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.
Willox has officially defended into self-parody.
His extremist views shouldn’t be oxygenated.
He spouts the same predictable crap regularly. The AIG could sack him , save hundreds of thousands of dollars every year and simply regurgitate his press releases in random order.
It’s yet another measure of how hobbled our public sphere is, and how dominated by a handful of not particularly bright or visionary self-interested voices.
We DO, urgently, need a proper debate about tax reform. And the tax reform that is needed is a shift away from taxing incomes and consumption and towards taking WEALTH. Which means at minimum serious capital gains tax reform and an inheritance tax on the already wealthy.
Nobody in politics is going to spook the horses by putting anything like that on the table, so we’re left with the Fourth Estate to play it’s role. So … we’re completely stuffed, in other words …
Which does not look at all like a strange idea, given we already bizarrely, have low-paid workers who also pay income tax and receive welfare. In other words employers’ wage costs are already being subsidised by the state, so replacing welfare with a UBI subsidising wages would not be a real change, it would just simplify things a little; and it would be even better if (highly progressive) income tax did not kick in until at least the median wage level.
Not sure how a UBI lowers wages. If you give everyone enough to live on, employers will have to compete harder for labour.
If we want tax reform, how about we start with land tax and wealth tax, get rid of income tax, give the trickle down set what they want. I want to see the backflips
“ If you give everyone enough to live on”
That’s a big if, Franky. The UBI rate would be set by the same people who think Newstart is enough to live in, remember.
And all kinds of corporate type billionaires were soo in favour of a UBI. If they thought it was a positive for them, no way it was going to be a positive for the rest of us. They most certainly would use it to cut wages, arguing the state was paying for everyone now. Do you trust them to do anything else, given the evidence in front of you?
Employers should be offering higher wages and competing for labour now, given the unemployment rate- yet it’s not happening.
The problem is, even if you did have someone setting that level in good faith, what “basic” are they setting the level for ? A “basic” level of income varies wildly depending on the recipients personal circumstances and location (eg: 18yo living at home vs single parent renting in Sydney).
UBI is the result of a “for any complex problem there is always an answer that is simple, obvious, and wrong” process.
If we’re going to look at the whole of taxes, I’m with you on land tax and wealth tax, but I’d keep income tax after making big adjustments and ensure all capital gains are taxed at an equivalent rate so that it is no longer easy for the wealthy to dodge tax by switching from income to assets. No more negative gearing and close the franking credit loophole. Inherited wealth needs to be addressed to get a grip on growing inequality; the weird aversion to taxing the wealthier estates (so-called death duties) can be acknowledged by simply including all bequests (above some threshold maybe) in taxable income, thereby taxing only the income of the living, not the estate of the dead. Related measures are needed to deal with the abuses associated with family trusts and so on. So much for personal taxes. Then we get on to closing the outrageous exemptions given to those who claim to be promoting religion (although other charitable actvities would still have exemptions), and all the corporate taxes and royalties where huge great loopholes need to be closed and the public given a proper return for the exploitation and extraction of national resources.
Because if employers don’t need to pay a wage high enough for their workers to survive on (thanks to the Government kicking in a UBI that makes up the difference), they won’t. That difference (liveable wage – UBI) will go into profits.
Assuming the “basic level” could be reasonably set, something like, say, 20% over and above that is a not insignificant increase in relative terms to the recipient (ie: easy to attract workers), but still a lot less than whatever the same level of salary would be out of the employer’s pocket in the absence of a UBI.
UBI is bad policy.
UBI is the minimum amount for the very poorest in society to live on. Rent, food, bills, etc. You can choose not to work and still survive. Nearly all studies, and they’ve been loads, show that nearly everyone who has a UBI still works.
Owners of capital have to pay higher to compete with the UBI, they don’t simply top up the amount. A UBI, expensive as it may be, saves a lot of costs because of simplification, it also saves an extraordinary amount because of greater society participation, saved health, mental health costs, the list of savings is LONNNNNNGGGGG
Live on where though ?
The living costs in Sydney are vastly different than even, say, Brisbane, let alone places where it’s actually cheap.
How will the UBI be calculated ?
I don’t think anyone seriously suggests a UBI will stop people working. A UBI is a poverty level income, and being poor sucks. Few will choose that if they have better options (like employment).
Maybe an example will help:
Let’s say someone is happy to do job A for, say, $50k. Their cost to the employer (oversimplifying) is $50k.
A $20k/yr UBI is implemented.
Person is still happy to make $50k/yr doing Job A. They do not care that $20k of it comes from the UBI and $30k of it comes from the employer. What they care about is how much money goes into their hand.
Cost to employer for that worker is now $30k/yr, and they have $20k more profit.
Almost all of which could be realised by fixing the punitive welfare system for the unemployed.
“ it would be even better if (highly progressive) income tax did not kick in until at least the median wage level”
Wouldn’t that be nice? I’d never pay income tax again. But since those of us earning well below the median wage are half of the base for income tax revenue in a country ridiculously dependent on it, sadly it won’t happen, Ratty. We have to pay their way so the high income earners can continue minimising their tax.
“Willox Bollox – Ch. DIX.”
Someone commented elsewhere that the wealthy Teal voters tend not to vote so much on hip-pocket issues.