Grattan CEO responds to Judith Sloan

by John Daley

Commentator Judith Sloan criticised Grattan Institute in an article published in The Australian on March 21. Grattan CEO John Daley responded in a Letter to the Editor, published the next day. This is the unedited letter:

Dear Editor,

Judith Sloan (21/3) says the Grattan Institute has a conflict of interest when analysing Labor’s dividend imputation policy. She has a strange definition of a conflict of interest. Grattan is not “a direct beneficiary” of the policy: it neither stands to gain nor lose from the changes proposed. By the Sloan definition, every participant in public debate is conflicted because a politician might propose some different policy in future that affects them.

Sloan also claims Grattan made factual errors in our analysis based on “out-of-date information”. But as she knows, many part-pensioners can have well more than $1 million in assets and still receive a part-pension, because the value of their home is exempted from the pension assets test.

As The Australian’s Adam Creighton pointed out (14/3), superannuation and other tax concessions have been absurdly generous to older people on high incomes for more than a decade. These age-based tax breaks help explain why the proportion of seniors paying tax almost halved in twenty years.

Abolishing cash refunds, but keeping franking credits for those who do pay income tax, is not the best policy. It abandons the principle that all company profits should be taxed at an investor’s marginal rate of income tax.

A better policy would reintroduce a number of higher-income, higher-wealth older Australians to the tax system by taxing superannuation earnings and abolishing age-based tax rates.

But so long as commentators such as Sloan refuse to acknowledge that a tax-free retirement is unsustainable, Labor’s policy may be the best Australia can hope for.

John Daley, CEO, Grattan Institute