Jim Chalmers’ super tax compromise proves Labor is too timid

Did Jim Chalmers backtracking on retirement privilege change the welcome? abandonment Of bad policy, backsliding and bow to vested interestseven one Machiavellian game By the Treasurer to persuade the super sector to accept heavier taxation? Maybe a little bit of all three.

The higher tax rate for super accounts over $10 million effectively puts a cap on the unlimited super accumulation allowed by the Howard-Costello era, as the super-rich who fall into this category will have to move assets over $10 million out of their retirement funds (most likely into other nasty tax loopholes, such as family trusts) to avoid paying higher tax rates. But there are only a few thousand of them. If a group is small enough to be hit without incurring any political pain, no one will be interested in people worth more than $10 million. Financial Review – then it won’t make much difference in terms of budget.

And it’s not clear why Labor is sticking to not indexing the $3 million threshold for a higher tax rate, especially given that super savings in any given year are multiples of inflation. Perhaps he was worried that it might set a precedent for indexing income tax thresholds, which is what we really need.

But pearl divers capitulating to the rich whining about taxing unrealized gains (a tax that every homeowner in the country pays when they pay council taxes) is a remarkable indication of how timid this government is, for fear it could be used to concoct future scare campaigns. Even after taking the policy into the election, which it won overwhelmingly, Labor was not only reluctant to expend any political capital in the name of sensible reform, but was also reluctant to do anything that might risk its own political capital down the road.

It’s one thing to shy away from ambitious reforms in favor of showing voters that whatever economic pain they’re feeling is on your side; Another is so careful that you are afraid of your own shadow. But this is the Albanian government that has always been obsessed with what its rivals can do rather than worrying them about what they can do.

So you can forget about any more significant tax reform or spending discipline; yesterday’s withdrawal came with inevitable but rather irrelevant aid to low-income earners, presumably to make it harder for the Greens and the Coalition to block it in the Senate. You can certainly forget about the carbon price, which is the fundamental efficiency reform that the economy and our decarbonization efforts desperately need.

This government’s idea of ​​reform is to hand out taxpayers’ money to multinationals lining up to benefit from the bailout, failed infrastructure projects chosen by desperate politicians, parasitic defense contractors with long histories of scandal and failure, and winners chosen in the Made in Australia Future lottery. Anything else is of little interest; Ultimately, this could prevent Albanese from increasing his parliamentary tally to 100 in 2028. Labor is a party in office, but not in power, because using that power might offend someone somewhere.

This return also shows how large the pension pot is. Chalmers becomes the second treasurer after Scott Morrison in 2016 to accept half a loaf when it comes to halting super tax cuts. The fixes Chalmers initially proposed would have been discussed 20 years ago mainly in the financial and business press and attracted marginal interest from voters. The possibility of ordinary workers receiving a $3 million pension when they retire is no longer a distant possibility for young people.

General super savings pool It is expected to double our GDP – currently around 150% of GDP – over the next 15 years. Even the retirement of boomers and gen x-ers can’t stop this; The superpool is expected to continue growing in real terms until at least 2060. The multitrillion-dollar Australian industry he created not only wields immense power over business through his investments; Superfunds and the ecosystem of ticket clippers and self-important financial gurus eager to dispense general advice (terms and conditions apply) have considerable influence over politicians who don’t want to be caught on the wrong end of a scare campaign.

And that’s doubly true for a government as timid as this one.