Thursday, May 10, 2018

Today by Paddy Manning

A needlessly divisive budget
The treasurer has doubled down on the politics of aspiration

Image of ACOSS CEO Cassandra Goldie

ACOSS CEO Cassandra Goldie with community sector representatives. Picture by Paddy Manning

Go figure. Malcolm Turnbull and Scott Morrison have overreached and, instead of delivering a steady-as-she-goes budget that features a welcome early return to surplus and modest tax relief for low- and middle-income earners, they have decided to pick an ideological fight with Labor over a radical reshaping of the tax system in seven years’ time. Those in government had an opportunity, courtesy of bulging tax revenues, to underline their credentials as competent economic managers. The last word they needed to associate with this week’s budget was “radical”. Opposition leader Bill Shorten, when he delivers his budget reply tonight, will hopefully resist the temptation to respond in kind. It will be enough to stick to a credible early return to surplus, offer modest tax relief for middle Australia, and eschew radical or unlikely initiatives.

What’s driving the government? Certainly the prime minister wants to portray Labor as the party of higher taxes, knowing it was never going to support the proposal to dump the 37 per cent tax bracket from 2023–24, so that the vast majority of taxpayers – anyone earning between 40,000 and 200,000 – will be on the same marginal rate. Tackling bracket creep is one thing, but going further to push for a less progressive tax system is quite another. As Fairfax’s Eryk Bagshaw reported this morning, the proposal goes further than former Treasury secretary Ken Henry proposed in his 2010 tax review, and ANU modelling shows that it will heavily favour the wealthy over the long term, costing taxpayers $17 billion a year besides.

Labor and the Greens remain opposed to this aspect of the plan, but with a Senate crossbench that is a mandate-free zone comprising independents, defectors and one-man bands who make it up as they go along, it is probable that the government can secure the requisite nine out of 11 votes. Support from One Nation, with three votes, may prove decisive [$]. And yet shambolic leader Pauline Hanson contradicted herself so many times on Sky News this morning – simultaneously standing by and walking away from her lower-immigration bargaining chip – that it is impossible to tell where her party will land. Either way, the government will keep up its attack on Labor: if the tax package fails, it will be Labor’s fault; if it succeeds, there will be a scare campaign about a Labor post-election repeal. We are hearing the lines of attack already: after a cup of coffee with seniors in Queanbeyan this morning, the prime minister accused Bill Shorten of stealing their franking credits as part of a “$200 billion tax grab”.

Except, as we are likely to hear tonight, Labor is going to be offering tax cuts for ordinary workers to match or better those of the government. So all the government has achieved in this budget is to shift the debate from the question of whether big business (and the banks) deserves a tax cut, to whether higher income earners deserve a tax cut. And the whole debate will have an air of unreality, because all of it – both large company and personal income tax cuts – won’t happen until well into the 2020s. Can we really sustain an election campaign, in 2018 or 2019, about whether to adopt a flatter tax system that overwhelmingly benefits the wealthy in 2024? As Tim Colebatch wrote in this excellent piece in Inside Story yesterday, it’s a mystery why the government has chosen to fight the next election on such weak ground.

There is a deeper philosophical motivation, which is bitterly divisive. In the budget lock-up, the treasurer told reporters that one thing the government would not be doing was lifting taxes on the rich, which he labelled as “anti-enterprise and anti-achievement”. Anti-achievement!? That’s even more mind-numbing than the “anti-business” accusation we often hear hurled against Labor. The underlying message is that, in the face of a post-GFC debate about rising inequality and a union campaign to restore fairer workplace laws, the government is doubling down on the politics of aspiration. Veteran finance commentator Michael Pascoe described the tax cuts as “an ideological leap to fundamentally weaken the system’s progressive nature”. Especially nervous-making is the idea that, for the Coalition and their brains trust the Institute of Public Affairs, rising inequality is actually a good thing.

Left behind are poorer Australians … working or otherwise. The prime minister says his welfare policies are based on love but his budget turns a brutally cold shoulder to anyone on Newstart, which almost everybody, including former conservative prime minister John Howard, acknowledges is manifestly inadequate at $40 a day after a 24-year freeze. At a press conference on Wednesday that was subsumed by the ongoing citizenship crisis, ACOSS chief Cassandra Goldie said it was “shameful” that the government had not taken the opportunity to raise Newstart, and held up a ten-dollar note representing the weekly tax cut on offer for most workers next financial year. Goldie said she was encouraged by the reaction of many decent Australians who wanted to forgo the tax cut, as seen in the #keepmytendollars social media campaign. Goldie told The Guardian: “The treasurer said ‘people are asking us what’s in it for me?’ … I think he’s got us wrong. I think what people ask is what’s in it for us as a community.”

Episode 14: Budget – Behind the scenes
Richard Denniss and former treasurer Wayne Swan discuss how the cogs of the political machine turn when the government decides who wins and who loses.


since this morning

A subpoena [$] for former prime minister Kevin Rudd has been handed out today by Victoria’s Supreme Court, in relation to his government’s home insulation scheme. Justice John Dixon ordered that Rudd give evidence in a civil trial brought about by more than 140 business owners and tradesmen.

More than 60 per cent of AMP shareholders voted [$] against the company’s remuneration report at its annual general meeting today.

In The Guardian, Andrew Fowler writes that the government’s budget cuts are an attempt to bully the ABC into silence.

in case you missed it

ASIC’s permanent funding will be cut [$] from $346 million to $320 million and staff numbers slashed by 30 investigators, in an unheralded budget cut. Insiders described the cut as shocking as the Hayne royal commission adds to the corporate regulator’s workload.

Liberal backbencher Jason Falinski has lodged [$] new documents on the parliamentary citizenship register in a bid to prove that he is not a Polish citizen, amid calls from Labor for his case to be referred to the High Court.

Australian scientist David Goodall, 104 years old, will voluntarily end his life today. He has spent his last hours wandering the Basel University Botanical Gardens in Switzerland.

by Helen Garner
The Courts
The court networkers
Volunteers make visiting courtrooms less of a trial

by Alice Pung
Home truths
Ah Gong and Ah Mah move into a culturally diverse aged-care facility

Paddy Manning

Paddy Manning is contributing editor (politics) at The Monthly and has worked for the ABC, Fairfax, Crikey and The Australian. He is also the author of three books, including a recently updated unauthorised biography of Malcolm Turnbull, Born To Rule?

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