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The Super Debate (cont’d)

On self-interest, principle and ‘fairness’

18 June 2016

9:00 AM

18 June 2016

9:00 AM

One of the joys of writing for this publication is that it is such a broad church. And that’s the whole point of any commitment to free speech, isn’t it? To hear ideas and views that contradict your own and that make you think again.

And so it is with my fellow columnist Michael Baume. He and I appear to differ on this Turnbull Coalition Government’s superannuation changes. Michael loves them. A ‘$3 billion budget saving’ is how he characterises them. As for those who balk at, and criticise, these superannuation changes, well, Michael labels them ‘NIMSA’s – Not In My Superannuation Account malcontents who are ‘dissident conservatives [hoping] for the triumph of self-interest over principle’.

First off, and with respect Michael, calling these super changes ‘savings’ is highly misleading. They amount to additional taxes. I know that the Greens and more than a few Labor types, and heck probably half the Coalition caucus, like to call ‘higher taxes’ a ‘saving’ just as they transliterate ‘more spending’ into ‘investment’. But Michael, we’re better than that, right? Reducing a tax concession is equivalent to a tax increase. More government revenue. It may well help to lower the deficit, but if it does it will be because the government takes in more tax money from hard working citizens, n’est-ce pas?

Once you see that, the claim that there is some sort of ‘logical inconsistency’ between wanting Team Turnbull to do more about the deficit (on the one hand) and despising this tax grab against those with Defined Contribution Superannuation Accounts (on the other) just disappears. Let me say this bluntly. This country has a spending problem. I want the deficit fixed by ‘spending less’. So I care about fixing the deficit and about not taxing superannuation in the way Mr Turnbull desires. You may differ on one or both of those Michael, but there is nothing inconsistent in holding to them both.

At the moment 20 per cent of taxpayers pay no tax at all; the next 24 percent pay 2.7 per cent of total tax; the next 37 per cent pay 30 per cent; the next 16 per cent pay 39 per cent; and the top 2.7 percent pay 28 per cent of total tax. Put differently, the top 19 per cent of income earners already pay two-thirds of the total taxes. One thing these proposals do not get to claim to be in some self-evident way is ‘fair’. If you want super reforms, fine. But the proposed $1.6 million limit is a good deal too low and the $500,000 non-concessional lifetime limit is massively too low. There should also be an ability to get monies out that were put in on the understanding the old rules applied. But that’s not the issue at hand. The issue is whether the Turnbull proposals are better than the status quo. They are not (and notice how the word ‘reform’ has been corrupted too, so that any change at all now counts rather than only those that make things better). Look, if the goal of superannuation is to take people off the Age Pension then it has been a clear failure. And if you want reform Michael, let’s talk abandoning the super guarantee, eliminating all tax concessions for super, and then significantly cutting marginal tax rates (all in an overall revenue neutral way). That’s a lot better than seeing a Liberal government tell people with defined contribution schemes that $1.6 million is sufficient for their retirements. And doing so while not cutting spending anywhere else at all and while leaving the lucky few with defined benefit schemes comparatively untouched. Which takes me back to the claim about putting self-interest ahead of principle. Let me put my cards on the table. I have a defined contribution super that is nowhere near the $1.6 million cap. Self-interest doesn’t come into for me, at least not in any obvious or direct way.

Perhaps the worst thing about this attack on superannuation is that it hits those with defined contribution schemes massively harder than it hits the judges and civil servants and ex-MPs who receive gold plated defined benefit schemes. People, perhaps, like you Michael. At present ultra-low interest rates what sort of lump sum would someone need to buy the sort of yearly pension you have received? 5 million dollars? 7 million dollars?

Otherwise it looks like ‘NUMPOY’ – Not Using My Pension Only Yours. And maybe that’s why these Turnbull proposals are toxic, my fellow contributor.

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