Lowering petrol tax (1 Viewer)

[Enteebee]

Nelson's Budget reply: slash petrol tax

By Samantha Maiden
May 15, 2008 07:55pm



BRENDAN Nelson has challenged Kevin Rudd to slash petrol taxes by 5c a litre if the Prime Minister is serious about reducing cost-of-living pressures.

After years of refusing to cut petrol taxes further in government, Dr Nelson has tonight staked his Liberal leadership on the $1.8 billion tax cut, admitting "there is only one way the Australian Government can do something about the price of petrol - and that is to cut taxes,'' The Australian reported.

In the traditional Budget-in-reply speech to outline the alternative government's economic blueprint for the nation, Dr Nelson has also confirmed the Opposition will offer tax breaks to small business retirees and will use its numbers in the Senate to block the $3 billion tax hike on alcopop drinks.

The Coalition, which will control the Senate until July, also pledged to block moves to remove the Medicare surcharge tax trap for people who fail to take out health cover.

Despite claims it will provide tax relief, the measure will slash spending on the Medicare rebate by 30 per cent, with Treasury estimating up to half a million Australians may drop out.

“We stand up for Australians with private health insurance. We always will. We will oppose this measure,’’ Dr Nelson said.

In his reply, Dr Nelson told parliament tonight: "This is an old-fashioned, high taxing, high spending Labor budget that seeks to punish those it does not like and discourage aspiration.

"Labor is giving with one hand and taking back with the other - and not just through knee-jerk measures such as the new Tarago tax on cars or the $1 slug on responsible Australians who happen to enjoy a pre-mixed Bundy and Coke or scotch and dry.''

For seniors, the Coalition will also not support Labor's changes to the income test for the commonwealth seniors health card that will see thousands of older Australians lose the concessions.

On petrol, Dr Nelson said rising prices were now hurting Australians.

"There is only one way that an Australian government can actually do anything decisive about the price of petrol - and that is to cut taxes,'' he said. "So tonight I propose a cut in fuel excise of 5c a litre.''

Promising a real education revolution, Dr Nelson has also called for university entrance scores to be lifted for teaching courses and a requirement that all trainee teachers be taught how to teach children to read using proven techniques, including phonics-based instruction.

Dr Nelson said tonight he would hold a forum on teenage binge-drinking but rejected government claims the new tax on alcopops would tackle the problem.

"This is nothing more than a tax binge falsely presented to Australians as a health measure. We will oppose it,'' he said.

Dr Nelson also pledged to use the Government's inquiry into carers to push for a better deal.

And he would also offer additional support to small business, the "backbone of the nation".

"Therefore we are announcing tonight a major reduction in capital gains tax for small business,'' he told parliament tonight.

"The current 15-year rule with respect to waiving capital gains tax on the sale of a small business entity on retirement from the age of 55, was an incentive to small business introduced by the Coalition in government.

"To further encourage small business men and women to invest in establishing or taking over a small business the Coalition will introduce a 5-year rule for CGT on sale of business for retirement.

"After owning an operating a small business for five years, we believe you should be entitled to CGT relief should you sell your business for retirement.

"You should be rewarded -as you should if you can grow and increase the value of your business.''

Um can someone explain to me how this won't just raise demand?

 

[Stevo.]

Populist.

 

[foram]

Um can someone explain to me how this won't just raise demand?

i dunno. maybe reserve bank will just raise interest rates even more to keep inflation down, so people won't have enough money to buy the petrol even after the 5c cut.

 

[chicky_pie]

What? Rudd promised before the election that 'working families will see petrol prices go down and groceries prices down' ever since then, the prices have gone up, and he set up for some old dude to watch petrol prices, without actually doing anything.

Did you fall for one of his gimmicks?

 

[Enteebee]

surely someone can defend this?

 

[han-]

Using economic models, the tax cut wouldn't "increase demand", but it wouldnt decrease the cost to the consumer by 5cents. The five cents would be shared between the consumer and producer.
It would increase quantity traded however which isnt good!

 

[Enteebee]

which economic model shows the tax cut doesn't increase demand?

 

[blakegman]

Total Surplus and quantity traded would rise and government revenue and deadweight loss would fall.

Im guessing the higher amount of petrol traded would deplete supply in the long run and raise prices anyway, quicker then if the tax remained.

 

[blakegman]

which economic model shows the tax cut doesn't increase demand?

just look at a supply and demand model with the effects of a tax. Lowering the tax leads to an extension of demand, not an increase.

 

[kaz1]

They need to show that they are fighting inflation somehow since the $40 billion tax cuts and cutting petrol prices will just increase inflation.

 

[Enteebee]

Commentary on the same topic from the US election:

Refiners run near capacity every summer as families rack up miles on family vacations. That’s one reason why gas prices jump in the summer. If McCain’s excise tax cut translated into lower prices, we’d all want to drive more, which would push up the demand for gasoline. [Greg: Actually, it's quantity demanded, not demand, since this represents a movement along the demand curve, not a shift in the curve, but perhaps pointing that out is too pedantic.]

Since the refiners can’t produce much more without building new refineries, the price has to go back up. Higher prices might stimulate a little more production and we might import more gasoline from our neighbors. But the price [received by refiners] will have to increase by almost the amount of the tax cut. Otherwise, there will be shortages. Unless the plan’s aim is to boost short-term profits for petroleum refineries, the proposal makes no sense.

http://taxvox.taxpolicycenter.org/blog/_archives/2008/4/15/3641270.html

It seems to me that you'll end up paying almost the same amount for petrol, while we polute more and the government loses money that can be spent on research/better roads etc to really tackle the problem.

 

[han-]

It seems to me that you'll end up paying almost the same amount for petrol, while we polute more and the government loses money that can be spent on research/better roads etc to really tackle the problem.

Yup i agree. Should be raising taxes if anything (im probably only saying this because i dont buy fuel though)

 

[Aryanbeauty]

Even if petrol price goes up to $ 5 a litre, it will not stop anyone from driving, simply because it is still cheap.

 

[shannonm]

would stop alot of people since that is more than double what they pay in europe

 

[Omium]

lol, Instead of Lowering Petrol tax to save each of us $4 a week, Wouldnt you like to spend that tax on hospitals.....

 

[Captain Gh3y]

Malcolm Turnbull laughs at this idea.