With its changes to the stage three tax cuts set to sail through Parliament, the Albanese government appears to have achieved the impossible: successfully polishing a turd.
Yes, Labor’s modified version is definitely better. It will distribute the benefits of the tax cuts more evenly to people on lower incomes, and by maintaining the 37% bracket it prevents the flattening of our progressive tax system. Sure, it’s a good thing that the government (finally) pulled its finger out and took a better position on this neoliberal bonfire, and congrats to them for weathering the inevitable, apoplectic attacks from their political enemies and the corporate media ghouls (“broken promise!”, “socialism!”, etc) and emerging unscathed.
Indeed, polling suggests that Labor’s changes are quite popular with the electorate — which pours serious doubt on the notion that to win in 2022, Labor had no other choice but to support the Coalition’s policy in full. Turns out voters can be very receptive to good, progressive policies, provided you believe in and fight for them. Who knew?
But the problem remains: a turd rolled in glitter might be prettier than your average turd, but it is still very much a turd. Slashing taxes for the wealthy in an already-unequal Australia was a terrible idea when it was being cooked up by Malcolm Turnbull and Scott Morrison; it was a terrible idea when it was enshrined in law (with bipartisan support from the ALP); it was a terrible idea when it was being repeatedly defended by the Albanese “No One Left Behind™” Labor government for more than 18 months; and it remains a terrible idea today.
With its modifications, Labor has merely stepped over the criminally low bar of expectations set by the stage three package, and the party is now trying to laud itself as some great champion of the common man.
I don’t think we should let them get away with it.
First, while Labor’s stage three changes may be fair-er than the previous iteration, it’s still egregiously inequitable policy. The bottom 40% of income earners were set to receive less than 1% of the benefit of the Coalition’s tax cuts; under the government’s version, they’ll be getting just 9%. The people in the highest tax bracket have now had their potential tax cuts halved, but they’ll still be receiving an extra $4,500 per year.
In a country where the richest 1% holds 50 times the wealth of the bottom 60%, and where one in eight people — including one in every six kids — are living in poverty, the party of the worker is still committed to handing out $84 billion over the next decade to the top 5% of earners.
This, apparently, is the best and fairest possible way to tackle the cost of living crisis.
Second — and this critique has been almost entirely absent from the debate — there’s still the matter of what these gargantuan cuts will actually mean for the country. Labor’s plan will still see the Australian government wave goodbye to more than $300 billion in foregone revenue.
If you share the view of plenty of (rich) conservatives — that the government only collects tax so that it can dump it into a massive fire pit and set it ablaze and laugh and dance in the shadow of the flames — then this is tremendous news. But if you live in the real world, where universal public institutions funded by progressive taxation are fundamental to a decent, functioning society, you’ll know that this is very very bad, because it’s going to mean future cuts for our already-underfunded public services and the welfare state.
Unless, of course, Albanese and Chalmers are secretly planning to bust out some brave and radical new tax reforms to raise hundreds of billions of dollars over the next decade. Hold your breath!
At a time when you’d hope a self-proclaimed “progressive” Labor government would be using tax revenue to materially improve the lives of ordinary people — by building more public housing, fully funding and expanding our public healthcare and education systems, investing in the green transition, or maybe even just following its own expert panel’s advice to lift those on JobSeeker out of poverty — the Albanese government has instead resigned itself to a tax giveaway bonanza that will further widen the gap between the rich and the poor, and seed a brutal austerity program for us to all enjoy in the near future.
We deserve better than this. The tax-phobic bullshit we’re constantly fed by the media and political classes, and which has been used to justify the horrors of stage three, must be roundly rejected. In truth, Australia needs to collect more tax, not less.
Contrary to what you might hear from the geniuses at the Australian Financial Review, Australia is a low-tax country: accounting for state and federal taxes, our total tax-to-GDP ratio was at 29.5% in 2021, which makes us one of the lowest-taxed nations in the OECD. Switzerland, Iceland, Norway and Denmark have higher levels of tax than we do, which should mean that their economies are weak and miserable — yet somehow all those countries enjoy a higher GDP per capita than Australia, as well as better public services, a stronger welfare state, less inequality and more happiness.
So, comrades: let’s make it tax time. Let’s fight for wealth taxes, inheritance taxes and the Buffett rule (that is, a deductions cap that ensures high-income earners pay a minimum amount of tax — a popular policy that Albanese used to believe in).
The fact that well-paid FIFO workers and Gina Rinehart are in the same tax bracket is insane, so whack a few more tax brackets in there, and while you’re at it let’s get back to the mid-twentieth century, when the top marginal tax rates in Australia was above 60%. We should scrap stamp duty (a tax on buying a house? Come on!) and impose property and land taxes instead. We should tax massive financial transactions and banks. We should end the use of super accounts as tax shelters and we should collect windfall taxes when energy companies make bajillions simply because Russia invades Ukraine. We should make the fossil fuel companies actually pay their taxes, and then we should tax them some more, just for fun.
The democratic redistribution of wealth and resources is fundamental to winning a better and fairer country. We simply cannot give up on that idea — otherwise, there’ll be nothing but countless more turds to come.
Fully agree with just about all that, we should never have allowed the wealthy to get the tax system so completely bent out of shape.
Also, at the same time as fixing the taxes, the enforcement needs to sorted out too. For decades all governments (no matter who you vote for, the government gets in) have gone to very extreme measures to hammer the comparitively tiny problem of welfare fraud, and at the same time have discouraged the ATO from making any serious effort on large-scale tax fraud and relentlessly cut the resources for investigating; even though it has always been known that each tax inspector will normally recover many times the inspector’s salary in a given year.
Minor point:
Maybe, but it is a big mistake to concentrate so much on income tax. For the seriously wealthy, income tax is usually not the point. Capital gains and other taxes are far more relevant, along with the whole paraphernalia of tax-dodging options available such as family trusts and tax havens. Liliane Bettencourt, the L’Oréal heiress, was for many years the world’s wealthiest woman and yet paid no income tax in France, her country of residence, for the simple reason her annual taxable income was below the income tax threshold. It’s easy when you know how.
Yes it is a well written and considered essay. Financial transaction tax and land tax are well established as good taxes. Capital gain can be a bit rude when you’re not really cashed up and need every cent of that capital gain. As for more brackets, great.
Where are those cross benchers when we need to squeeze some two party testicles?
Good points. This article has a good bookend with Gittens on the same subject in the Age today, https://www.theage.com.au/business/the-economy/how-top-earners-kid-themselves-and-us-they-re-overtaxed-20240222-p5f76b.html
But that distinction you make between the inequality in wealth as opposed to income is a key one. The tax system is very poor in relation to taxing wealth, as you would expect in a capitalist system. Debates about fairness in income tax are very important but are also to a great degree arguments between, and about envy directed within, the bulk of people who largely rely on a wage or salary for a living. Progressive tax is really important, in principle and its effects, and certainly the top 1-5% income earners are very well off, and well rewarded. Many of them become indistinguishable from the wealthy as they transform income into capital assets. But by not taxing wealth effectively we remain more reliant on income tax and then expend energy and divert debate into middle class v working class incomes. Which perfectly suits the conservatives. It is ironic/tragic that both the middle and working class are beset with anxiety about their falling living standards but are conned into seeing the debate as being about a zero sum game between them.
I note as an aside the continual demand for immigration largely rests on an assumption that we are and will remain dependent on income tax to support our state services and benefits.
The top 5% starts at about $180k, through to about $190k.
Even the top 2% only goes from about $240k to about $280k
These are high incomes, and the people on them certainly shouldn’t be struggling for any reason that isn’t self-inflicted. But I can guarantee you there is a very large distinction between a mostly unremarkable white collar middle-aged professional going to work every day and “the wealthy”, and other than their family home, those people are probably not turning that income into a lot in the way of capital assets (especially if they live in Sydney or Melbourne, and to a lesser degree Brisbane/Canberra/Perth).
In as much as taxes fund things, the typical immigrant will cost more in consumption of services and infrastructure than they return in taxes. Even more so if they become a permanent resident or citizen and get old here. So sure the overall tax take goes up, but the expenses go up more (and the overall capability/quality drops).
The reality is the federal Government doesn’t need taxes to fund services, it just needs the resources to deliver them. Unfortunately it likes to pretend it does need the money, and we are all worse off because of that.
Thanks for the nuance in your first point. Agree not truly wealthy but over time, especially a two income power couple, can accrue capital assets and get skin in the game. But yes largely this group either provides specialised services, often to the wealthy, or runs the overall system for the wealthy, which includes directing workforces. The system’s logic being promoting capital accumulation for those with capital.
Your second point is complex, especially the last sentence but I will think on it. We seem to be in agreement that the argument for immigration that goes that “because without more workers there would be a fiscal crisis” is a furphy. The crisis would be that with less income tax other sources of taxation, such as wealth, would need to be found. Thus creating a conflict between the state and those the state is set up to protect.
Wealth taxes please – including the sacred family home. Land taxes are a good start.
Hell yeah, Tom Ballard! Almost makes up for the loss of Maeve McGregor. Love your work, Tom! (Except for getting Tonightly axed – the Batman bit was pure gold, but it wasn’t worth the whole show.)
But mate, you’re dreaming if you think we’ll ever get anything remotely approaching sensible policy up in this joint. That would be like suddenly expecting to see an outbreak of social justice. Whitlam was the exception proving the rule: we’re dumb colonials doing dumb colonial sht, until we drown in it. Our defining characteristic is our determination to piss everything away.
Where did Maeve McGregor go?
That’s what I’d like to know…
Her linkedin has her leaving Crikey in January, but no current employer. Quick search doesn’t turn up any recent articles. Doesn’t look like there’s a substack. Maybe she got a gig in Albo’s office too?
A sad loss for Crikey. I had been wondering why we hadn’t a good blast from Maeve for a while…
Am I right in thinking that Howard and Costello are jointly responsible for many or even most of the absurdities in our tax system? And that they should always be given full recognition in discussions like this one?
Probably, but let’s not forget Labor’s meek acquiescence, nay, crypto-support.
This revision of Stage 3 might as well have been planned from the beginning, as a way to get away with it. Now with 5% less rat sht.
Keating (and the modern Labor party is largely guided by his ideas) was a fairly major contributor as well.
Great to see Tom on Crikey! More please.
It was ancient wisdom that rule by poets is preferable to rule by kings.
After the industrial revolution that was modified to “better philosophers than bean counters”.
Today it seems that the only decency available in the public sphere is cartoonists so the new maxim should be “Better comedians than politicians!”
As a comedian, Tom is a good policy analyst.
More, please.
It was Plato, in his Republic, who proposed as an ideal a nation ruled by philosophers.
Victorian civil servants were exceptionally well read (unlike shallow keyboardists such as yourself who have to google everything to pretend a knowledge they neither have nor can understand from such cursory ‘research’ – eg you clearly have not read Greene’s book as he made it plain on the first page that he was using ‘comedian’ in the classic sense of actors in a drama, not jokesters – much less the Toton).
The Indian Civil Service had the most rigorous of all entrance tests with a 97% fail rate. The failures then joined the domestic service as a fall-back and would have been able to quote Plato in the original (again sans googling) so knew of which they spoke when very specifically preferring philosophers to bean counters and not even countenancing any place in government for the lowest species of all, shysters and their ilk.
Alas, 2/3 of our MPs are Ba LLB or worse, too slack to have bothered with Articles or practice before getting their snouts in the trough.
It shows, doesn’t it?
Ha ha ha ha. How little you know, grasshopper. And how much you foolishly assume.
A society run by comedians?!
Sign me up, yesterday.
First Dog on the Moon for PM. Ballard for treasurer.
On the other hand, Grahame Greene thought Haiti under ‘Papa Doc’ Duvalier and his secret police, the Tontons Macoutes, was a society run by comedians, as described in Greene’s book of that title, published in 1966; Haiti was perhaps more amusing when viewed from the outside than from within. Papa Doc did not seem all that amused, either. His Ministry of Foreign Affairs responded with a brochure Graham Greene Demasqué (‘Finally Exposed’) which said Greene was ‘A liar, a cretin, a stool-pigeon… unbalanced, sadistic, perverted… a perfect ignoramus… lying to his heart’s content… the shame of proud and noble England… a spy… a drug addict… a torturer.’ (Greene said he was a little puzzled by the final epithet.)
Fiona Katsoukis for Environment, Amy Remeikas for A/G, the inimitable Cathy Wilcox for Social Services – such a wealth of choices!
Instead we have tired retreads from the apparatchikbrigade, no good at anything except smarming and backstabbing who’ve never read a book nor had an original idea.