Election 2016: A lesson in the politics of superannuation policy
25 July 2016, by Emily Millane
“The government failed to effectively sell its superannuation changes, particularly to its own back bench.” Virginia Star
“Don’t ever put up income tax, mate. Take it off them anyhow you please, but do that and they’ll rip your f**king guts out.” So Tony Blair says he was advised by Paul Keating back in 1995, in response to the idea floated by Blair’s deputy, Gordon Brown, to raise British income tax.
No modern Australian government of either persuasion wants to raise tax; they do so because they have to. If a government does so in the absence of any convincing explanation or narrative about the reasons for increasing taxation, they can expect a disembowelling. This is the lesson the Turnbull government is learning now with its proposed superannuation changes.
In superannuation, we have a $3 trillion pot of gold that no one is giving up their part of without a fight. With all the vested interests in superannuation, including many wealthy and powerful groups, it is one of the hardest areas of tax to reform.
A branch of public policy literature known as historical institutionalism says that the policy choices made when an institution is formed, or when a policy is initiated, will have a large influence on the policy far into the future. Dropping a whole suite of changes on a budget night, which also happened to be election eve, was not smart politics. We then watched the unedifying spectacle of frontbenchers struggling to articulate, for example, what a “Transition to Retirement” pension is, let alone what the government proposed to do with it.
Increasing tax on areas of superannuation means taking away benefits from taxpayers, often benefits which come to be perceived as entitlements. Introducing a 15 per cent tax on formerly tax-free pensions is arguably the biggest example of this. This very generous benefit has been in place for 10 years, and people are not letting go of it without a fight.
Read the full article at Austaxpolicy blog