One wonders at the incompetence of Malcolm Turnbull in his handling of the proposal to return income taxing powers to the States. But only for a second or two.
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What he has shown himself to be good at is springing surprises. He wouldn’t be prime minister if that weren’t so, and Tony Abbott and Peta Credlin would still be running the country.
The great challenge that faced Prime Minister Turnbull was achieving fiscal responsibility in the wake of the expenditure traps set by the ALP government before its inevitable defeat. The choice was between increasing revenue, that is to say putting up taxes, and cutting back on expenditure.
Proposals for increasing taxation floated about, and were duly howled down by the ALP with the aid of the media. The Budget is to be brought down on May 3, only a month away, presumably to be followed by a double dissolution.
Bill Shorten had a point when he said the proposal to return income taxing powers to the States was a “thought bubble,” that is to say a last minute bright idea that had not been thought through.
That was reinforced a couple of days later when the premiers sat down with Turnbull to discuss the idea. There wasn’t even a piece of paper to look at, let alone a formal proposal. It was indeed a thought bubble. As expected, the premiers rejected State income taxing powers out of hand. The ALP and the media declared it to be a defeat for Turnbull.
Yet he walked out of the meeting grinning like the Cheshire cat. He is still grinning. His choice is to cut back on expenditure, and it is the states that will sustain these cuts.
Turnbull had sprung a trap, fully as cunning as the National Disability Insurance scheme that the ALP produced on the way to their inevitable defeat. They thought of it, and the coalition government is stuck with paying its high price.
The States will presumably get funds to cover their current grants for hospitals and schools, as a percentage of the total income tax take. It will go up when taxes go up and doubtless down, as the Federal government focuses more on its prime responsibilities of defence, national security and economic management.
Economic management means industrial relations reform and reducing the deficit and the need to borrow money to finance those deficits. When those deficits came down under the Howard government the Public Sector Borrowing Requirement sank to nil, leaving an easier market for the private sector in which to borrow, and thus to employ more people.
We have never got back to the four per cent unemployment rate that was the Howard legacy. Turnbull and his treasurer Scott Morrison now have their chance.