Finally, it's hard enough to look after yourself when you're in no-man's land in the middle of great monetary battle. But Australia's government isn't making it any easier with proposals to change how your retirement savings are taxed. The way these changes are described is a deliberate abuse of language in order to pervert intent and confuse meaning.
If the Gillard government follows the Obama camp's election strategy, they will repeat a simple mantra between now and election day in September: millionaires and rich people should be willing to pay their 'fair' share of tax in order to make Australia more equitable place for those most disadvantaged, especially children and the disabled. It's a question of national priorities and values. And if you don't agree with us, you're selfish and greedy.
That's the emotion they'll be going for anyway. The language will be more neutral. The language will include spurious phrases like 'tax concessions,' or the idea that lower tax rates on earnings and contributions to retirement accounts are something the government gives to you and is entitled to take back.
If you think about it for a moment, this is just another way of saying your money is the government's first and yours second. What you take home is not up to you. It's up to what the government concedes. And what's conceded can be taken away. Government first, you second. Government, of course, is 'we' the people. You are just a selfish and cold-hearted jerk.
Another spurious use of language is that the government makes 'savings' by increasing taxes. To accept this way of thinking, you have to accept that it 'costs' the government money when it lets people keep their own money at a lower tax rate. Again, it's not the government's money in the first place. It's not a 'cost' to let someone keep what is theirs. Only a confused or moronic person would think otherwise. Or a liar, a thief, and a cheat.
The basic problem is this: Welfare State spending keeps expanding. No one in government wants to cut spending. So they talk about 'savings' in the form of higher taxes on retirement incomes. This is a raid on people who plan responsibly so that they're not a burden on the State when they retire. It's pretty shameless, but par for the course.
The proposed 'reforms' to the tax rules on super would likely only effect around 100,000 people. In a democracy, that's easy pickings. The 5-10% of savers who would be affected by higher tax rates don't stand a chance in an election. Taking their money is as easy as calling them wealthy millionaires who are 'costing' the government billions in 'lost' revenue.
The government has lost plenty of revenue. But not by failing to tax you enough. It's lost it (the surplus) by spending too much. It's now trying to make up for it by taking money wherever it can find it, and then saying it's all about fairness and equity. We'll see how that plays with the voters. Probably pretty well, if the US election is any indication.
for The Daily Reckoning Australia
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About the Author
Dan Denning is the author of 2005's best-selling The Bull Hunter (John Wiley & Sons). He began his financial publishing career in 1997 and has covered financial markets form Baltimore, Paris, London and, beginning in 2005 Melbourne. He’s the editor of The Daily Reckoning Australia and the Publisher of Port Phillip Publishing.