The dirty secret at the heart of the projected budget surplus: much higher tax bills



Bill shocks are the flipside of a surplus built on higher tax collections and tighter access to support payments.
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Peter Martin, Crawford School of Public Policy, Australian National University

The budget is bouncing out of deficit and is set to stay in surplus for the decade to come.

That’s what the April budget and the final budget outcome for 2018-19 tell us, and Thursday’s report from the Parliamentary
Budget Office doesn’t say any different.

It doesn’t have much choice. The Parliamentary Budget Office is required to take the government’s surplus and deficit projections for the next four years as given, and to take its economic forecasts and tax and spending announcments for the next ten years as given, whether realistic or not.

What it is allowed to do, and does once a year in a publication entitled medium-term fiscal projections, is to set out the implications of those projections.

Those implications, spelled out on Thursday, show the projected budget surplus to be so fragile as to be unrealistic, except the parts that rely on much higher personal income tax collections.

That’s right: much higher income tax collections per person, even after taking into account the coming decade of legislated tax cuts.

Middle earners hit hardest


Parliamentary Budget Office

But it won’t be higher for all of us.

The middle fifth of earners will pay far more of their income in tax in ten years’ time under the government’s projections, according to the PBO’s calculations. Instead of paying 14.9% of their income in tax, by 2028-29 they will pay 18.8%.

That’s after taking into account the long-term tax cuts the government pushed through parliament in May and went to the election on.

Without those legislated tax cuts, they would have been paying an extra 6.3% of their income in tax. With the legislated cuts (and others pencilled in by the PBO to keep the government’s tax take within its promised ceiling) they will be paying an extra 3.9%.

Put another way, the government’s tax cuts will undo some of the damage caused by bracket creep as more of each pay packet climbs into higher brackets, but not most of it.

It’s the same for pattern for the second-lowest fifth of earners. They will move from paying 5.3% of their income in tax to 9.9%, a near doubling, which is taken is taken into account in the surplus projections.




Read more:
Those future tax cut promises… they’re nowhere near as big as you’d think


The second-highest fifth will move from paying 22% of their income in tax to 23.4%, even after the tax cuts. The bottom fifth, who don’t pay much tax, will move from paying 0.6% to 1.2%.

Highest earners escape

But workers in the top fifth, which at the moment is workers earning above A$90,000, won’t pay a cent more, at least not on average.

The government’s projections, as spelled out by the PBO, have them paying less of their income ten years from today than they do today.

Put another way, they are the only fifth of the population that won’t be expected to wear pain to keep the budget surplus.



Parliamentary Budget Office

There are other contributors to the budget surplus. One is a pretty hefty assumed decline in growth in government spending over the next decade, amounting to 1% of GDP, taking government spending from around 24.9% of GDP to around 23.9%.

Much of it is projected to come from tighter eligibility criteria for payments, and measures to constrain their growth, something the PBO believes might be difficult to maintain:

The spending restraint seen over the past few years may be increasingly difficult to maintain over coming years given the length of time over which restraint has been applied, the pressures emerging in some spending areas, and the potential need for fiscal stimulus, noting that the projected improvement in the budget balance is mildly contractionary.

What it is saying, gently, is that it the longer the government attempts to restrain spending (for instance by imposing tough conditions on access to benefits and using debt collectors to recover alleged overpayments), the harder it will get.

And it is saying the government might need to spend in ways it hasn’t accounted for, including on measures to support the economy in the event of a downturn.

Budget conventions to the rescue

The projections assume the opposite of a downturn.

No blame should attach to this government for them, but our rather odd budget conventions dictate that the worse the economy is, the better the budget’s projections for economic growth. That’s right: the weaker our current economic growth, the stronger the budget’s projections for future economic growth.

The thinking is that over the long term, the economy should grow at roughly its long-term average growth rate. To get there when the economy is weak, as it is now, the budget assumes several years of stronger than normal economic growth to catch up.




Read more:
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In this case it’s five years of stronger than normal economic growth.

The PBO contents itself with the observation that economic growth that was merely normal (or worse, remained weaker than normal) for some of those years would have a “significant and compounding effect on the budget position over time.”

The surplus is far from assured, and it shouldn’t be. The government might well find that it can’t and shouldn’t restrain spending on payments as much as is projected in the decade ahead, and it might find it needs to spend to support the economy.

It will almost certainly find that lifting the tax take on middle Australians from 14.9% of income to 18.8% is intolerable.The Conversation

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Massive ‘Reconversion’ Event in India Aimed at Christians


Hard-line cleric leads campaign in Maharashtra, ideological capital of Hindu nationalism.

MUMBAI, India, October 27 (CDN) — Hundreds of tribal Christians and adherents of aboriginal religion from villages in Maharashtra state were reportedly “reconverted” to Hinduism yesterday in the Mumbai suburb of Thane at a ceremony led by a Hindu nationalist cleric.

Swami Narendra Maharaj’s goal was to “reconvert” 6,000 Christians in the so-called purification ceremony, reported The Hindustan Times, which put the number of “reconversions” at around 800. Hindu nationalists believe all Indians are born Hindu and therefore regard acceptance of Hinduism by those practicing other religions as “reconversion.”

Maharaj, a Hindu cleric known for opposing proclamation of Christ, has allegedly led anti-Christian attacks in tribal regions. On March 15, 2008, his men reportedly attacked two Catholic nuns, Sister Marceline and Sister Philomena, from the non-profit Jeevan Jyoti Kendra (Light of Life Center) in Sahanughati, near Mumbai.

The attack took place in a camp to educate tribal women on HIV/AIDS, which also provided information on government welfare programs, according to Indo-Asian News Service. The assault in Sahanughati, Alibaug district was followed by a mass “reconversion” ceremony in the area on April 27, 2008, said Ram Puniyani, a well-known civil rights activist in Mumbai.

Rightwing Hindu groups are mostly active in tribal areas. Hindu nationalists attack Christians in tribal areas because they provide social and development services, regarded as competition by rightwing Hindus seeking to woo tribal voters, said Anwar Rajan, secretary of the People’s Union of Civil Liberties (PUCL) in Maharashtra’s Pune city.

Kandhamal district in the eastern state of Orissa, where a massive spate of anti-Christian attacks took place in August-September 2008, is also a tribal-majority area. At least 100 Christians were killed, 4,600 houses and churches were burned, and over 50,000 people were rendered homeless in the violence.

Sociologists maintain that India’s tribal peoples are not Hindus but practice their own ethnic faiths. Hindu nationalists run Ekal Vidyalayas (one-teacher schools) in tribal regions to “Hinduize” local villagers and repel conversions to other faiths. These schools are operating in over 27,000 villages of India.

Dubious Claims

An anonymous spokesman of Maharaj said the plan for yesterday’s event was to “reconvert” 6,000 Christians to achieve the larger goal of “bringing back” 100,000 Christians, according to the Press Trust of India (PTI) news agency.

The rightwing spokesman in Maharashtra, a western state where Hindu nationalism originated decades ago, claimed that Maharaj and his followers had overseen the conversion of more than 94,000 Christians “back to their original faith” and plan to complete the target of 100,000 in the next two years.

Maharaj, whose followers call him Jagat Guru (Guru of the World), told PTI that those who “reconverted” were not coerced.

“We are not having a religious conversion here – it’s a process of purification,” Maharaj was quoted as saying. “We taught them the precepts of the Hindu religion, and they decided to convert to Hinduism on their own after repentance. They were not forced.”

Many reports of “reconversions,” however, have been found to be false.

In 2007, Hindi-language daily Punjab Kesari reported that four Christian families in Nahan town, in the northern state of Himachal Pradesh, had “reconverted” to Hinduism. But a fact-finding team of the All India Christian Council revealed that none of the members of those families had ever converted to Christianity.

The Hindustan Times reported yesterday’s ceremony included rituals involving cow’s milk, seeking forgiveness from ancestors, installation of idols of the Hindu gods Ganesh and Vishnu, and an offering ritual performed by priests from Ayodhya, in the northern state of Uttar Pradesh. Ayodhya is believed to be the birthplace of the Hindu god Rama.

Home of Hindu Nationalism

The basic philosophy of Hindu nationalism was expounded by Vinayak Damodar Savarkar, popularly known as Veer Savarkar, in 1923 through the publishing of a pamphlet, “Hindutva: Who is a Hindu?” Savarkar, who is from Maharashtra, argued that only those who have their ancestors from India as well as consider India as their holy land should have full citizenship rights.

A follower of Savarkar, Madhav Sadashiv Golwalkar, also from Maharashtra, further developed the Hindu nationalist philosophy through a book, “A Bunch of Thoughts,” in 1966. He claimed superiority of Hinduism over other religions and cultures of the world.

“In this land, Hindus have been the owners, Parsis and Jews the guests, and Muslims and Christians the dacoits [bandits],” he said.

The emergence of Hindu nationalist ideology from Maharashtra came in reaction to the politics of social justice by Dr. Bhim Rao Ambedkar and Mahatma (Jyotirao) Phule, said Irfan Engineer, director of the Institute of Peace and Conflict Studies in Mumbai and an expert on religious conflicts. Phule led a mass movement of emancipation of lower castes, mainly Shudras and Ati-Shudras or Dalits, in the 1870s. Ambedkar, known as the architect of the Indian Constitution, began movements against “untouchability” in the 1920s.

Also born in Maharashtra was the Rashtriya Swayamsevak Sangh (National Volunteer Corps, or RSS), India’s most influential Hindu nationalist conglomerate. It was founded in 1925 in Nagpur by Dr. K.B. Hedgewar.

Hindu society has traditionally had four castes or social classes, namely Brahmin, Kshatriya, Vaishya and Shudra. While Shudras belong to the lowest caste, Dalits were formerly known as “untouchables” because the priestly Brahmin class considered them to be outside the confines of the caste system.

During British colonial rule in the Indian subcontinent between 1858 and 1947, sections of the Brahmins felt the British were sympathetic towards the Dalit reformist movement, said Engineer of the Institute of Peace and Conflict Studies. Mahars, Maharashtra’s largest Dalit people group, have been very organized and powerful since then.

The PUCL’s Rajan said that the Brahmins have long portrayed minorities as enemies of Hinduism.

“Since the Dalit reformist movement is essentially against the Brahmin hegemony, the Brahmins had to react and get organized,” Rajan said. “As a part of their strategy to weaken the reformist movement, Brahmins projected minorities as the ‘real’ enemies of all Hindus, including Dalits and other lower castes, diverting attention away from the atrocities they meted out on them.”

Most of the founding leaders of Hindu nationalism, including Savarkar, Hedgewar and Golwalkar, were Brahmins. Since communal troubles benefited Hindu nationalists politically, the use of divisive issues became routine for them, Rajan added.

After two successive defeats of the Bharatiya Janata Party, political wing of the RSS, in general elections in 2004 and 2009, differences between the moderate and extremist sections within the Hindu nationalist movement – which blame each other for the party’s downfall – have deepened to unprecedented levels.

In frustration, the extremists have accelerated their activities, especially in Maharashtra, the ideological capital, said Dr. Suresh Khairnar, a well-known civil activist from Nagpur.

Report from Compass Direct News