Thursday, June 21, 2018

Today by Paddy Manning

Tax cuts are L-A-W
Income taxes are going down, big business taxes are next


High-income earners will get significant tax relief if the Coalition wins the next three federal elections, after the Senate today passed the whole of the government’s $144 billion income tax plan. In his press conference this afternoon, the prime minister called the plan “the biggest reform to personal income tax in a generation”, and the passage of the cuts is being hailed as a major victory for the government. Already, however, commentators such as The Australian’s Dennis Shanahan are comparing [$] the legislated tax cuts – which don’t take full effect until 2024 – to the infamous “L-A-W, law” tax cuts that former prime minister Paul Keating had to abandon in 1993.

Labor has already committed to repealing phase two (which lifts the 37 per cent threshold to $120,000 from 2022) and phase three (which abolishes the 37 per cent threshold for anyone earning up to $200,000, from 2024), and it won’t take much in the way of an economic downturn for a future government to make the case that these stages are essentially unaffordable. Whether or not these legislated tax cuts ever happen, however, a win is a win, even if it comes after what was described as an unprecedented gag on debate in the Senate, and by way of last-minute deals with the Centre Alliance and One Nation, whose full terms we don’t yet know. Independent senator Tim Storer accused his former colleagues of selling out the principles of former party leader Nick Xenophon – who famously turned up to the Senate in his pyjamas to ensure proper debate of reforms to optional preferential voting – by backing the government’s gag order.

In his allotted five minutes today, Greens leader Richard Di Natale made some heartfelt comments about the impact of the plan. He noted that the plan will take $144 billion out of the public revenues and therefore make it harder to fund schools and hospitals, or pay down debt, and which by its end will see 95 per cent of the tax relief go to the top 20 per cent of income earners. The Greens alone opposed all three stages of the Turnbull tax plan, and Di Natale today said the plan would do nothing at all for the bottom 40 per cent of earners, and “fundamentally rewrites the fabric of Australian society”.

In his press conference the prime minister again accused the Labor Party of aspiration denial. “We’re not mystified by it,” he said in another dig at deputy Opposition leader Tanya Plibersek, who will not be allowed to forget her on-air comment the other day, when she said: “honestly, this aspiration term, it mystifies me”. Plibersek is being verballed, of course, because the point she was making is that nobody in their right mind would knock back a pay rise because they might have to pay a bit more tax, as is clear if you read the full answer which she tried and failed to table in parliament, but later tweeted. In short, Plibersek was not arguing against aspiration, she was sticking up for existing marginal rates under our progressive tax system. As I have written before, Grattan Institute analysis shows that the government’s tax plan makes the tax system less progressive, especially from stages two and three.

The Coalition argument seems to be that unless you support showering the wealthy with taxpayer dollars – through lower taxation, public funding for elite private schools, or lavish tax concessions for “self-funded retirees” – you are an enemy of aspiration. The PM quoted with approval this quite extraordinary editorial [$] in this morning’s AFR, which accuses Labor of abandoning the aspirational working class created by Paul Keating’s reforms of the 1980s. The editorial goes further, accusing the ALP of propagating falsehoods when it claims the government’s tax plan will see the well-off pay less tax. The AFR decries “the rotten core of modern Labor” waging an “absurd new class war” and accuses the party of “fake news” when it points out that a cleaner on $40,000 and a doctor on $200,000 will pay the same rate of tax under the government’s plan. In fact, because of the tax-free threshold, the paper points out the percentage rate would be different. It’s a cute debating point. More important is the level of partisan vitriol, and the election hasn’t even begun.

The focus next week will move on to the government’s stalled company tax cuts for businesses with turnover greater than $50 million. Pauline Hanson has signalled today that she is willing to talk if a deal involved a major effort to tackle multinational tax avoidance, for example, which would raise another $100 billion in revenue. At this afternoon’s press conference, finance minister Mathias Cormann made clear that the government was “always open to engage with all members and senators who have good ideas”. Treasurer Scott Morrison boasted that the government had already raised an additional $7 billion from multinationals and was about to receive a review of tax paid by digital giants like Apple and Google. Australia was leading the way on multinational tax avoidance, Morrison said: “There is no jurisdiction in the world that has taken a stronger position”. Which sounds like game on. 

Episode 20: Violence against women in the media
Richard Denniss talks to Chris Kenny and Ebony Bennett about the way violence against women is reported in the media.


since this morning

A group of pro-coal Coalition MPs is keeping the pressure on the government on energy policy by releasing [$] a “fact sheet” that outlines the number of new coal-fired power stations across the globe, according to The Australian.

Crikey’s Bernard Keane writes [$] that Telstra’s major strategy update reveals that delays around the NBN rollout are worse than expected.

in case you missed it

Federal government payments to private schools could be determined by the income tax paid by parents under a new funding model set to disadvantage some elite institutions but reward others.

The ACT has warned that it will be “very difficult” to sign on to the national energy guarantee in early August if Josh Frydenberg fails to give any ground before the definitive meeting of the COAG energy council.

The Australian reports [$] that Australia has notified the International Criminal Court in The Hague that it is investigating possible war crimes committed by Australian troops in Afghanistan.

by Don Watson
The conservative crusade against the ABC
Why do Andrew Bolt and company love to hate the national broadcaster?

by Elle Hardy
The Nation Reviewed
Curing Clarksdale’s blues
A music-loving Melbourne economist is revitalising a Mississippi town

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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