Private Health loss of Rebate for some

[dfcatch]

1/ Our comparison borrowings with other countries is not entirely irrelevant..... But it does not hide the fact that our government debt has skyrocketed to record levels, and it hasn't all been spent on productivity-increasing infrastructure projects.

It is a problem, by Australian standards, and the electorate are concerned.

Fact is that our level of debt (servicing costs etc) means less money available for other uses - such as dental subsidies or increased disability support.

2/ Medhead - increasing productivity is the name of the game. You want more people working, you want them (not necessarily working more hours) producing more output per hour, you want them aspiring to earn more...... And of course it results in higher tax receipts, economic growth through their increased spending power, higher company profits/company tax receipts, and of course higher employment (which further drives increases in real wages) as those higher spending workers have more coffees, dinners out, vacations.

The benefits flow all the way through to the lowest paid waitress or hotel janitor.

The economic (and tax revenue) benefits of workers aspiring to earn more far outweighs the short term savings from means testing a rebate.

We should be doing everything in our power to reduce marginal tax rates - not increasing them.

Hawke got it, Keating got it, Beazeley got it, even Latham and Crean understand it. And of course Howard and Costello got it.

Rudd - whilst he never got it - he did sell it.

It's only the current bunch that seem to have no clue whatsoever.

3/ Don't ever accuse Katter and Brown of being stupid. They are incredibly intelligent and very smart political operators. They both have some nutty of-the-rails views - but they are smart and will be re-elected.

Windsor and Oakeshott are not politically savvy whatsoever, and won't be re-elected. They swanned in up until now on their previously conservative coat-tails. The only smart thing they've done is to be too smart for their own good - as the saying goes.

There is no comparison between Brown/Katter and Windsor/Oakeshott - chalk and cheese.

 

[medhead]

Standard tripe run out by ALP apologists that don't want to limit/restrain borrowing at all. This government took its first step by increasing the amount it can borrow. These things have to start somewhere. We as a nation had enough trouble last time paying off the previous ALP efforts. This next lot is going to be much more difficult to pay back.

I agree our % of borrowing vs GDP is much lower but at some stage in the past the US was at 10% then 15%. See where it goes if restraint isn't shown??

It isn't tripe at all. It is ironic that the attack dogs are banging on about restraining borrowing and also attacking the government over The reduction in the PHI rebate which is a restraint on spending.

What is tripe is to say the government don't want to limit borrowing. It is also tripe to say it was difficult to pay off the debt last time. Let's just ignore that the government always had debt.

The fact is that our percentage of GDP borrowing is nothing at all like other countries and it is false to view the situation of other countries as indicative of our current situation.

1/ Our comparison borrowings with other countries is not entirely irrelevant.....

Indeed. Yet we have the henny pennys running around saying look at the borrowing in other countries.

2/ Medhead - increasing productivity is the name of the game. You want more people working, you want them (not necessarily working more hours) producing more output per hour, you want them aspiring to earn more...... And of course it results in higher tax receipts, economic growth through their increased spending power, higher company profits/company tax receipts, and of course higher employment (which further drives increases in real wages) as those higher spending workers have more coffees, dinners out, vacations.

The benefits flow all the way through to the lowest paid waitress or hotel janitor.

The economic (and tax revenue) benefits of workers aspiring to earn more far outweighs the short term savings from means testing a rebate.

Try telling me something I don't know! (Let's ignore that marginal tax rates haven't increased.) Do you seriously believe that removing the PHI rebate, the topic of this thread, destroys productivity?

As for aspiration, there is real aspiration; and there is aspiration dragged out as propaganda, eg by those who would have us believe 9% super comes out of our before tax pay.


Sent from the Throne

 

[Moody]

Kindergarten economics impresses only the myopic, so you all might as well stop it now. Either that or move on to the flat-earth argument because it is just as enlightening.


Me - I am happy to live in a nation that deftly/luckily avoided the carnage of the GFC and has reasonable social policies. The way some people talk here you would think they have never travelled overseas - leave the ignorant debates to the truly ignorant please!

 

[wafliron]

The aged pension was introduced in Germany by Bismarck. At the time people started working at 15 or 20 or whatever and the average life expectancy was the same, in fact I think actually it was lower than the official retirement age (i.e. people died while they were still working for a living).

Point taken. But on the flip side, our current welfare system bears little resemblance to the one you mention, so I'm not sure a direct comparison is warranted?

As for the superannuation issue: $75,000 wage...9% super from 25 to 65 equals $270,000 total.

I just did some rough calculations, looking at a worst case of a very low income earner, and being conservative with investment returns, etc.

For someone who:

- starts work at age 18 on a wage of $30,000pa,
- linearly works their way up to only $65,000pa by the time they retire at 65,
- receives 9% superannuation contributions, minus 15% contribution tax, and
- earns 5%pa on their superannuation balance on average across their working life.

This person will have a super balance of approximately $530,000 by the time they retire. At a pretty safe investment return of 6%pa they will receive approximately $32,000pa tax free during retirement. The aged pension, assuming it increases roughly in line with inflation (which it probably won't), will be approx $45,000pa by the time the same person retires. So even in a conservative case for a very low income earner, their super balance will replace 2/3 of the pension. For those earning an average wage (or higher) it will easily completely replace the pension.

But of course this isn't part of the welfare state, this represents people taking responsibility for their own future which is exactly what we should be doing;

Yes, this is true, but it's directly replacing a benefit of "the welfare state" so it is relevant.

No no no...the essence of simplification would have to be that you and me don't have to horse trade like that!

That doesn't make sense. But we're waaaay OT here

Yes it is but is that an excuse to go ahead and borrow more? Personally I don't think so. There was a big stink around the US when they extended their borrowing limits. We did the same. When does it stop being something that supposedly resembles strategic/sensible borrowing and when does it become kicking the can down the road like they have? If the trend is never arrested then we end up in the pooh.

It stops being responsible borrowing when:

1) borrowing continues to grow in an uncontrolled fashion,

2) borrowing continues during good economic times - particularly after an extended period of good economic times,

3) money borrowed is largely being spent on things that are not "investments for the future".

None of these apply to the current Australian government. They (and the previous Labour government) have done exactly what a responsible government should do: they leveraged a strong budget position to stimulate the economy when required during unprecedented, global economic turmoil (GFC), they spent most of that borrowing on infrastructure and other investment-style projects, and now that things are improving they are rapidly returning the budget to a surplus position.

I agree our % of borrowing vs GDP is much lower but at some stage in the past the US was at 10% then 15%. See where it goes if restraint isn't shown??

Are you trying to say that the because the USA's debt was at one point 15% of GDP (on the way to 160%), as soon as Australia's debt hits 15% we're also on a sure track to continue on to 160%? In isolation, that argument is about as weak as arguments come. It's like saying because a murderer went to school, everyone who went to school is going to become a murderer.

The USA is a very different beast to us. They're in their current predicament because they've done the exact opposite of what a responsible government should have done: they ran deficits during good economic times and continued to cut revenue (through tax cuts) despite running said deficits. Add to that the GFC, a lack of ability (or political will) to properly stimulate their economy, wasting trillions of dollars on wars over the past 10 years and a range of other issues, and you get to their current situation.

We should be doing everything in our power to reduce marginal tax rates - not increasing them.

Cutting revenue at a time that the budget is in deficit - why? That would be a massively irresponsible thing for the government, and one of the main reasons I'm scared of the possibility of the coalition taking power. The last coalition government had some idea about managing an economy (although I still think they wasted a lot of the "proceeds" of the good times), but the current opposition have absolutely no clue.

If you're going to trot out an argument about reducing tax leading to an increase in productivity that actually increases overall tax revenue, that is a flawed argument. Plenty of research has shown this to be completely false in most cases - and you don't need to look any further than the USA to see the proof.

 

[rechoboam]

As for aspiration, there is real aspiration; and there is aspiration dragged out as propaganda, eg by those who would have us believe 9% super comes out of our before tax pay.


Sent from the Throne

Medhead, who are you referring to when you say "us"? For I am self employed. I have to take 9% from my profits to pay my wage and I assure you every dollar that goes there to super comes out of my wage. I have other employees too- as my businesses turnover and gross income is limited by the realities of the market, every dollar I pay out in superannuation is a dollar that can't go to wages eg for a new employee. I don't understand where you think employers find the 9% for super? I realize there are people out there who think both employers and governments have access to magical money trees but I know you wouldn't be one of them! Surely you would agree that super is a way of compulsorily locking away part of one's salary for future benefit. I think the current government have made it clear that the move to 12% will result in slower wages growth for several years for their constituents.

 

[TiredOldFlyer]

The often complex (and moral ) issues raised in this forum seem to me to be a good argument for a flat tax rate.

 

[drron]

There are also some Wayne swan furphies that seem to be believed here.
Costello had it easy but squandered the proceeds of the best time ever.Sorry but since 2008 Australia has had the best terms of trade EVER.The beneficiary has been Wayne Swan.Costello at least set up the Future Fund so as to at least hopefully fund the retirement benefits of Commonwealth public servants.Wayne Swan has added zilch.
The ALP government steered us through the GFC without damage.Refer to point above-that was decided by China,not our Government.Certainly to a lot of people there was no recession-eg capital Cities and mining areas.However in regional Australia times have been tough.Even here on the Sunshine Coast businesses have closed.In places I visit(Tasmania,Hervey Bay) times are very tough.Even in Mackay where I was 6 weeks ago restaurants and retail businesses had closed since I last visited 6 months ago and that is an area that should be going gangbusters.
Our banking system is the strongest in the world.Well why did they have to have a deposits quarantee.Why did the have their hands out for billions from the US Fed.And what happens if the price of housing continues to fall-they really do have most of their eggs in 1 basket.And I have heard all the arguments as to why austalian housing is different.The very same arguments were postulated for California in 2004,05 and look where they are now.
The Government has invested in infrastructure with it's bailout program that is now giving us a return.Problem is a lot of that return is negative.For example the $900 handout.Certainly stimulated retail spending and added to GDP.But it merely brought forward spending and now those businesses that benefitted are finding it tougher than ever.And where is the continuing return from The batts program,from BER-initial stimulus to large building companies but smaller operators basically excluded and of course those buildings are not contributing 1 cent to revenues now.
We are now in the position of relying on just 1 nation,China,for our continuing wellbeing.In history no nation has ever had continuous growth so when China catches a cold-we will have the acute respiratory distress syndrome.

 

[Stephen65]

Try telling me something I don't know! (Let's ignore that marginal tax rates haven't increased.) Do you seriously believe that removing the PHI rebate, the topic of this thread, destroys productivity?

The headline marginal tax rates have not increased (if you ignore the so-called flood levy) but the government has done things that have exactly the same economic effect as a tax increase, e.g. removal or reduction of the PHI rebate for higher income earners. If you look at the net contribution higher income taxpayers make (ie tax minus benefits) then this has increased both in absolute and relative terms.

The economic effect of the PHI rebate changes are clear for the Federal Goverment - it saves money by reducing or removing it and at the same time shifts the additional costs (increase use of public hospitals and increased PH insurance premiums) onto others, namely the state governments and the privately insured as a group. Whether or not it's economically positive, neutral or negative depends on whether those costs end up exceeding the savings.

As for aspiration, there is real aspiration; and there is aspiration dragged out as propaganda, eg by those who would have us believe 9% super comes out of our before tax pay.

I don't understand this point. The 9% super employees receive is in reality part of the overall remuneration they receive for providing their services. The difference from ordinary pay is that it receives a different taxation treatment. Instead of being treated as being part of an employee's income and taxed at marginal rates its instead taxed to the fund at a special rate of 15%. Absent those special rules it would satisfy the classic definition of income and be taxed as such.

 

[Alanslegal]

Fact is that our level of debt (servicing costs etc) means less money available for other uses - such as dental subsidies or increased disability support.

Come on. No government - Labor or Coaltiion - wants to spend money on these things. These are "uncool" topics that get nobody's attention. Just like mental health spending, nobody cares yet the reality is that 1 in 4 will suffer a mental condition during their lifetime. I know, I work in this field.

I've seen mental health issues and problems go up and up and funding seem to either go down via way of not enough services for what is needed. No government is willing to fork out billions for what are "uncool" topics .... yet come to breast cancer - the whole world goes pink. Think prostate cancer, the same number of men die from that disease each year as women die of breast cancer, yet nobody talks about prostate cancer, let alone receive the much needed funding to research and find a cure for this deadly disease. And then when it comes to mental conditions, "oh, they're probably drug affected" when they are really suffering delusions, schizophrenic episodes ... or they just stole food because they are intellectual disabled and do not know what is right or wrong. Everyone is just seconds away from being in conditions such as these eg. getting hit by a car, falling off a ladder at home. That brain is mightily important and if its damaged, you could end up from the most perfect citizen in the world, to become the world's biggest pest.

 

[dfcatch]

Come on. No government - Labor or Coaltiion - wants to spend money on these things. These are "uncool" topics that get nobody's attention. Just like mental health spending, nobody cares yet the reality is that 1 in 4 will suffer a mental condition during their lifetime. I know, I work in this field.

I've seen mental health issues and problems go up and up and funding seem to either go down via way of not enough services for what is needed. No government is willing to fork out billions for what are "uncool" topics .... yet come to breast cancer - the whole world goes pink. Think prostate cancer, the same number of men die from that disease each year as women die of breast cancer, yet nobody talks about prostate cancer, let alone receive the much needed funding to research and find a cure for this deadly disease. And then when it comes to mental conditions, "oh, they're probably drug affected" when they are really suffering delusions, schizophrenic episodes ... or they just stole food because they are intellectual disabled and do not know what is right or wrong. Everyone is just seconds away from being in conditions such as these eg. getting hit by a car, falling off a ladder at home. That brain is mightily important and if its damaged, you could end up from the most perfect citizen in the world, to become the world's biggest pest.

That's very untrue Alan.

There are very good programs and policies from both major parties over the years trying to help address the issues in these areas. And both parties have not been shy in this regard. They may be uncool to the media - which is why they don't get talked about much.

They are also underfunded - but this is a long standing problem.

You miss the point however - when you have billions of $$ going out the door in interest payments, that's $$$$ that you otherwise would have had to spend on other programs, including these ones.



…
I should have used the term "effective" when referring to marginal tax rates above.

And yes - when you have high effective incremental tax rates as a result of losing subsidies resulting in an effective tax increase - it reduces the incentive to pick up the additional income.

These barriers are well documented in reducing productivity and ultimately reducing tax revenues.

And it's not just an issue for high income earners - the same issue exists at the lower end when talking about moving from benefits to income (welfare to work). When a dollar more of income essentially costs a dollar of benefit - it removes the incentive.


And on the issue of borrowing in good times - lets not forget that Swan inherited $20 billion in the bank. For all of Costello's faults - he left cold hard cash.

That cash was blown even before the GFC stimuli was effected.

And a $40 billion deficit followed by a $1.5 billion surplus is not "getting us back to a solid surplus" - it's simply shuffling the deck chairs and everyone knows it. Although at least one year of not increasing government debt may positively help business confidence.

 

[Stephen65]

And a $40 billion deficit followed by a $1.5 billion surplus is not "getting us back to a solid surplus" - it's simply shuffling the deck chairs and everyone knows it. Although at least one year of not increasing government debt may positively help business confidence.

Especially when the so-called "surplus" is generated by using every accounting trick in the book to manipulate and massage the figures to minimise expenditure and maximise revenue in that year.

 

[dfcatch]

Cutting revenue at a time that the budget is in deficit - why? That would be a massively irresponsible thing for the government, and one of the main reasons I'm scared of the possibility of the coalition taking power. The last coalition government had some idea about managing an economy (although I still think they wasted a lot of the "proceeds" of the good times), but the current opposition have absolutely no clue.

If you're going to trot out an argument about reducing tax leading to an increase in productivity that actually increases overall tax revenue, that is a flawed argument. Plenty of research has shown this to be completely false in most cases - and you don't need to look any further than the USA to see the proof.

No no no no no!

Not cutting revenue!! (or nominal tax rates)

Reducing effective marginal tax rates.

You don't want to penalise people for earning more - you want them to earn more because that increases tax revenue.

For example - imagine we had a flat 30% tax rate (simplistic example).

1/ A worker earns $10,000 - he pays $3000 in tax.

2/ A worker earns $100,000 - he pays $30,000 in tax.

You can complain that the higher income worker can afford not to receive the rebate - but he also pays more tax (even at a lower or flat tax rate).

If his effective marginal tax increases too much as a result of income increasing over the bracket or losing rebates (effectively the same as a tax increase), he will try even harder to minimize his taxable income.

High effective marginal tax rates disincentivise people from earning more.

 

[medhead]

Medhead, who are you referring to when you say "us"? For I am self employed. I have to take 9% from my profits to pay my wage and I assure you every dollar that goes there to super comes out of my wage. I have other employees too- as my businesses turnover and gross income is limited by the realities of the market, every dollar I pay out in superannuation is a dollar that can't go to wages eg for a new employee. I don't understand where you think employers find the 9% for super? I realize there are people out there who think both employers and governments have access to magical money trees but I know you wouldn't be one of them! Surely you would agree that super is a way of compulsorily locking away part of one's salary for future benefit. I think the current government have made it clear that the move to 12% will result in slower wages growth for several years for their constituents.

Try reading back in the thread of an example of someone who basically said wage - tax - 9% = what they get in their hand. WRONG!!!

As for your situation, you've neatly blurred the lines between your roles as business owner and employee. All of your employees get paid a wage and they also get paid 9% super on top of that wage. While that 9% does come out of the business profits it does not come out of your wage. Wage + super equals total package and of course there is a balance between the 2 but for the time being they are separate.


Sent from the Throne

 

[dfcatch]

Try reading back in the thread of an example of someone who basically said wage - tax - 9% = what they get in their hand. WRONG!!!

As for your situation, you've neatly blurred the lines between your roles as business owner and employee. All of your employees get paid a wage and they also get paid 9% super on top of that wage. While that 9% does come out of the business profits it does not come out of your wage. Wage + super equals total package and of course there is a balance between the 2 but for the time being they are separate.


Sent from the Throne

Where it "may" relate to the wage more directly is in future increases.

Eg. If a small business now has an additional 3% of overheads (the increase in the SG), that may limit their affordability to increase their wages bill next year.

So you could argue in some circumstances that it ultimately comes out of wages - but technically it is as Medhead says.

 

[medhead]

Where it "may" relate to the wage more directly is in future increases.

Eg. If a small business now has an additional 3% of overheads (the increase in the SG), that may limit their affordability to increase their wages bill next year.

So you could argue in some circumstances that it ultimately comes out of wages - but technically it is as Medhead says.

Of course, we shouldn't forget that the first 3% was achieved by a forgone wage increase. Maybe I like to be absolutely clear about these distinction because I have experienced packages that might include a whole range of things, eg living, utility, shift allowances, super, etc.


Sent from the Throne

 

[Moody]

Can we move on to the topic of mythical moon landings now?

Over the past 2 decades the top marginal tax rate has reduced, a consumption tax has been introduced, and the tax-free threshold has been increased. These have all flattened the tax take from the government but to listen to the grinch's on here you'd think economic armageddon will occur if the rich have to pay 1 cent more.

I have never heard of a wealthy person saying "If the government takes more than 50 cents in the dollar I am going to take a wage cut. That'll show 'em!" What I am more willing to accept is that those sort of people who believe that taxation should stop when it suits them, will use every trick in the book to minimise/avoid paying tax. "Stimulates the economy" they cry to the rabble they have just stolen from, and disappear off to buy a new luxury car from overseas.

So the government rather than pumping the economy as fast as they could via the BER, Insulation Scheme, etc. should have just handed back revenue to the rich who would have saved the economy without us needing to go into debt? If you believe that then Joe Hockey is in trouble.

Anyway - apart from legalising euthanasia (and making it compulsory) how exactly can we fund the health-care sector properly without raising more revenue? Increasing the age of retirement has been one method, but frankly I would happily pay more tax now if it meant I could enjoy time with my grandkids later.

 

[eastwest101]

Can we move on to the topic of mythical moon landings now?

Over the past 2 decades the top marginal tax rate has reduced, a consumption tax has been introduced, and the tax-free threshold has been increased. These have all flattened the tax take from the government but to listen to the grinch's on here you'd think economic armageddon will occur if the rich have to pay 1 cent more.

I have never heard of a wealthy person saying "If the government takes more than 50 cents in the dollar I am going to take a wage cut. That'll show 'em!" What I am more willing to accept is that those sort of people who believe that taxation should stop when it suits them, will use every trick in the book to minimise/avoid paying tax. "Stimulates the economy" they cry to the rabble they have just stolen from, and disappear off to buy a new luxury car from overseas.

Just several points of order - wages have risen faster than the tax brackets and the medicare levy trigger. Glad you raised the luxury car tax - another distortionary example of taxation with un-intended consequences. If you think that everyone whom drives a car made in Europe is a thief then good on you.

I don't know if you are correct about the tax avoidance/minimization - it could simply be a matter or maintaining or reducing hours or salary saccing into super.

I imagine that a similar proportion of people defraud centrelink as those whom use elaborate tax schemes and offshore juristictions - just a dishonest minority.

We should also remember that we operate in a globalized market for labour and services, income tax and company tax is part of the consideration when employment is created.

 

[medhead]

Well just finished ironing my shirts for the rest of the week. Just wanted to get on and let all the taxpayers know that they are still getting a return on the taxes that were committed to my training 20 odd years ago. Talk about the gift that keeps on giving.

 

[TiredOldFlyer]

"As for your situation, you've neatly blurred the lines between your roles as business owner and employee. All of your employees get paid a wage and they also get paid 9% super on top of that wage. While that 9% does come out of the business profits it does not come out of your wage. Wage + super equals total package and of course there is a balance between the 2 but for the time being they are separate."

Don't agree.

For SMEs Super is an expense. Only considered as part of a package for "High Fliers (No Pun)"
When compulsory super was introduced Unions agreed on wage constraint. Now it has become a right separate to wage rates.
It exists because Govt is aware that they cannot continue to pay pensions - Make the rich employee pay !

 

[medhead]

Don't agree.

For SMEs Super is an expense. Only considered as part of a package for "High Fliers (No Pun)"
When compulsory super was introduced Unions agreed on wage constraint. Now it has become a right separate to wage rates.
It exists because Govt is aware that they cannot continue to pay pensions - Make the rich employee pay !

Pin not sure what you disagree about. I assume you mean employer not employee, since employees don't pay super. I stand by my previous post that the separation between these 2 very different roles were blurred, when someone is both employer and employee it is easy for this to happen but it doesn't change the situation.