Monday, October 15, 2007

Political rant II

I know I said a couple of days ago that this blog's main raison d'etre was not to be a political soapbox. And it won't be, promise.

But after John Howard and Peter Costello announced their raft of tax breaks today, I feel the need to point something out. And please, don't be scared off by all the numbers - it'll be reasonably painless.

First, take a look at the tax amendments. As per usual, the government has handed the most significant tax breaks to the big end of town. No real surprise there. What changes there are for middle-income earners are not in fact what they seem. The top end of the 15% bracket moves from $30,000 to $37,000, whereupon it goes to 30%. So there is a saving of 15% over the $7,000 difference, or $1,050.

Now look at the change in the tax-free threshold for low-income earners. The threshold goes from $6,000 to $16,000. At first glance, some might feel that they are getting a windfall of $10,000, but of course they're not. They're getting a saving of $750.

With the expected upward pressure on interest rates with the $34bn tax breaks, does anyone really expect that $1,050 for middle-earners or $750 for low-earners is going to make any kind of significant dent in the cost of housing one's family? Sadly, many will, and that is the great deceit of this government. Howard and Costello will happily allow people to celebrate their 'windfall' in advance, knowing all along that it is just a cheap vote-buying stunt.

So if you know anyone whom you even vaguely suspect might be duped by this, set them straight. Show them the maths - half a percent rise in interest rates (quite realistic over the next three years) will add $91 per month to a $250,000 mortgage. This adds up to $1,092 extra per year, which is more than the promised tax break to middle-income earners, not to mention what it will do to the rent for the low-income earner.

This is what is commonly known as a BFS - a big fat smokescreen. We can't fall for it.

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