documents show that on average only 41.5 percent of students left charter schools with NCEA Level 2, well short of the target for 2014/15 of 67 percent. While one school had a big impact on the overall average, even without that school’s results, the overall results were below the agreed target.”

    So far Charter Schools

    * are 5 times the cost.
    * exhibit a 20% operational failure rate at huge cost to the government.
    * universally fail to achieve their academic targets.

    If this was a public schools report there would be change of government required, but this is private industry at a work so failure is excusable, and expected to be forgotten.

  24. On 2nd April Jumpy wrote:

    And the Henry Tax Review was published 3 years before even Abbott was elected.

    That’s correct.

    My mention of the largely-unimplemented Henry Review had two purposes:
    1. To give an example of a thorough investigation at expert level (in contrast to last week’s strange mini-drama without – by all accounts – a skerrick of background calculations, drafted plans etc.);

    2. To implicitly criticise a recent Labor PM and the Cabinet of the day.

    Praise where it’s due and criticism likewise, Jumpy.

  25. From Ambigulous , April 2nd 2016.

    The other group mentioned was “major corporations”. I took that to refer to notorious cases, which had quite a public airing several months ago, where large corporations paid a (derisory) low rate of company tax on large turnovers and/or large profits. Do you recall that public discussion?

    From Ambibulous today, 4th April 2016.

    Praise where it’s due and criticism likewise, Jumpy.

    If the media did that I would say they’re balanced, do you think they are ?. I await, with bated breath your praises for major corporations that pay enough in your eyes.
    Please name and praise as well as name and shame.

  26. *Clarification

    Please name and praise as well as name and shame.

    Was not directed at you Ambigulous, rather a statement of general balanced judgment for open consumption.

    Sorry for confusion caused.

  27. Zoot, Quiggin tells a sorry tale of Abbott/Hockey/Turnbull/Morrison being basically clueless on what to do about the budget. The latest effort was farcical and leaves Turnbull with no policy on what to do about funding schools and hospitals.

    He’s kicked the can down the road till after the election, but expects us to elect him so he has time to work it all out.

    Or maybe he will surprise us during the election campaign with yet another you-beaut idea!

  28. Dear Jumpy

    I am not bibulous just now.

    I find your clarion call, to heap praise upon corporations who pay a reasonable rate of company tax, puzzling.

    Happy to do so: well done, all you non-evading, honest, true-blue, dinkum corporations!!!


    But being legal, fair, honest and just, is surely its own reward? Those who are virtuous need neither encouragement nor praise from me. They do the right thing by their brethren; good.

    I will now embark on a wider programme of praise (there are so many worthy, forgive my omissions Jumpy). I commend:
    * folk who avoid carrying out mass shootings
    * sober drivers
    * those who learn first aid and lifesaving
    * volunteers who assist charities
    * volunteer firefighters (apart from the secret arsonists)
    * every man who doesn’t assault his wife
    * every priest, teacher, sports coach, uncle, family friend … who has never molested or raped a child and never will
    * donors to charities assisting the hungry, homeless, seriously ill, addicted, ….
    * corporations that pay correct wages
    * corporations that daily fail to hoodwink their customers
    * bloggers who provide hospitable fora
    * blog posters who are customarily polite
    * dog owners who clean up after their dogs
    * persons who don’t litter
    * persons who clean up litter
    * donors to opp shops
    * customers of opp shops
    * folk who organise food swaps
    * Francophiles
    * history enthusiasts
    * the perpetually curious
    * modest geniuses
    * Pedants Anon; and their valuable work
    * that bloke who invented the “off” switch on rap music
    * those who comfort the sick or dying

    That’s enough for the time being.
    Blessed are the cheesemakers.

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