Wednesday, April 10, 2019

Today by Paddy Manning

Slap and trickle
The future tax debate is hotting up

The competing economic visions of the Coalition and Labor are now laid out for all to see. On the ABC’s Q&A on Monday, Treasurer Josh Frydenberg showed again why he is the federal government’s best communicator, answering a range of questions earnestly and without talking down, losing his temper or sloganeering (apart from one stray “back in black and back on track”). Shadow treasurer Chris Bowen, speaking at the National Press Club today, was equally cool, happy to zoom in on the detail and zoom out to the big picture. New Labor taxes totalling $200 billion? Well, Bowen pointed out, that’s a Coalition estimate over a decade, in which both parties will raise something like $6 trillion in tax revenues. So, if the election debate is about whether the Commonwealth should raise $6 trillion over the next decade, or $6.2 trillion, well, fine.

Beneath the calm demeanour of both aspirants to the treasurer’s job in the next parliament there is a raging philosophical debate about the far-off second and third stages of the Coalition’s tax plan, and what that will do to the federal government’s revenue base. It is strange, given the Coalition wants to fight this election on economic management, to turn it into a debate about what might happen in three, four or five years’ time, but that’s what it’s done.

First to Bowen’s speech today. The burden of it was that the Frydenberg budget used dodgy accounting and magical forecasts to render affordable its stage-two and stage-three tax cuts, which Labor opposes and are worth a whopping $50 billion a year in lost revenue according to the Parliamentary Budget Office. (To put that into perspective, the worst of Labor’s budget deficits in the 2007–13 years was $55 billion in 2009–10, and it has taken us a decade to get back to surplus from there. Bowen pointed to recent PBO estimates that the ageing population would be costing Australia an extra $36 billion a year.) Bowen said the cost of these tax cuts was $286 billion over a decade and, given that the Coalition was forecasting that government payments would fall from 25 to 23.6 per cent of GDP by the end of the decade, it should explain where the savings were coming from. “The size of government magically shrinks over time,” he said. “Claiming that reduction in spending – with no outline of where the cuts will come from – magically makes their expensive and regressive tax cuts suddenly affordable.” It’s unnerving: where do the government think they can cut another $50 billion a year?

By way of contrast, the questions to Frydenberg on Monday night’s Q&A – for example, about the “underspend” on the NDIS, and failing to raise Newstart – suggest that the public is not thinking about these tax cuts with their hip pocket. The guy that really got to the nub of things was questioner Alfie Oppy, who asked Frydenberg how the rest of Australia would be better off by giving people earning more than $180,000 a year a tax break of $10,000 or more. The exchange went like this:

ALFIE OPPY: So, how does the money that actually goes back into these high-incomer earners’ bank accounts benefit the rest of Australia?

JOSH FRYDENBERG: Well, of course, money that goes into the hands of all taxpayers is money that is spent in the economy, and enhances economic activity, so ...

TONY JONES: Can I just interrupt there? Is the philosophy that, if you give money to wealthy people, they’ll put it back in the economy, it’ll trickle down to poorer people?

JOSH FRYDENBERG: No, the philosophy is that we need to have a progressive tax system, Tony, and that is actually enhanced by the system that we have announced and already legislated a significant part of that tax plan.

If Frydenberg’s answer to Oppy was not a classic statement of trickle-down economics, I’m not sure what is. Perhaps the treasurer is arguing that the rest of Australia benefits even when the wealth doesn’t trickle down, and stays in the bank accounts of high-income earners?

Other issues will fire the economic debate in this election: Labor’s tax reforms on refundable franking credits, negative gearing, capital gains tax and family trusts, as well as tax relief for those earning under $40,000, and Labor’s “fighting fund” of bigger surpluses to cope with an expected economic downturn. (It was interesting to hear Bowen say today that although Labor saw storm clouds ahead, it did not expect a repeat of anything like the financial crisis.)

But the really big bucks are in the argument about the Coalition’s stage-two and stage-three tax cuts. We already knew that the coming election was going to be important, but given that last week one side of politics doubled down on a plan to smash the tax system, it just got even more important.


“With today’s decision, women in Victoria and Tasmania never again need to worry about being forced to run a gauntlet of abuse to access abortion care. Safe access zones are here to stay.”

Adrianne Walters, senior lawyer with the Human Rights Law Centre, on the High Court’s decision to reject a challenge by anti-abortionists to safe access zones around abortion clinics.


“Labor’s car tax would mean higher prices on some of Australia’s most popular cars.”

Liberal Party Facebook ads falsely claim that Labor wants to tax cars, and are targeted to users with an interest in particular car brands.

The Number

The number of former fire and emergency leaders, from every state and territory, who have signed an unprecedented joint statement calling for stronger action on climate change, warning that worsening extreme weather is threatening Australian lives.

The Policy

“The panel has made 27 recommendations ... The panel believes it is vital for these recommendations to be implemented in order to protect and restore native fish populations in the Murray–Darling Basin. More fish death events can be expected under current conditions – the panel is focused on long-term management to protect native fish species. Action is required.”

The list

“Chairman and founder Gautam Adani’s transformation from a small struggling businessman in the state of Gujarat, a trading state with a vast coastline, to one of the richest and most feared industrialists in India is a story that runs parallel to the opening of the Indian economy since the early 1990s. It is a story of ambition and enterprise, as well as of the proximity of business to politics, which allows those who know how to work the system to make huge gains by ensuring that rules, if not bent, are suitably interpreted in their favour.”


“One striking thing to emerge from the commission’s hearings so far is just how many opportunities police had to correct, or cease, their collaboration with Gobbo – and how shockingly persistent both parties were in continuing it. There was no shortage of warnings, and nor were the principles that were being violated obscure ones. Regardless, no legal advice was sought on the appropriateness of Gobbo’s use as a source until 2011.”


“It’s fair to say that cancer touches every family on the planet. Screening programs complicate the picture. They are very effective for skin and colon cancers because early surgical intervention can be 100 per cent successful. But breast and prostate cancer screenings are extremely controversial because even though doing nothing is often the best option – many early-stage cancers never progress to be life-threatening – patients are understandably reluctant to merely watch and wait when diagnosed with a potentially killer disease.” 

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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