They pride themselves on being the party who looks out for the little guy.
But Labor’s idea to fix the dividend imputation, or franking credits, will ultimately be taking money right from the profits of retirees — who have been working to the bone their whole lives.
They plan to end the Howard government’s regime of giving shareholders without a tax liability a cash refund on excess franking credits from shares they hold.
That means the self-funded retirees who rely on this income will be forced to dip into their superannuation rather than keep it as a form of wealth accumulation.
Labor’s response? They say there are only a small number of these kinds of shareholders, and ultimately the $55.7 billion in revenue which their plan could raise outweighs the damage it does to these unlucky few.
The damage in a nutshell
Under the proposal, this $55 billion in extra taxes will be put on Aussie retirees.
Labor has tried to mitigate this fact by painting up this image of rebate-less retirees as money-hungry fat cats with loads of investment properties and high profit-earning businesses.
But recent analysis shows that this isn’t the case at all.
Professor of economics at RMIT University and adjunct fellow of the Institute of Public Affairs, Sinclair Davidson, found through his study that 56% of those currently receiving these cash rebates are women.
Of these women, 68% are over the age of 60, and 47% of this group are either single or widowed.
And it’s this vulnerable demographic which Labor is willing to let suffer in order to stick it to the Big Four.
A slap in the face, to say the least. Especially when you consider that these tax hikes could have a range of flow on effects to the broader economy.
Analysis says banks won’t be heavily affected by changes to franking credits
According to Citibank’s analysis of the impact of this new proposal, it doesn’t look like it will be effective in the right places.
Citigroup said ‘potential changes to dividend imputation and the removal of cash refunds from investors is likely to have a meaningful impact on bank shareholders’, the ones relying on rebate payments.
But in terms of the banks themselves, Citigroup found that the change ‘could impact major bank valuations by up to 13 per cent.’
This is less than the impact the royal commission itself had on the banks, where we saw share price falls of almost 20%.
Therefore, Citigroup believe that the election itself could raise enough turmoil that will flow into the wider economy, insisting that the banks should ‘not be feared’.
Labor have their own interests in mind, not yours
But what voters should remain wary of is Shadow Treasurer Chris Bowen’s attitude towards scepticism of Labor’s proposal.
He says of those opposing the plan, they’re ‘entitled to vote against us’.
So it seems, rather than looking out for the little guy, Labor are only looking out for the ones that look out for them.
That’s not leadership. That’s blackmail.