Tax cuts

Yep, but as capital, it doesn't contribute to the surplus ...

You're mixing the capital account and capital-type investment I think. The budget surplus is simply government income (taxes) less expenditure. Money is money.

My issue is that the surplus is produced by spending less on key services such as health and education. I understand that putting money into these areas will cause a flow on effect to the economy, but I think it's worth it ...

Yes, but our system is run by pollies and their first priority is get themselves re-elected. Tax cuts play better to voters (though Glenn Stevens might give Johnnie a slap in the face next month).

Personally, I've totally given up on pollies. I'll just get rich and stand above it all. If I really want something done politically, I'll just buy a few pollies.
Alex
 
You're mixing the capital account and capital-type investment I think. The budget surplus is simply government income (taxes) less expenditure. Money is money.

Yes, the surplus is revenue less expense. But, infrastructure (indeed the purchase of any item over the asset threshold) isn't an expense. At least not in the state government, and I assume not in the federal since we all have to follow the same accounting policies.

That is, if I go out and build something, it comes straight off the balance sheet, and never runs through the operating statement ... ie, buy a company - DR share investment, CR cash. No operating statement impact ...

Agree on all comments re pollies - how could I not?

DJ
 
Yes, the surplus is revenue less expense. But, infrastructure (indeed the purchase of any item over the asset threshold) isn't an expense. At least not in the state government, and I assume not in the federal since we all have to follow the same accounting policies.

That is, if I go out and build something, it comes straight off the balance sheet, and never runs through the operating statement ... ie, buy a company - DR share investment, CR cash. No operating statement impact ...

Government accounting a whole new different ball game. Think if it more as cash accounting. But re your double entry book-keeping, where is the balancing cash entry? Someone else must have a DR cash entry. And that someone is eventually going to spend it.

Point is, both tax cuts and building a train line increases inflation, but a train line has more long term benefits. What pollie thinks about the long term?
Alex
 
Government accounting a whole new different ball game. Think if it more as cash accounting. But re your double entry book-keeping, where is the balancing cash entry? Someone else must have a DR cash entry. And that someone is eventually going to spend it.

Point is, both tax cuts and building a train line increases inflation, but a train line has more long term benefits. What pollie thinks about the long term?
Alex

Ah, hang on, you've got me wrong. I'm not saying that they are investing, and hence pushing cash out into the economy. I'm just saying that whatever is going to the economy by way of infrastructure isn't having any impact on the overall budget position, and so isn't causing the surplus. And that the whole concept of a surplus has been sold to the public as a good thing, when, IMO, creating a surplus based on under-investing in vital services isn't the role of government.

As for forward thinking pollies ... that'd have to be an oxymoron. Political forward thinking extends as far as the next election - unless they're voting on their own salary/super changes. Then it extends to retirement ... :D

Strangely, many of the financial decisions that are aimed at 'helping' taxpayers seem to have the opposite effect - I believe this is returning to an argument raised elsewhere about the difference between supply & demand-side solutions.

DJ
 
IMO, creating a surplus based on under-investing in vital services isn't the role of government.

Ignoring the accounting concepts, for practical reasons you're right. But that doesn't change reality, unfortunately. Like it or not pollies see surplus numbers as better than, say, better hospitals or schools. I don't know enough about politics to comment on that.

Strangely, many of the financial decisions that are aimed at 'helping' taxpayers seem to have the opposite effect - I believe this is returning to an argument raised elsewhere about the difference between supply & demand-side solutions.

Maybe that's why I'm apolitical. Money crosses all political boundaries.
Alex
 
Ah, but we have the modern-day version: Captain Bligh has just created a new job (Head of the Office of Climate Change within the Environmental Protection Authority) - and appointed her husband to the position!!!

On the same day, Queensland's second largest hospital (Princess Alexandra) announced the closure of 40 beds due to lack of $$$. :confused: :confused: :confused:

Cheers
LynnH
 
Forgive my ignorance in taxation law and accounting..

Just a simple ?

Referring to this http://au.news.yahoo.com/071015/2/14ocw.html

Rudd is proposing to remove the 35% bracket, Costello is saying its a critical mistake

Does this bracket equate to the surplus which the cuts are now being passed along to, or is it greater or lesser etc
Follow what i'm on about?
 
Alex,

You've got that a bit wrong I think... ;)

Tax cuts --> higher net income --> greater serviceability --> higher prices

Sorry about that. Let the good times roll!

Cheers,
Michael.


Actually, he has it correct IMHO ...

Tax cuts --> Higher net income ==> higher inflation --> lower prices.

This idea of tax cuts is the only sneaky way that Gov's can reverse the -ve gearing incentive without removing the -ve gearing itself. (political suicide).

Certainly, serviceability will increase, but that capacity will be completely absorbed by inflation of other basic items (food, fuel, and increased interest rates due to the RBA acting against the 3% desired CPI ceiling).

I'm not a fan of tax cuts as a general rule, but I see the need to deflate the RE bubble, and this may be an easy way to do it....

The really neat thing about it is this... (please close your eye's if your up to your neck in IP's with high LVR's)...
Due to many Investors ignoring the Capital gains tax (many are structuring their portfolio in a manner that is based quite simply on never selling)... if/when -ve gearing becomes quite unattractive... what will the investors do with that less attractive investment ?

Selling would be unattractive as this then brings into play the Capital Gains tax to be paid...

So the Investor is somewhat trapped into having to continue renting the property...

Higher returns could be sought (rent hikes), however since RE would be dropping in value, the possibility is that renters may suddenly be able to afford to buy again.. and rent hikes risk losing tenants... 2 weeks rent can take quite a long time to make up even with a decent rent hike.

The good news ?... well the tax cuts are spread over a long period (2 election cycles), so there is plenty of time to consider your options.

So... tax cuts, bring them on...
 
Ah, but we have the modern-day version: Captain Bligh has just created a new job (Head of the Office of Climate Change within the Environmental Protection Authority) - and appointed her husband to the position!!!

On the same day, Queensland's second largest hospital (Princess Alexandra) announced the closure of 40 beds due to lack of $$$. :confused: :confused: :confused:

Cheers
LynnH

That is because Qld Health is not giving enough money to the Hospital so they can actually keep the staff operating. (or keep the staff from leaving for better pay elsewhere)
and
That is because the Qld. Gov. is not giving Qld Health enough money to fund the level of health required for Qld's explosive population increase.

I'm working in another SEQ major hospital and we've seen this all before... usually it's hidden from the media, but on occasions it pops up.

RWBH (Largest Hospital in Australia, and at one time the 2nd largest hospital in the Southern Hemisphere I believe) is strained under the load... Outpatients are being quite simply told they can wait on the 'waiting list' for C.T. Scans, or they can go to another hospital and actually get them done... it's their choice.
Gold Coast Hospital has a particular 'waiting list' for Outpatients that is internally known as the 'don't bother list'.

I could go on, but I think you get my gist.
 
An interesting article on Howard Govt Spending vs Keating Govt Spending. Corrects a lot of the common beliefs about who spends more in these areas.

http://www.cis.org.au/POLICY/summer_06/polsummer06_norton.htm

A large contributor to the Howard Govt surpluses has been the retirement of a large portion or most of the previous Govt's debt, via the sale of Telstra and some spending cuts early on.

Not paying interest on the credit card means there is less going to debt servicing these days.

On the tax cut side of things, this election was always going to be interesting with both sides playing Russian Roulette with inflation (via tax cuts and spending promises).

My bank is currently offering a 10 yrs fixed rate which is .2% above the discounted(.7% off variable) rate. My latest purchase, for the most part, is getting fixed for 10 yrs.;)
 
Ah, but we have the modern-day version: Captain Bligh has just created a new job (Head of the Office of Climate Change within the Environmental Protection Authority) - and appointed her husband to the position!!!

On the same day, Queensland's second largest hospital (Princess Alexandra) announced the closure of 40 beds due to lack of $$$. :confused: :confused: :confused:

Cheers
LynnH

Hi Lynn

From what I hear thru the grapevine her husband is a pretty clever guy, and if memory serves, hes been in the public service for many years.

The OCC is something which has been on the cards for a while - before Bligh took control

While I agree beds in hospitals closing isnt a good thing I dont think we can blend Premiers, EPA and Health into one department
 
lukentel

Mmm - just found the announcements of these 'news' items somewhat ... (am searching for the words) ... perplexing? ill-timed? unwise in terms of PR?

Yes, Greg Withers has apparently been in the public service for some time. He resigned/stood down/whatever just before Anna Bligh's 'ascendency' due to perceptions of conflict of interest, apparently - then, lo and behold, he's back after only a few weeks. Perceptions of a conflict of interest?? What conflict of interest????? Queensland politics - just gotta love it!

Cheers
LynnH
 
Ah, but we have the modern-day version: Captain Bligh has just created a new job (Head of the Office of Climate Change within the Environmental Protection Authority) - and appointed her husband to the position!!!

On the same day, Queensland's second largest hospital (Princess Alexandra) announced the closure of 40 beds due to lack of $$$. :confused: :confused: :confused:
Cheers
LynnH

My wife is a nurse, and has worked at several hospitals where the beds are closed in varying amounts, for 14 years now.

The main reason why this occurs is not due to lack of funds as the media likes to portray, as the Hospital charges out the cost of a bed to the Govt depending on the services provided to look after the patient.

The real reason why beds close is due to LACK OF NURSING STAFF. If there are no nurses available to staff a bed, then the Hospital has no choice but to close the beds and send any new patients elsewhere (if beds are available).

This is a common, everyday occurance. The reality is that there is a world-wide nursing shortage. Everyday, in every hospital, in every ward, or ICU unit, or Emergency Room, or Neo-natal Unit etc, the Unit Managers are on the phones to the various Nursing Agencies around the place to try and get temporary staff to fill the vacant shifts.

But the cost to become a nurse is escalating, and the pay for the work they do is not that exciting, when you consider they have to put up with whinging prima-donna surgeons and doctors, who earn 4 times the money and more (they deserve it by the way), whinging relatives and patients, cleaning up spew and excrement all day long, difficult work hours with no weekends off, rude unit managers with no management skills ra, ra, ra, etc, etc.

There is enormous responsibilty and exposure to litigation. Who would do all this when they can get a cushy job in an office working 9-5, weekends off, nice work conditions etc for the same or even more pay? Less people are going into nursing for all the above reasons and who would blame them?

There is a nursing strike this week in Aus for more pay, and of course; the Govt is resisting. Time will tell what happens.

The very best paid nurses are earning around $80k per year. This invloves doing all the hard shifts; nights, weekends and public hols to maximise the pay rates. It is a thankless job most of the time.

The average wage for a nurse would be around $25 per hour, and will have to do the above to increase the hourly rate.

Meanwhile; my wife is earning US$90k over here in the USA. And this is not one of the best places to go for pay. There is a massive shortage of nurses here as well. Even the famous Cedars-Sinai Hospital in Beverly Hills where my wife worked for 2 years, is staffed primarily by traveller nurses; most of them from the Phillipines. Cedars-Sinai treats its nurses like sh*t. The turn-over rate is HUGE.

The funny thing is; most media coverage of the Healthcare situation never focuses on this problem, and I don't know why.
 
Actually, he has it correct IMHO ...

Tax cuts --> Higher net income ==> higher inflation --> lower prices.

This idea of tax cuts is the only sneaky way that Gov's can reverse the -ve gearing incentive without removing the -ve gearing itself. (political suicide).

Certainly, serviceability will increase, but that capacity will be completely absorbed by inflation of other basic items (food, fuel, and increased interest rates due to the RBA acting against the 3% desired CPI ceiling).

I'm not a fan of tax cuts as a general rule, but I see the need to deflate the RE bubble, and this may be an easy way to do it....

The really neat thing about it is this... (please close your eye's if your up to your neck in IP's with high LVR's)...
Due to many Investors ignoring the Capital gains tax (many are structuring their portfolio in a manner that is based quite simply on never selling)... if/when -ve gearing becomes quite unattractive... what will the investors do with that less attractive investment ?

Selling would be unattractive as this then brings into play the Capital Gains tax to be paid...

So the Investor is somewhat trapped into having to continue renting the property...

Higher returns could be sought (rent hikes), however since RE would be dropping in value, the possibility is that renters may suddenly be able to afford to buy again.. and rent hikes risk losing tenants... 2 weeks rent can take quite a long time to make up even with a decent rent hike.

The good news ?... well the tax cuts are spread over a long period (2 election cycles), so there is plenty of time to consider your options.

So... tax cuts, bring them on...

Have you considered this scenario, it may be less attractive from a negative gearing perspective with lower tax brackets, but that would make capital gains more attractive, increasing the turnover of the property market.

Also, as over time, negatively geared properties generally become positively geared, so the tax cuts work to benefit property owners.
 
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