The Federal Budget 2011-12 was released this week. Everyone else is giving opinions on it, so I may as well. All in all, I think it is a positive budget that would hopefully get Australian back into surplus by 2012-13. The growth in revenue seems optimistic and the spending cuts are probably in my opinion not deep enough, as much deeper cuts are needed in middle-class welfare. But all in all, it is a step in the right direction, that is, keeping taxes high and cutting spending. It follows the fundamental rule of personal finance, which is to spend less than you earn.
In the world of FBT, the budget gets rid of the loophole that allows tax benefits to be accrued if you drive your work car more than 25,000 kilometres per year. This horrendous loophool meant that many small businesses actually deliberately drove their company cars more than they needed to in order to get tax concessions.
A number of people complained that there were no increases in family tax benefits for those earning over $150,000, which I thought was incredibly surprising as those on $150,000 are definitely rich given that the average household earns around $70,000. For Australia to get back into surplus, spending cuts need to be made or taxes need to be raised, and cutting spending or increasing taxes on the poor is not only highly immoral but could actually kill them. Therefore, the rich need to be sacrificed. I am surprised that there was so much opposition to this idea, even among religious people and poor people.
The budget contianed no details about the coming carbon tax, which is disappointing. I am happy with the carbon tax as I think it is one of the best ways of cutting carbon emissions in Australia. It gives me great pleasure when I look at those people driving large SUVs and live in large McMansions and know that they will soon be punished for their behaviour. The carbon tax is understandable unpopular with many people believe most people don't like the idea of cost of living increase. This is why I believe that Prime Minister Gillard needs to give very generous compensation to low-income people. It is already disappointing to hear that only half of the revenue raised will actually go to compensating low-income people (it should ideally be 100 per cent). If I were Prime Minister Gillard or if I were her adviser, I would suggest that the way she go about compensating people is to made amendments to the low income tax offset (LITO). Specifically, she should increase the LITO payout and increase the threshold when you are no longer eligible for it. This will put money back into the hands of the poor and give a moderate amount to the middle-class. If the compensation is large enough, I am sure just about every single Labor supporter will be happy and a substantial number of Liberal voters will switch sides and vote Labor to secure for themselves the compensation, and Prime Minister Gillard will win the next election.
We'll see what she does.