Super tax backdown PM's only choice

Articles here on Business Spectator played their part in convincing Julia Gillard to back down on taxing over 60s superannuation. Will politicians and bureaucrats now help close the budget shortfall by looking at their generous entitlements?

Thank goodness common sense has prevailed and the government will not tax the benefits of people struggling to finance their retirement. As I will explain below I may have had a small role in "helping” the government make the right decisions.

It means that the superannuation retirement benefits are now a ‘no go’ area for politicians trying to raise taxes.

The government’s problem is that it is unable to raise large sums by rationalising state and federal activities, which is what Tony Abbott plans to do. He will raise huge sums by this process and will actually improve services.

In addition there tens of thousands of new regulations on business that have been introduced by the current government most of which are not that useful. They will be abolished, as will the staff that operates them. Abbott says he will raise $1 billion by this process.

The government wants to raise money to fund the Gonski education reforms and disabilities insurance. Without the Abbott alternative Gillard will either have to raise taxes in other areas, cut spending sharply or run a higher deficit.

The alternative is to take the Abbott line and rationalise federal/state activities but my feeling is that it is too late. In the past the Commonwealth has tried to dictate to the states which has proved hopeless and goodwill is lost.

I may be being too clever but prior to last year’s budget there were strong suggestions that superannuation benefits to retirees would be taxed because it was unfairly claimed they represented "middle class welfare”.

The greatest illustration of middle class welfare (and arguably our greatest tax rort) is the free indexed pensions senior public servants and politicians get for life. They would have to be taxed and taxed heavily.

The superannuation benefits tax idea quickly died last year once this was raised. This time around I again raised the issue of the senior public servants "middle class welfare” and illustrated the rort by the $10 million plus worth of indexed pension that is going to the retiring attorney general.

Once again the proposal to tax superannuation benefits was dropped.

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