But I do wish to make a couple of points;
- Bill Shorten has framed his rhetoric around envy and class warfare, once again seeking to exploit the politics of grievance. His method is to quote an outlying example such as a supposed SMSF where refunds of $2.5m were claimed. But in doing so he has overreached. Under the new rules where the maximum in a tax-free pension account is $1.6m, such a refund would be impossible to generate. I suspect they have used old data.
- The same flaw has lead him to overlook the crucial part that the refundable credits play in the investment strategy of self-funded retirees who now face losing several thousand dollars in income each year. These are people might have picked up CBA, Telstra, Qantas, CSL shares on privatisation, that cost relatively little but now make up a very tidy portfolio. In many cases their assets place them outside the age pension criteria relieving the government of the cost of supporting them. Rather than being thanked, they are being vilified and a furious backlash will be the result. When members of retail and industry funds realise it is not just the SMSF members being hit, this backlash will grow. It is evident the only pensioner Bill Shorten likes is one that is a client of the government.
- A justification for the grab is that these credits have blown out and are now “unsustainable”. One of the worst weasel words in the modern lexicon. Remember that the credits are only created by tax paid, so if the credits have blown out then so has company tax payments. Bill can’t have it both ways. If he wants to reduce the credit pool then he can always agree to lower company tax.
- In a tax system that is basically derelict, the imputation system is pure and very progressive. It encourages investment in tax paying and dividend paying companies with huge amounts of income released into the economy as a result. Any cost benefit analysis that considers all the economic factors, will conclude the system should be left as it is.
This is an issue on which the government, and all persons interested in the welfare of savers, investors, pensioners and in the integrity of the tax system, must come out hard.
You know Bill Shorten is vulnerable when he resorts to seeking the blessing of Paul Keating, as he has on this issue. In all other instances of genuine economic reform and fiscal rectitude Keating had a hand in, Shorten has abandoned. Prediction? At first, I felt he might get away with it, but am coming to the view that there are so many of the dreaded “intended consequences” that pretty soon Bill will be looking for a climb down on this one. But the blow torch needs to be applied to defeat this dreadful policy.