Two reactions to Opposition Leader Bill Shorten’s Friday speech about inequality and the need for tax changes illustrates why Labor is again preparing to pursue a risky strategy of advocating significant tax reform ahead of the next election.
As Crikey noted on Friday, any mildly controversial tax policies would elicit a scare campaign from the Coalition. Treasurer Scott Morrison was promptly reported as warning of death taxes and inheritance taxes from Labor, presumably under the impression such ideas were so politically toxic even the mildest association with them is fatal. But in the current environment, does anyone really think, say, an inheritance tax set at a high threshold (the Tory government has a $700,000-equivalent per person threshold in the UK, and double for couples; it applies only to the amount over the threshold and doesn’t apply to spouse inheritance) would be fatal?
The other was from the Financial Review today, which in an editorial railed at Shorten for claiming that inequality was worsening in Australia. The Fin wants Shorten to drop the “empty bromides” and instead cut wages. “Australia’s alternative leader should focus on the real issues that affect the prospects of those he claims to represent. The bigger problem is that Australia’s inflated post-mining boom cost base is now being exposed by increased competition from abroad by the likes of Amazon and more fully integrated global supply chains.” Shorten should thus copy Bob Hawke and “[restore] profits and job growth by deliberately cutting real wages”.
[How will neoliberals respond to the populist onslaught?]
If this is the best the chief organ of neoliberalism in Australia has got — demanding real wage cuts to lift corporate profits — then the populists have got it made, because it simply reinforces their central message that the current economic system is delivering for the few while failing the many. After a generation of the share of income shifting from workers to companies, if the answer from neoliberals is “more please”, that will only further antagonise the electorate.
Shorten’s message — that there’s a two-tier tax system where most of us are stuck in economy but the wealthy get to take advantage of a much friendlier first-class tax system — will resonate in a disillusioned electorate. The government’s response, that Shorten isn’t interested in growing the economy, has the problem that for much of the electorate, the economy hasn’t been growing in recent years because their wages haven’t grown.
[Turnbull’s ‘conservative’ quandary is all about the N-word]
Instead of death duties, it seems Labor will pursue trusts. The ATO has been going after trusts more aggressively in recent months, but trusts remain a massive rort exploited by farmers and small businesses — to the tune of hundreds of billions of dollars. The Liberals know what a rort trusts are — that’s why Joe Hockey proposed taxing them like companies in 2011, before retreating under heavy fire from the Nationals and regional Liberals. But it’s also a widely used rort, with some 800,000 trusts in existence. Most users of trusts wouldn’t vote Labor if their lives depended on it, but that doesn’t mean they can’t wage a noisy campaign in defence of small businesses, the farming way of life, families, kiddies, etc. The tax dodgers at News Corp will shriek “class warfare”. Doubtless there’ll be variations on a theme we saw during the election campaign last year when Malcolm Turnbull and Scott Morrison promised to protect property-owning one-year-olds from the depredations of Labor.
The government will be hoping it plays out differently this time: Labor adopted a high-risk strategy on negative gearing and capital gains tax reform and the Coalition was entirely unable to make them pay for it. The electorate has moved further since then and Labor knows it can pull off a big-target strategy.
Don’t think, though, that the government won’t be thinking hard about how it too can further respond to where the electorate is going on this. On superannuation tax concession reform, the government went from preparing to attack Labor’s reforms (it’s your money, not the government’s) to going further than Labor proposed, albeit at the cost of an internal fight. There are opportunities for everyone in the rotting carcass of neoliberalism.
There are lots of potential targets for “tax reform” – trusts, negative gearing, capital gains, salary sacrifice, super, private health insurance rebate, leased cars are just some examples. Which ones does Labor have the guts to go after?
Good list Mr Smith. Perhaps add-in deductibility for tax advice, apparently quite a few of the million dollar plus earners who paid no tax managed it by claiming 7 figure deductions for tax advice. Would be pretty easy to set a limit of say 10% of earnings max. To everyone else that would be ridiculously generous, but to the average multi-million earner that would prevent some of the worst excesses.
More than that, there needs to be an ongoing culture of shutting down the loopholes, so that every time that mole rears its ugly head it gets whacked again.
In 1996, with the help of Australian Democrat careerists, Howard reduced the company tax rate by 16.67% and paid for the shortfall by introducing a highly regressive GST. This was flatly counter to the central core of the Democrats’ party platform A central figure in this sellout was Andrew Bartlett, who has now joined the Greens and wants to be given one of the Greens’ newly vacated Senate seats. Greens beware!
Re trusts: Shorten needs to list – in layperson’s language – three or four deductions/perks associated with trusts. Many people (particularly the young) wouldn’t have a clue what trusts are or the unfair benefits afforded to them.
Once all voters understand the inequity it could help Shorten through at the next election.
As, with the help of rogue Democrat Senators’ votes, Howard squeezed through hos regressive CST to fund his 16.67% cut to the company tax rate, Shorten Labor could well pledge to reverse this by restoring the company tax rate and junking the GST. Why not – whose side are they on?
Sorry, his regressive GST
Sorry Dion but GST replaced wholesale, sales tax which was an absolute disaster to administer and one of the most complex, inefficient and costly taxes on the planet. The problem with the GST is all the deals done to ‘modify’ it. Tax everything, same rate, no exceptions – then use the revenue to increase the welfare/support payments (compensation) for those who are impacted in lower socioeconomic-economics groups – pensioners, unemployed, those with disabilities etc. Simple because the government always has the mechanisms in the place to identify and make payments to those groups. Removing the GST would be a disaster (you’d just have to create the same thing by a different name) but fixing it would be straightforward.
Transfer it back to company tax. Taxing everything means the many pay more so the few can pat less. Same with sales tax. The eonowonks’ term for it is “regressive”.
Morrison has a point, he can rally the grey haired troops with scare campaigns about death duties and inheritance taxes. My 70- something mother listens to 2HD talkback radio every day and fear of it comes up whenever a politician mentions it. I over heard Mum and another lady her ago discussing how wrong death duties and inheritance taxes would be once when they were standing in a bank queue. When I asked her later why she would have an issue with the very rich paying death duties or their descendants paying inheritance taxes, she said it’s because it wouldn’t be the very rich paying them, it would be ordinary people, because politicians- ALL of them – always exempt the rich and go after ordinary people. So there’s your problem, in a nutshell. Yes, it takes a great deal of cognitive dissonance for the elderly to swallow fear mongering from Nasty party rep, Morrison – but they can remember some pretty nasty stuff from the ALP, too.
*her age – not her ago*
Where’s an edit button when you need one.
Hey, I’m grey (actually white) haired and there’ no way in a fit I’d be scared by stuff about inheritance taxes, given that in the UK it doesn’t start to cut in till the inheritance exceeds 700,000 pounds (around $ 1.5 million).
But, does your mother usually vote Labor? If not, not looking at a lost vote.
Some small business owners have extremely variable revenues and thus profits. A Family Trust can enable a small business owner to smooth out their personal tax liabilities over time. If a small business owner makes $1m in one year and nothing for the next three, in the absence of some smoothing mechanism, he/she is going to pay a lot more tax than someone who makes $250k in each of those years.
The conversation should be a little more nuanced than just bashing Family Trusts.
While that’s true Mr Fekete, the overwhelming anecdotal evidence is that trusts are used to farm out income to the lowest tax paying member of a group, whether it be an individual or a business, and then often enough the tax doesn’t get paid at all. The Obeid’s were noteworthy in not having paid tax on hundreds of thousands of dollars of distributions. Clearly there is very lax oversight of trust distributions as well.
Dog’s Breakfast, presumably that could be addressed by limiting the number of beneficiaries.
In less than 2 years we will have a Government which will be able to tell arseholes who plead hardship because they make only $1m every 3 years, instead of $250k annually (which is $750k anyway) where to go and what to do when they get there. Suffer, you plutocratic spiv. Is that nuanced enough for you?
Rhwombat, warrior of the left are you champ; everything’s binary in your little world I guess?
I’ll remind small business owners of what the rest of the workforce has been living with for the last 30 years:
The world does not owe you a job.
Duncan, this thing where people just jump on and attack each other is something I would anticipate at the Telegraph. Not possible to have a sensible conversation here?
Not an attack, but a statement of reality.
I’ve heard the ‘world does not owe you a job’ talk in more than one workplace (it was meant to motivate us).
JF’s post read like a case of special pleading.
Some Australians can ‘smooth out their personal tax liabilities’ over a number of years but PAYG taxpayers have no such opportunity. This is not ‘bashing family trusts’, it’s pointing out a pretty glaring inequity in the tax system.
I really do try to keep it civil – and sensible.
Joe…usually folks are relatively civil around here, but this inequality thingy is becoming a very angry topic for the ordinary worker…and those in the community who support him/her.
When we get trolls on here suggesting that small business owners need trusts because their $1 million income per annum might turn into $250,000…there is not a lot of sympathy from those who earn less than a quarter of that…if they are lucky!
This putrid government thinks ordinary folk are stupid…that we don’t know how much profits for businesses and CEO salaries have increased, while workers get virtually no wage rises…despite good productivity gains.
But one thing the workers haven’t realised yet, is that they will only achieve equality through POWER…and that power will only come through everyone joining their relevant union…and standing up to these parasites. It is not possible for individuals to do this.
Sorry if that is not ‘sensible’ enough for you!!
Duncan and CML, I am JF. I am also a Crikey subscribing Labor voting rabid fucking leftie who believes in the Unions, collective action, penalty rates, the welfare system, genuine tax reform and whatever else you care to throw into the mix. I don’t want tax cuts, either personal or company. I am quite happy with the idea of death duties and inheritance taxes and I’ve never earned $1m in my life.
Guys, the above was an example. Would it have been better if I’d said $500k over 10 years – would that have been better than $1m over 4? Cos fuck-knuckle above couldn’t even get his head around 1+3=4 and tried to be smartarse about it.
Why do I get called an arsehole and a troll for suggesting Family Trusts are not as evil as comrade Rhwombat thinks? Can’t the Crikey-police cope with an alternative opinion?
Seriously guys, I thought the right had the monopoly on one-eyed brain-dead fuckwittery.
Actually, Duncan, if the world doesn’t come up with jobs or money, most current business models will die. There is a job loss tsunami on the way. Within very few years there will be millions out of work in Aus. Taxi/bus/truck drivers, bricklayers, paralegals, accountants & lawyers to name just a few of the jobs to go. All at the feet of automation and AI.
Seeing the writing on the wall, several countries are experimenting with a universal wage, perhaps financed by robots. No doubt Australia won’t experiment in this area, its just not in our nature, but sooner or later we’ll be dragged into some sort of ‘dole’, if we want small and big business to survive.
Where did Stutchbury earn his membership of the privileged class he fights to protect?
I think you will find that was at the mudrake press, Klewie…Stutch transferred all his malevolent crap from Ltd News (The Australian) to the Fin Review it seems.
No accounting for those drongos at Fairfax for hiring him in the first place!!!
A simple shovel would have been cheaper.
I think he just wants to be liked by the rich and powerful.
Some people are deeply and sincerely impressed by wealth.