Labor’s tax backflip all the easier against an opposition with no spine

Labor’s tax backflip all the easier against an opposition with no spine.

This week’s news that the Coalition will meekly roll over and accept Labor’s massacre of the Stage 3 tax cuts shows yet again how weak their commitment to tax reform really was.

The fact is that both the government and the opposition richly deserve to be hauled over the coals for this policy debacle.

It is now clear Labor never intended to honour its repeated and explicit commitment to allow the legislated tax cuts to come into effect. These assurances were merely weasel words, designed to delay any blowback.

Whatever they said, they were merely waiting for a politically opportune moment to make the change.

Now Labor is waving around polling purporting to show that the voters approve of the changes, as if this somehow makes their decision honest.

But hang on, if Labor thought the voters agreed with them on these changes then they could have taken them to the 2022 election. They could have been upfront with the voters and given them an actual say on the policies they were always going to implement.

Obviously Labor remains as committed to the politics of envy and ‘soaking the rich’ as it was when it was defeated at the 2019 election.

Despite the rejection of these policies by the electorate, the only lesson Labor learned from that defeat was to hide their plans until they were in office and keep them hidden until the time was right to strike.

The brutal fact is the only thing between Labor and a suite of reforms that will increase taxation, empower and supersize government — while hobbling markets and consumers — is a wavering belief that the politics is against them.

Regardless of what the government says, the following options must now be considered on the table: gutting negative gearing, capital gains tax increases, further limiting super fund transparency and choice, raising taxes on superannuation contributions and earnings, abolition of franking credit refunds, a crackdown on trusts, carbon taxation … maybe even inheritance or wealth taxes.

Perhaps we shouldn’t be surprised; after all the voters elected a Labor government, so why act shocked when they get one. The Albanese government is merely following the same path as the Rudd – Gillard government before them.

However, none of this excuses the Coalition’s repeated missteps over the same issues.

Things went fundamentally wrong from the beginning. There was no economic or even fiscal reason to construct the tax reform package so it stretched out over most of a decade. The rationale was entirely political.

Clearly the then government thought they were being clever and binding high income voters to them for the next two elections. The bargain was simple: vote for the Coalition or risk Labor overturning the tax cuts.

Even though the Teals didn’t pick up pace until after the 2019 election, it was abundantly clear that higher income voters had been trending away from the Coalition for a number of years.

Although no doubt one big reason they didn’t bring forward Stage 3 in 2020 or 2021 — unlike Stage 2 which was brought forward two years — was the hope tax cuts would quell the Teal wave that eventually cost them a suite of formerly blue ribbon seats.

But these Faustian political bargains lay clear the fundamental lack of belief in the merits of the tax reform package. If the Coalition had genuinely believed in the reforms, why would they leave them vulnerable to Labor overturning them?

Remember that these reforms had to survive almost three terms in office and two elections when they were announced — and the Coalition government wasn’t expected to win even the first of these elections.

When they did win in 2019, and Labor capitulated to the reforms, they could have brought the start date forward. They certainly could have brought it forward together with Stage 2 during the pandemic, when the government was hurling money around the economy like it was confetti. A $275 billion deficit and no scope to implement their supposedly signature tax policy?

There are only two plausible explanations for this failure. Either the Coalition has accepted the Labor premise that tax relief to higher income earners is fundamentally unfair or they lack the courage to fight the point in public. Either way, their approach has been lacking in principle or courage.

For example, why would the opposition not at least try and argue to retain the Stage 3 package as well as provide tax relief for low and middle income earners?

The budget bottom line is tens of billions of dollars ahead of where it was predicted to be only a couple of years ago. The budget is in fact in surplus. Returning some of that surplus to hard working tax payers is a perfectly right and proper thing to do.

Of course, Labor could have provided this cost of living relief without overturning Stage 3 had it wanted to. But for many of its supporters — not to mention the Greens in the Senate — raising taxes on higher income earners is part of the point.

So why wouldn’t the opposition at least try and make this case?

Acquiescing to Labor’s broken promise not only displays the lack of faith in tax reform within the Coalition, it also weakens the Coalition argument on Labor’s broken promise.

The voters might buy the claim that they don’t know what Labor will do, but they also don’t know what the Coalition actually stands for.

In the end, while the small target, blowing with the political wind’ approach might win you government, it doesn’t set you up to govern well.

We can only wish both sides of politics could learn this lesson.

Simon Cowan is Research Director at the Centre for Independent Studies.

Photo by Ron Lach