Families And Tax Reform Wayne Swan - Shadow Minister for Family and Community Services , Manager of Opposition Business in the House of Representatives

Radio Interview with Leon Byner

Transcript - 5AA, Adelaide - 30 April 2003

E & OE - PROOF ONLY

BYNER: My next guest has actually a lot in common with our financial commentator David Koch, who you hear on Mondays on 5AA. I'll tell you why. David Koch has long said that our tax system needs some very desperate reform. He made the point that ordinary Australians are now paying the top tax rate as if they are rich - the top tax rate. So they lose basically half their money. And indeed, even those who aren't taxed at the highest rate, maybe at the second highest rate at 42%, when they work overtime they lose half their overtime. Why would they work it? But it gets better. 860,000 Australians, many of them families on modest incomes, are giving the Government 60 cents in every of overtime they earn. Double the number of those who faced such high rates of tax five years ago. Double.

When we talk about poverty the word conjures up different things. In Australia it means to be somebody who can barely afford to put food in their mouth or shoes on their feet. Who probably can't afford to pay the rent and who might have to do a second job just to pay, if they've got a family for example, just to pay the school fees and might not be a private school, they be public school too.

Let's talk to the Shadow Family and Community Services Minister Wayne Swan. Wayne, I'm glad you're on this case because Mr Costello the Federal Treasurer, is under a lot pressure to have a look at the reforming the tax system and I think it's not before time. What do you reckon?

SWAN: He did reform the tax system 2 ½ years ago, which has produced the current situation where we have the highest taxing government in Australian history and where people on low and middle incomes are paying very high rates of taxation when you take into account the withdrawal of social security benefits. So you can have people earning $30,000 - $40,000 and when they work a bit of overtime are paying 60 cents in every additional dollar of overtime to John Howard and Peter Costello.

BYNER: That's because the tax rates are just not keeping pace with the reality of what's going on.

SWAN: Well there's two things in that. There's the tax rates, or what's called bracket creep, where the tax rates are not adjusted for increases in incomes. But it's also the consequences of the withdrawal of important payments that are made to those families, namely family payments, which have always been made historically in this country to assist to those parents with children to a better life.

Now what's happening under this new system, constructed by Peter Costello is that they are all paying the GST, they were all told they were going to get very big cuts to income tax to compensate and for most low and middle income earners that didn't materialise. And in the process of doing that they constructed a family payment system which is leaving one in three families with debts at the end of the year, and that's another story. But worse than that for many of these 860,000 of families or groupings that you mentioned before, three quarters of them are families on low and middle incomes and they are actually paying an effective marginal tax rate of 60 cents in the dollar. They don't give up their time with their kids to work harder through overtime, just to get 40 cents in every additional dollar they earn.

BYNER: Let's say for a moment, let's suspend reality and presume you are a Minister in a federal Labor Government. What would you as a policy man, what would you be nudging the Treasurer to do right now? How would you be different?

SWAN: My priority would be relief for these low and middle-income families who are being squeezed in the tax system and the social security system like they have never been squeezed before.

BYNER: You see now, I've got to say this. A system that gives them money and then takes it away because it's not fair is a bit damn stupid. You're actually paying for bureaucratic process to occur that ought not be occurring in the first place.

SWAN: All these families were told they were going to get a bonanza under the GST.

BYNER: The trouble is and this is where the Democrats come in, they did the deal

SWAN: They did the dirty deal. And it was lead by South Australian Meg Lees.

BYNER: And this is the other thing, people often say to me Wayne and it's good you've got onto this one ‘what happened to all these charges that were going to go'?

SWAN: Absolutely. I've been on this case for a long time Leon and in fact in January the interesting thing was that Tony Abbott came out and confirmed in a speech in Adelaide to the Young Liberals all of these criticisms that I've been making for a long time. It's just that he's been rolled in the Cabinet. He's been rolled by Senator Vanstone, another South Australian who is responsible for this debacle by the way. Senator Vanstone is responsible for these very high effective marginal tax rates that are hitting the families that we're talking about. But she's been in hiding for the last year. I mean I don't even know if she's still alive actually.

BYNER: Oh she is. I did speak to her on the air and she is well and truly alive.

SWAN: I'm pleased to hear it.

BYNER: But listen Wayne. I'm pleased you're on this case and I can understand when you get the opportunity you'll tilt at the others because that's what you do. But can I just put this to you. I think there is a lot you guys can do to nudge this government in to reforming the tax system fairly.

SWAN: Too right.

BYNER: The notion that if you earn $45,000 to $50,00 a year that you're rich is a nonsense.

SWAN: It's a complete nonsense. Look at the figures for families. They're the figures you've got to look at. Your average family will be pulling in combined, because they have got to have two incomes or one and half incomes to get by, around $40,000. And I can take you through those figures for South Australia some other time. The point is this. Those at the top under this current taxation system are doing well and all the time doing a lot better. But the rest, low and middle-income people are drifting a lot further apart of this group.

BYNER: I think what we have do though is not tax incentive. We don't want people to say ‘I won't work this hour or I won't do this job because it's not worth my while'.

SWAN: Absolutely. Because it makes the country poorer when that happens. And this is the contradiction. This is the Government out there all the time blaming the unemployed and pouring scorn on them. Yet it's constructed a system, that when they work part time as the Government says they should, go out and get some casual work so they can stand on their own two feet, work hard for themselves and their family, takes 80 cents in every additional dollar they earn over the threshold.

BYNER: Wayne, you've got as you know when I introduced you, you have an unusual ally here in people like David Koch and others.

SWAN: Too right. I've had this discussion with David on channel 7.

BYNER: And we're all in agreement. So the next thing you can do is really put the wood on Peter Costello, who according to David Koch is rolling in GST funds and other revenue from all the little levies we're paying, to do something about getting some tax cuts particularly to those people on 40 or 50, who are not rich. They're not rich people.

SWAN: I've asked Peter Costello this question in the Parliament and he denied it was a problem. I asked this question in the last session of the Parliament and he denied it was a problem. And I don't know what Senator Vanstone says about it, but she's partly responsible along with Peter Costello. And I'm happy to debate her on your show if we could.

BYNER: Wayne, you maintain the rage. And I'll continue to push too because I think we need some sensible taxation relief here, because people who are poor don't employ other people. People aren't taxed fairly, I mean if you've got to work an extra 10 hours a week and you've got to pay 60%of that back…

SWAN: That's right you don't do that to give 60 cents back to John Howard. You just don't do it. You'd rather spend time with your family.

BYNER: Wayne thank you for joining us. That's the Family and Community Services Shadow Minister, Wayne Swan on 5AA.