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Time for a House Un-Australian Activities Committee?
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Beware of Gillards bearing gifts

Julia Gillard has floated the idea of using some of the carbon tax revenue to increase pensions and cut taxes to offset the impact of the tax. Beware.

For a start there aren’t just age pensioners on government supported fixed incomes. There are students, the disabled, the unemployed. Will they all get increased payments too to fully compensate for the increased living costs of the carbon tax?

The Labor Party fears budget deficits. A $12 a week increase for all pensioners would cost around $2.5 billion.

If adequate compensation does go ahead for all those on fixed Government payments it is probable it would be paid for in part out of cuts to public services instead of taxing the rich and big business.

And what sort of tax cuts does Gillard have in mind?

Ross Garnaut, the Government’s climate change adviser, sparked the debate when he called for some of the carbon tax revenue to be used to begin the tax reform process recommended by the Henry Tax Review.

That Review argued for three tax rates for personal income – no tax on incomes up to $25000, a flat 35% on incomes above that up to $180000 and 45% for those lucky 3 percent who earn more than $180000.

There’s just one problem with this proposal. Workers earning between about $37000 and $94000 would pay more tax than they currently do.   

Pay a carbon tax and pay more income tax! That is likely to be very popular with voters. Tony Abbott would become PM.

So the Government won’t touch these flatter tax recommendations with a barge poll. 

They may play around with the low income tax offset (‘LITO’).  

The first $6000 of income is tax free. However LITO gives a non-refundable full offset of $1500 against the tax paid on incomes earned up to $30,000. Effectively this means that any Australian resident earning income up to $16000 pays not tax.

Once a taxpayer earns more than $30,000 the offset begin to cut out at the rate of 4 cents in every dollar above that. This means the offset cuts out completely at an income of $67,500, almost exactly the average wage. 

The beauty of this tax offset cut out is that it doesn’t benefit the rich. It also doesn’t benefit well paid workers.

Recent estimates are that a carbon tax of $25 per tonne would add about $600 every year to an average family’s bills.

Such a tax would raise around $12 billion in revenue and about $6 billion appears to be earmarked for household compensation. The rest would compensate the polluters, especially in trade exposed industries.

An increase in the tax free threshold from the current $6000 to say $10,000 would cover the cost of the carbon tax’s impact on ordinary wage earners. However it would deliver tax cuts to the rich too.

So the Government will be tempted to fiddle with LITO, and set it at such a level that it seemingly compensates low paid workers. But they might be tempted to adjust the cut out level to pass on the carbon tax costs to workers whose pay is close to or around the average wage. 

Even the current LITO framework won’t help compensate many workers.  

To offset the possible extra $12 a week resulting from the carbon tax, and taking into account that most families are two income families, LITO would have to be increased from its current $1500 to over $2000. 

But remember this. First, LITO is non refundable. For people paying tax who earn below the current $16000 effective non-taxable level, part of the offset is wasted because they can’t claim a tax refund of the difference between the tax they are liable for and the offset itself.

Increasing the offset to say $2000, while it will change that $16000 tax free level to about $19000 effectively tax free, will just mean that all those earning below $16000 get no benefit from the change because the offset isn’t refundable. So without more, Gillard’s compensation through LITO will be meaningless to them.

Second, carbon tax compensation through LITO would start to cut out for people earning greater than $30,000 if current arrangements continue.

For someone on $50000 a year the compensation would be half the amount needed to cover the cost of the carbon tax.

Third, the what happens when, as planned, the Government moves to an Emissions Trading scheme in 2015 and the tax money dries up? Does the compensation flowing from it dry up too? Or do we pay for the tax cuts by cuts to services?

And if that move to an ETS doesn’t happen, because, as appears likely, the rest of the world hasn’t adopted an ETS, and so the carbon tax continues, the design of the tax is to increase the price of carbon each year. There appear to be no plans to compensate for that annual tax increase.

What a great con. Fiddling with LITO gives the impression of compensating many people when in fact most workers will get little from it and certainly not enough to fully cover the increased living costs arising from the carbon tax.

Now of course critics will say this is all conjecture. True.

But this is a government that wants to make workers pay for the cost of capitalism’s environmental crisis. Reducing the burden on the poor through tax offsets and increasing it on average wage earners through that inadequate compensation scheme must be tempting Gillard and co very much.

Beware the sleight of hand.

Maybe I am just too simple a man. Why not tax the polluters and the rich instead, and tax their profits, not our consumption?

The Resource Super Profits Tax would have raised an extra $100 billion over ten years compared to the Minerals Resource Rent Tax. That could fund a lot of compensation to workers and build a lot of renewable energy plants around Australia.

The final thing to say about tax cuts is that they can erode over time. If Gillard doesn’t inflation adjust the limits then the value dissipates as the years go by.

Instead of uncertain and inadequate tax cuts through LITO that won’t fully address cost of living increases for most workers, why don’t we fight for wage increases that do? That shifts the cost of the tax on to the bosses especially if it is combined with strict price controls over carbon tax price increases.

The bosses are the polluters. Cut their profit rates to make them pay for their climate change.



Comment from Seamus
Time March 21, 2011 at 9:59 pm

Came on here after watching Christine Milne on Q and A. You’re right to be wary, any new tax and the subject of “compensation” to polluters should raise alarm bells.

Unfortunately, the standard leftist catch cry of tax the rich, expropriate the expropriators etc. feels very hollow at this juncture.

The window of opportunity to do something to mitigate climate change is fast closing (if it’s not closing already), if the revolution comes in 50 years time when the planet is dead it shall do none of us any good.

Unfortunately capitalism is the system under which we live. Regulation CAN mitigate it’s worst excesses, and some capitalists may even seek to invest in renewable energy. It is a stop gap solution of course, but a stop gap could make all the difference.

This is the age old problem of the left in many ways, at what point compromise with your principles? Sartre framed the problem better than most in his play “Dirty Hands”. In so many ways, dirt is far harder for the ideologically minded to deal with than blood.

Do we dare get our hands dirty?

Comment from Martin
Time March 22, 2011 at 12:08 am

Seamus, what exactly would what is essentially a tax on working class consumption do to prevent climate change in the long run anyway? It would have negligable effect on emissions- the vast majority of emissions in the domestic sphere are produced by such unavoidables as the morning commute, for example- and let the biggest polluters off scot free. Climate change being such a pressing issue, it’s important that any measures taken to prevent it are effective, and not limited to satisfying your need to do something /now, damnit!/ or the window of opportunity will be missed. This isn’t a matter of avoiding a reasonable compromise for the sake of the future revolution, it’s a case of rightly criticising a measure that’s worthless at best and potentially detrimental for both the lives of working class people and the state of climate change discourse.

Comment from John
Time March 22, 2011 at 3:56 am

Seamus, the Greens support the Super Profits tax. The idea that screwing workers will save nature is an interesting one with real shades of a reactionary parson from the 1800s called Malthus.

I love this idea that we must be pragmatic instead of principled. so what are we fighting for? principles? Or are we like labor – get into power and trash every one of our principles?

I imagine your view finding expression in new words over Parliament House – abandon principle all ye who enter here.

Capitalism is inherently destructive of the environment. When the environmental movement tells me about how a carbon tax will save us all, something about deck chairs on the Titanic springs to mind.
In any event I argue for massive government investment in renewable energy, paid for by taxing the rich.

Am I to take it from your comments that you don’t support that?

Well put Martin.

Comment from Tony
Time March 22, 2011 at 10:09 am

Good piece, John.

Comment from Bill Koutalianos
Time March 22, 2011 at 10:43 am

The carbon tax and tax cuts are a sleight of hand to get the workers to pay for capitalism’s perceived environmental crisis. This crisis is promoted by the UN IPCC, by government funded science, by much of the media, by green groups, by the left, at times by the right and very much by some of the biggest corporate groups including big oil and big energy. What the public need to wake up to, is that they are the ones who will pay for this scam and in terms of value for money, it will achieve absolutely nothing to change global temperatures or pollution. Carbon dioxide helps plants to grow, it is not a pollutant. Satellite data shows temperatures plateaued a decade ago. The IPCC predictions of dramatic warming over the last decade were completely wrong. Yet Ross Garnaut has a weekly prime time slot to tell us the opposite is true. Mantra’s like “the big polluters will pay” continue to be used even after being confirmed as deceitful by tax cut and compensation talk. The PM’s sleight of hand to silence criticism in the last election, should sound alarm bells that something is amiss. Wayne Swan said that those who claimed Labor would introduce a carbon tax were “hysterical”. It seems we hysterics were right all along.

Comment from Cal
Time March 22, 2011 at 11:28 am

This week, without warning or pretext, the terrorist organisation Hamas fired over 50 deadly rockets from within civilian areas of Gaza into a neighbouring and democratic country.

What is the response of the Socialist Alternative? To write a letter to the editor calling for an armed intervention – not against the terrorists, but against the victims of a potentially deadly missile attack!!

It’s no wonder the SA gets only a handful of votes and can count its membership on one arm.

You support the oppressed while they fire rockets towards schools, homes, shops, parks etc? No wonder you oppose the NFZ against Gaddafi….

Comment from Peter
Time March 22, 2011 at 3:28 pm

Silyard has done it again and is offering billions here and there every where as compensation for the so called carbon tax which is not needed in the first place.
I have yet to be convinced by any reasonable scientific results to be able to blame CO 2 as the mother of all contaminents, yes, we have climate change and what ever we do we will continue to have it, irrospective of any carbon change.
Pollution in this world is a real thing and I agree that we need todo some thing about it, but CO 2 is not the pollutent.
Just where Silyard and Swany are getting there info from I don’t know, but suggest that they be more open minded and look at the issue with open eyes and minds, i know this is a very dificult thing for a polititian to accomplish if not impossible.

Comment from Ray Bee
Time March 22, 2011 at 10:42 pm

Good policy should set out the justification, the implementation costs, the benefits, and the impact on economic growth and employment.

Unlike other taxes, the carbon tax has neither scientific nor economic justification for its adoption.

The influence of anthropogenic carbon dioxide emissions on global warming is so insignificant, that no one has been able to produce any scientific measurement of it.

The overall annual costs to the economy are unexplained, and there is no estimate of the expected temperature reduction that would be achieved by say 2020.

How economic efficiency is improved by phasing out efficient low-cost coal-fired power and replacing it with unreliable wind power that is five times as expensive and with unreliable solar power that is at least ten times as expensive, is a mystery. The huge investment required in back-up power systems to complement wind and solar power generation, and in interconnection to the main power grid, is not revealed.

Based on UK experience, where for every job created in renewable energy, 3.7 jobs were lost elsewhere, the number of renewable energy jobs created can be expected to be much lower than the number of jobs shed in other industries. Forecasts of jobs created and lost must be tabled.

Consequently, the overall cost to the economy of adopting a carbon tax would be huge, but the benefits would be immaterial.

The adoption of bad policy can never result in efficient outcomes.

Comment from Martin
Time March 23, 2011 at 12:40 am

@Cal (You’re off-topic, but here goes):

Zionist outrage at Palestinian violence reminds me very much of Australian history. During the process of colonisation, white settlers stole land from its original Aboriginal custodians, massacred them, and were generally quite nasty and violent, causing untold misery. When Aboriginal bands responded by lighting settlers’ houses on fire and spearing the occasional sheep-hearder, these attacks were taken as proof that the Aboriginal people were naturally violent and thuggish, and deserved to be wiped out for attacking the ‘superior’ white civilisation.

If you’re going to steal a peoples’ land and spend the next few decades periodically attacking them with overwhealmingly superior military technology and man-power, you have to expect the occasional spearing and/or rocket attack.

Comment from Cal
Time March 23, 2011 at 8:14 am

Martin, you must be willfully ignorant or simply have a bias. Stole the land? First, the term ‘palestinian’ did not originate until recently, the area you call ‘stolen’ was occupied by 18 different invaders over time so whose land is it: the Greeks, Romans, Asyrians, Egyptians, Babylonians or the Jews, who were the original inhabitants for thousands of years? Also, it was Arab landlords who sold much of the land to Zionists before and after WW I. They purchased the land, and what they now occupy is the result of the Arab League declaring war in 1948 and attempting to kill millions of people.

And you seem to fall into the trap which is to assume that ‘the palestinians’ only live in the Gaza and West Bank. The majority live in Jordan, which refuses to recognise them or create a homeland for them. But attacking the Jordanians obviously doesn’t fit with your view.

And finally, you live in Australia right? The land you live on was – as you rightly point out – stolen from Aboriginal people. I do hope (!) they don’t fire a rocket into your home, that your children are not attacked and maybe your family not stabbed while they are asleep. How tragic it would be if the cinema you go to is blown up, if your loved ones are blown to bits while shopping … after all, it is bastards like you who live on the bones of dead Aboriginal people.

Don’t be a hypocrite, leave Australia and stop benefitting from genocide and mass murder. Hypocrite.

Comment from Martin
Time March 24, 2011 at 1:47 am

Cal, this isn’t an argument of abstract ‘ownership’. I’m not one to consider either Imperial writ or Holy Word as the equivalents and/or guarantors of property rights. This is an argument of concrete theft- the establishment of Israel didn’t just deprive people of their rights in the abstract, it drove them out of homes and off lands they and their families had been living in, whether for centuries or for decades, and created a situation whereby people now numbering in the millions when one includes descendents were displaced or made to live in what are effectively massive prisons in Gaza and the West Bank or refugee camps across the middle east. Obviosuly we disagree, but I consider actual, tangible connections to the land somewhat superior to a bit of scribbling in an ancient storybook or the support of imperialists like Britain and the US, among others.

Even assuming your little history lesson, including the allegations about the word ‘palestinian’, is correct, you cannot discuss violence originating from Gaza or the West Bank without taking into account the fact that these are people whose lives have been massively and negatively impacted by the establishment, expansion and maintainence of the state of Israel. All else is empty, moralistic hypocrisy.

Jordan is indeed quite horrible for not recognising the Palestinians, and many of the semi-permanent refugee camps in Jordan and other countries are in an awful state of repair. Lebanese fascists have been repeatedly recruited by Israel to help slaughter Palestinians in that country during the IDF’s extremely frequent northward adventures. I could go on. However, a) It would not be a problem for the Palestinians for these states to behave this way were it not for Israel, and b) ‘creating’ a homeland for the Palestinians just won’t cut it when the vast majority desire, above all else, to return to their family homes and lands free of harrassment or discrimination. Attacking the Jordanians, the Lebanese, etc does nothing but let Israel off the hook and obscure the long-term causes of the crises.

No-one is advocating forcing Jews to leave historic Palestine here. There are, indeed, Palestinians who do advocate this- but given the circumstances, one can hardly blame them. Whatever else it has done, the formation of Israel has successfully developed a new ‘native’ population (and a severely racist one at that) whose total displacement would be as much a crime as the displacement which began with the Nakba. What is being advocated, at the very, very least, is for Israelis to stop acting all surprised and innocent and outraged over rocket attacks, especially given that the IDF periodically unleashes a hell of a lot worse than rockets into Gaza and the West Bank, and continuously refuses to grant even basic land rights, or even a halt to illegal settlements in Jerusalem and beyond. Until the day the “Right of Return” is extended to Palestinians aswell, Israel has no right to use the violent actions of a frustrated and dispossessed people as excuses for sickeningly violent repression.

Comment from cal
Time March 24, 2011 at 7:33 pm

Martin – let’s talk about people being driven from their homes. In 1948 the Arab League declared war on the independent State of Israel. As John Passant so dismissively puts it, “innocents were killed”. The land Israel was granted by the UN was 13 miles across – you could walk it in two hours. It represents 1/16 of the Arab land mass.
But amazingly, this tiny slither of land is, as if by magic, the only area where ‘Palestinians’ lived and had homes. Odd that their traditional home was Transjordan. Even odder is that the upper estimate in ’48 was an Arab population on 700,000; yet today over 1 million Arab Israeli’s live in Israel.
In terms of displacement, not one – let me repeat that – not one Palestinian has ever been granted citizenship by a neighbouring Arab country. Australia, the US, UK, France, Germany etc have welcomed thousands of Palestinians as citizens: yet Syria, Egypt and Jordan have not given citizenship to a single one. What does that tell you – that this is an ideological conflict of religion and culture, not human rights or land.
And if it was land, then pray tell Martin, why in the 19 years Egypt ruled Gaza and Jordan the West Bank, they suppressed Palestinian nationalism and refused to give them their own state? Surely their Muslim brothers wanted a Palestinian state then? Actually no, they wanted Israel destroyed.
As for right of return – for whom? Why do you not advocate and protest and write blogs about the 400,000 Jews expelled from Arab countries? Where’s their right to their property, homes, society and religious freedom? Or is it only one side has a right of return?
And of course these Jews are racist – they have a constitution calling the extermination of another 6 million do they … sorry, that would be the elected rulers of Gaza. My mistake.
So like John Passant, from the comfort of your chair in leafy suburbia, you say what’s a few rockets, what’s a few suicide bombers, a few dead Jews.
You know what I detest about you Australians? You say this stuff while you pretend the genocide against Aborigines is somehow not about you, and the benefits of the conquered land is not realty your doing – yet you are international pontificators about other nations and their so-called ‘theft’ and murders.

Martin, you have no credibility at all until you give up your home and return it to the traditional owners. Otherwise you’re just another middle class hypocrite sprouting misinformation while you make a nice cuppa, switch on the plasma and moan about the oppression of others!

Comment from John
Time March 24, 2011 at 8:10 pm

Cal, your views are so infantile – not even up to undergraduate standard. The UN sets up a state specifically designed to expand; that state drives the people of the region off their land; it expands; it expands relentlessly. That is genocide. It was genocide in 1948; it is genocide now, Maybe reading Pape might assist you. Or Marek Edelman, a hero of the Warsaw Ghetto uprising. But you cannot teach the oppressor history except through struggle, as South Africa shows. I am not dismissive of the death of Israelis; I put it in its historical context of the oppressed fighting the oppressor. I am also not dismissive of what drives desperate people to fight against their oppressors in any way they can, including dead ends like bombings (if it was done by Palestinians. There is no report yet that this was the case). I am not dismissive of the Israeli war machine that imprisons Gaza. I am not dismissive of the Egyptian revolution which has within it the potential to free the Palestinians and I think that is where they Palestinians need to look and indeed to emulate, but to go further than the Egyptian revolution ash gone to date. Don’t characterise my view through the narrow racist eyes of Zionism Cal.

Comment from John
Time March 24, 2011 at 8:14 pm

Actually Cal, it is the revolutionary left in Australia which supports a treaty and sovereignty, recognition of prior ownership and paying the rent. look forward to you joining us in that campaign. That of course would undermine the Australian settler state, just as the Palestinian struggle challenges the Israeli settler state. That is one reason why Australian capitalism is so supportive of the apartheid Israeli regime – we share common antecedents. Aborigines are the Palestinians of Australia and the settler state of Israel has the same intention for aim or Palestinians as Australian capitalism tried to achieve with Aborigines – their destruction as a people.

Comment from John
Time March 24, 2011 at 8:17 pm

Except they drove hundreds of thousands of Palestinians off their land and expanded their borders. Actually they were given 45% of the land; the Palestinians 55%. That lasted about a day as the Zionists expanded – it is the logic of Zionism to do that and drive the Palestinians off their land. That logic is today being played out with the settlements and the apartheid wall and the regular brutal incursions into Gaza to destroy any resistance to the genocide.

Comment from Tony
Time March 24, 2011 at 9:27 pm

Cal: You are now talking AT all Australians (not our gutless sycophant government) on the pure basis of nationality. Yes, some Australians hold the view you project, although you haven’t got your head around the Australian “History Wars” during the Howard years. The reactionaries took the view you are projecting.

You suggest you are not Australian with your term “you Australians”, it raises the question of just which nationality do you represent? What do you expect to achieve on this blog?

If you actually decided to ask people’s opinions before stuffing your preconceived views as coming from other’s mouths (things they didn’t actually say), you would probably find (and Australians feel free to raise an objection to what I am about to say) most Australians posting here, myself included, think it is about us and we are calling for our government to return empowerment to the indigenous population through self determination of their communities with linkages to state/external support at their request. Our government refuses to grant them that basic right.

We want to see NO REPEAT of the paternalistic “interventions” from a central bureaucracy as has occurred in the years since the days of the pastoralists poisoning waterholes, the church seeking to expand its reach by setting up missions and colonial forces rounding up and massacring indigenous people.

The current interventionists are arguing an expansion of efforts is required in spite of the policy not appearing to be effective. Maybe they think “shock and awe” may work?

The generalised accusations you cast against Australians, I’d suggest, is the attitude projected by Australian reactionaries, the gutless politicians who react to their wishes, big business wanting access to resources under aboriginal land and the reactionary media and technocratic courtiers.

Comment from Cal
Time March 25, 2011 at 8:16 am

Before you start with your usual name calling, childish insults and slanderous comments, you might like to acknowledge that Israel’s borders expanded AFTER the Arab League declared war and sent hundreds of thousands of soldiers under Glubb Pasha to wipe out the new state and its inhabitants.

Don’t preach to me when you distort history and use misinformation and myth to perpetrate an ideology!

And yes, you are dismissive of the deaths of people you oppose. You said so on this very site when you glibly noted that “innocents die” for a greater cause.

Comment from John
Time March 25, 2011 at 2:37 pm

Actually Cal that is not what I said. But hey keep sprouting your bullshit if it keeps you happy. I am tired of your nonsense. I’ll let others rebut your juvenile drivel.

Comment from Tony
Time March 25, 2011 at 3:38 pm

Thanks for not answering questions, Cal.