IPA Today

Stage Three Tax Cut Debate Will Be Cancelled

Written by
22 September 2022
Originally appeared in The Australian Financial Review

Labor running a ‘big national conversation’ about ‘how we fund the things that we value’ will end up only one way – a discussion on how to raise taxes.

And so it begins. And no one should be in the least surprised. Perhaps what is surprising is that it didn’t happen even sooner.

Labor has been in office in Canberra for less than four months and already Treasurer Jim Chalmers says he wants “a big national conversation about the structural position of the budget and how we fund the things that we value not just in our economy, but in our society”.

The Labor Party running a “big national conversation” about “how we fund the things that we value” will end up only one way. It will be a discussion about how to raise taxes.

Reserve Bank governor Philip Lowe said as much last week. He also pointed out that despite unemployment at a 50-year low and the highest terms of trade on record, Australia still somehow managed to have an enormous budget deficit.

Every indication is that the conversation will go the same way as an episode of the ABC’s Insiders. Everyone will agree with everyone else. Exactly as occurred at the already-forgotten Jobs Summit a few weeks ago. There was no genuine debate about anything. The Summit had a pre-ordained outcome, which was duly delivered upon.

As business representatives participated in the pantomime, the 33 union delegates (out of the 142 people at the Summit) talked among themselves knowing the government had already promised to give them most of what they wanted.

Every indication is the conversation will go the same way as an episode of the ABC’s Insiders. Everyone will agree with everyone else.

You can easily predict the topics that won’t be up for discussion. For example, regardless of what the public think, it’s already been settled that immigration will return to pre-pandemic levels.

Likewise, no consideration will be given to whether taxes are, in fact, the best way to pay for “the things that we value”. There might be some things individuals and families should pay for themselves and which the government has nothing to do with – such as childcare. “Free childcare” actually means young working-class singles paying for middle-class parents to increase their incomes even further. “Free childcare” is a wealth transfer from the poor to the rich as inequitable as the government offering “free university education”. To admit this, though, risks being cancelled.

The shape of the conversation is already clear. First, the Coalition’s “stage three” tax cuts will be cancelled and then the tax increases will come. The arguments for abandoning those tax cuts will be more polite than the way they were written about in The Guardian recently, but their meaning will be the same. “The stage three tax cuts are a pile of garbage, and everybody knows it … a rotting pile of garbage from the Turnbull-Morrison years that no one is, as yet, willing to throw in the bin.”

It’s true the tax cuts are legislated but Labor would have no problem getting the numbers in the Senate for their repeal. Admittedly, abandoning them would break an election promise but the ALP’s rhetoric won’t be complicated. “We can’t afford them. They are pre-COVID-19 commitments. Anyway, if the Coalition thought they were so important why didn’t they implement them instead of promising them on the never-never?”

The Liberals will have a political problem defending tax cuts. Many Liberals (not all) have convinced themselves that the best way back to government is by regaining the “teal” seats and being more teal than teal. Certainly teal voters like tax cuts as much as anyone, but Liberals arguing for tax cuts for “the rich” hardly fits with the kinder, gentler teal-friendly brand some Liberal MPs yearn for. The Liberals will learn it’s difficult being half-teal.

One MP has already rehearsed the lines of retreat. He told the ABC last month: “When things change, we should change. The world has turned on its head since the tax cuts were introduced. So people like me don’t need tax cuts … We could be spending that money on social housing, defence, it goes on and on. We’re just sending the wrong message to the Australian people at this time that tax cuts for the wealthier cohort of our community are acceptable.”

That was from Russell Broadbent, a backbench MP. He’s a Liberal.

It looks for all intents and purposes as if Chalmers’ “big national conversation” is over before it even started.

If you've enjoyed reading this article from the Institute of Public Affairs, please consider supporting us by becoming a member or making a donation. It is with your support that we are securing freedom for the future.
JOIN DONATE

John Roskam

John Roskam is a Senior Fellow at the Institute of Public Affairs

Become a Member