In what may be an ominous development for the opposition, debate around Labor’s revamped stage three cuts has moved on, or is being moved on, from discussion of Labor’s broken promise to demands for more reform.
The Coalition wants the focus to stay on Labor’s breach of faith and “class warfare” (remember the truism that if someone makes accusations of class warfare, they’re the ones engaging in it?), but it seems as if the broken promise is yesterday’s news. Even the criticism of Labor that it has locked in bracket creep for a decade is more about how to improve the tax system than why stage three should never have been tampered with.
One of the main offenders is The Australian Financial Review, which could normally be relied on to defend the interests of high-income earners, but which, in the manner of a neighbourhood dog hearing distant barking and deciding to join in, has decided if tax is being talked about then it’s time to bang on about “tax reform”. It has devoted two articles in the past two days to lining up some usual suspects to call for “genuine” tax reform.
There are some good faith participants. Teal MPs Kate Chaney and Monique Ryan back Labor’s tax cuts but both want more reform — Chaney urges the gold standard bracket creep reform, indexing tax thresholds. Other teals are umming and ahhing, reflecting that, especially in Sydney, they reflect the kind of affluent electorates where the changes will see more losers than winners.
But as always with any calls for “economic reform”, it’s best to assume whoever is calling for it is simply being self-interested, until proven otherwise.
At the most blatant end of the scale is Crikey’s long-time industrial relations favourite Innes Willox at Australian Industry Group (Ai Group), who wants the value of the tax cuts docked from any increase in the minimum wage for low income earners. Even by Willoxian standards, this is extreme stuff. Not merely would that punish low-income earners but it would amount to a direct transfer of worker incomes from the private sector to taxpayers — the kind of logic that saw billionaires promoting universal basic income (remember that?) because it would enable them to slash wages.
Willox lamented that a minimum wage rise and the tax cuts would be a “double whammy” for employers, as if it would be employers paying for the tax cut. It turned out, once you made your way through the thicket of his explanation, the “double whammy” was that it would have an “inflationary impact”. Except, Willox, apart from the modelling that suggests nil additional inflationary impact, how is that impact supposed to manifest itself? Through, erm, extra demand for the goods and services your own members produce. Innes is complaining that low-income earners will have more money to spend with his members.
The business lobby is, with the inevitability of a broken record, also complaining that tax reform to boost productivity and competitiveness is needed. Anyone who didn’t come down in the last shower knows that’s code for raising the GST and cutting company tax rates, although Business Council of Australia (BCA) head Bran Black sensibly referred only vaguely to “our current settings, across the board, are falling behind many other countries and that has real-world consequences when investment and jobs go elsewhere” (thank goodness all those jobs are going elsewhere, given how tight the labour market is).
At least Ai Group and the BCA are consistent in their demands for workers to be impoverished to boost profits. At the AFR, though, calls for “tax reform” are utterly disingenuous.
See, a party took a large and detailed, high-quality program of tax reform to an election. That was Labor in 2019. Its negative gearing changes, to confine it to new housing supply, were sensible both in fiscal and housing policy terms — indeed now look prescient. Its push to end the Howard government’s changes to franking credits would have ended a monumental rort (as would the changes to salary packaging taxation in 2013).
Did those tax reform addicts at the AFR support those changes? No way. The AFR became the in-house journal for the deeply misleading push by rich retirees to stop the franking credits changes — indeed, ever since it has been happily whipping up scare campaigns about franking credits. And it defended negative gearing, peddling the lie that low-income earners are the people sitting around with multiple, taxpayer-subsidised properties to their name.
Just last week, an International Monetary Fund staff paper on the Australian economy recommended: “The capital gains tax exemption for the sale of main residences, costing around 2.5% of GDP annually in forgone revenues, should be restricted.”
It’s not the first time the IMF has urged such reform. Did the AFR and business lobby groups seize on what is a A$55 billion tax concession and urge reform there? Or is that kind of reform a little close to, well, home for the AFR’s wealthy home-owning readers?
The AFR runs op-eds demanding Labor be “courageous” on tax and lamenting it hasn’t got the ticker for big changes. If you could tax self-interest and hypocrisy in the media, you could make a motza.
Has Innes Willox gone too far this time? Let us know by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
