Paging ScoMo
Rex Bevan writes: Re. “Morrison can run but can’t hide from S&P” (yesterday). No government can ever produce a budget surplus while we keep handing out $20 billion a year to rich people via franking credits, for no obvious reason. When will this fundamental fact sink in?
On Wilkieleaks
Wayne Bartlett writes: Re. “So how did Bolt get hold of Wilkie’s top-secret Iraq War doc?” (Friday). The AFP are well within their rights to track do the source of a leak, no matter how much a journo or others think the leak was with the right intentions. The other side though is they may not coerce the press to name source through the instruments of the state such as arrest. That said, there should be a demarcation between the press acting as an instrument of informing the public and the press waging political campaigns such as we see in The Age and Bolt in the Sun.
Rex,
Shareholders are taxed on franking credits. Suppose a shareholder receives a $100 franked dividend. There’s a franking credit of around $50. Tax is assessed on $150 (the original dividend plus the franking credit) and then the franking credit is deducted, so not all the franking credit actually goes to the shareholder.
Shareholders on a lower marginal tax rate get to retain a higher proportion of the dividend too, and may also have a residual credit to apply to other income, so it’s a progressive concession.
Removing franking credits would, besides leading to double taxation, mean that the share prices of companies actually paying tax fall. Leading to lower revenue from the capital gains tax. It would be more sensible, from a revenue viewpoint, to reduce the capital gains discount to say 25%. Or to index it against inflation, as was previously done (which I hated, because it was difficult to calculate).