I suppose it can be said that Treasurer Wayne Swan and Prime Minister Kevin Rudd have been in some state of confusion this week over the detail of their own Budget in May and the consequences of the last Costello Budget.
Now in many ways this could be called tax reform. I should say, at the outset, that the government has now backed off and they're going to introduce amendments into the Senate on Monday to ensure the fringe benefits tax changes which come into force on July 1 won't penalise, their words, 85,000 low paid workers in the charity and not for profit sectors.
Now I'll come to that in a moment.
But can I say that I think the Treasurer, Wayne Swan, knows what he's doing here and he should be supported. In other words, it may not be that the amendments to prevent all this happening are right.
It may well be that what Wayne Swan and Kevin Rudd were trying to do is the course of action necessary.
Now as one editorial said earlier this week, you can't be backing down at the first whiff of grapeshot. What Kevin Rudd and Wayne Swan have both identified is the unarguable truth: that people are getting welfare who shouldn't be getting it, and others are getting more welfare than they're entitled to.
Now speaking generally, the Howard Government half recognised this and basically said in their last Budget that from July 1 this year fringe benefits will be included for the purposes of assessing income, to determine whether people got family tax benefit A, family tax benefit B and a range of other benefits.
Now the concern is what this does to charity workers or people working for religious institutions. They can't afford a lot of money for staff, and so they make the package more attractive by, for example, paying for their petrol, providing them with a car from a sponsor, or whatever. Then the Swan Budget added salary sacrifice, where you take 10,000 dollars out of your salary and stick into superannuation for which you'll pay, when you eventually take it out, a lesser rate of tax.
Now a couple of points of principle here.
The Rudd Government is right to address what are rorts in welfare. So it's not a matter of which workers might face dramatic consequences.
The first is that taxpayers are forking out much more than they should in welfare payments, and the Prime Minister and the Treasurer have sought to wind that back.
For example, from now on everyone won't be getting the baby bonus. There's a $150,000 threshold. And that is correct. And surely if we're going to pay people welfare, all income should be included.
Now it's easy to understand that the Government is going to be bashed up by what's called the non-profit sector, where such changes will very much affect the benefits workers receive. But these are difficult decisions and as the editorial writer said, not the time to back down at the first whiff of grapeshot.
For example, there was an illustration of what this means this week. I read a story about a single income Brisbane family where the husband earned in excess of $100,000.
But because he salary sacrificed $10,000 of his wages each year towards superannuation - a move which is ultimately to his own benefit - and because he has seven children, he was able to bring down his income sufficiently to qualify for $300 a week from Centrelink under family tax benefit A.
That's not bad money.
$300 a week paid for by the taxpayer, more than someone gets in unemployment benefit, to a family already earning in excess of $100,000 a year.
So the simple question for the critics of what Wayne Swan and Kevin Rudd are trying to do, is: Should the taxpayer be supporting such a family to the tune of $300 dollars a week?
As I said, someone on the dole doesn't get that. But when they get their piddling couple of hundred dollars they have to demonstrate mutual obligation.
In other words, they've got to do something for it. And nothing remotely similar to what is handed out under family tax benefit A is ever handed out by government to working single people.
So summing up, Wayne Swan and Kevin Rudd were right the first time. They most probably should have ridden out the storm.
But on Monday they'll introduce amendments which virtually will say: Let's go back to where we were. And where we were is basically what we can't afford.
You'll never get tax reform if you jump at every shadow to protect special interests for political purposes.
The messages this week have been very mixed.
