Labor’s big business budget and tax review

Big business leaders and all the major newspapers praised Wayne Swan’s third federal budget when it was released in mid May. For ordinary people however there is very little in the budget to be happy about.

For the capitalist class this budget – coupled with the recently released Henry tax review – not only protects their profits but it also ensures that it will be not be them who have to pay for the economic crisis.

In an attempt to starve off the worst effects of the downturn, Rudd pumped billions of dollars into the economy through stimulus packages. These measures led to a $57 billion budget deficit and this debt now has to be paid back.

Despite the fact that most of the money from these packages ended up in the bank accounts of the big retail, automotive and construction companies, the bosses of these same companies now want working people to pay the debt through cuts and reduced government spending.

Swan has gladly granted the bosses their wishes by pledging to cap spending at 2% per year. This, he argues, will return the budget to surplus three years earlier than originally predicted. He has also included in the budget a whole series of cuts by stealth.

Some of the first people forced to pay will be those on welfare. Far from giving assistance to the most vulnerable, it will now be harder to get the Disability Support Pension (DSP). Many welfare recipients will be forced into low paid jobs or training or else their benefits will be cut.

The annual child care rebate will be reduced and capped while reductions will also be made to Family Tax Benefit A. These changes are expected to affect tens of thousands of people. The only money invested in welfare will be in the area of ‘surveillance’. In other words, policing the system to ensure less people are receiving benefits.

On the surface it seemed as if health was a winner in this budget with $7 billion allocated over the next four years. Unfortunately this funding is part of new health reforms that restrict hospital access and encourage the expansion of the private sector. In the long term these reforms will lead to less investment in public health.

This budget needs to be looked at in conjunction with the Henry Tax review as it includes several changes to the taxation system. The first is a reduction in the corporate tax rate from 30% to 28%. This will be a boost to employer profits and will be phased in by 2015. The other major change is the introduction of the so-called ‘Resource Super Profits Tax’.

The mine owners have cried foul that their profits are being attacked through this tax. They have threatened a strike of capital with the announcement of investment projects being put on hold, dumped completely or moved off shore. This is the real threat to jobs.

It clearly demonstrates that big business has no interest in jobs and investment in Australia, only in their own profits. The threats of a capital strike show why the mining industry should be nationalised to ensure that the massive profits of this sector are used for the benefit of society as a whole.

While the government has used populist language to claim that Australia’s resources should be ‘shared’, not one cent of this new tax will go towards improving services for ordinary people. The billions of dollars in revenue collected will be directed back to the mining companies in the form of investment in infrastructure to support their operations.

The other significant measure announced in the Henry Tax review is the increase in the superannuation guarantee from 9% to 12%. This will be phased in over the next ten years.

Again while this may seem like an improvement on the surface it is really a move designed to undermine the pension system. Instead of the state guaranteeing elderly people a decent income, workers will be expected to fund their own retirement. Employers will also expect the increase to be offset by a reduction in real wages.

The budget and new taxation measures really represent a plan to transfer wealth from the pockets of working people to employer and government coffers. The plan for reduced spending, reduced corporate tax and a reduced welfare system should not be supported as it is designed to make ordinary people pay for the increased government debt.

Swan has shown that the economic policies of the Labor Party are identical to those of the Liberals. Workers desperately need to build a political party that puts their own economic interests before those of big business.

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