Monday, November 9, 2015

Today by Richard Cooke


A mature debate
Any argument will do when it comes to raising the GST

Source

As the season changed, so too did the tone. The prime minister tried to strike a moderated note on the GST. “What I am proposing is that we have a mature and rational debate about fixing our federation,” he said across the chamber. “That just for once everyone in this parliament put the long-term national interest ahead of the short-term politicking.” That prime minister was Tony Abbott, speaking around this time last year. 

You might recall that mature and rational debate: it started with $80 billion in cuts from federal health and education funding. It was a bit like setting fire to someone’s house, then asking if they’d thought about a new insurance policy. It didn’t feel like much of a development though, only a new sense of manufactured urgency. Like the poor or boondoggles involving the Northern Territory, the GST debate is always with us.

Australia has a relatively low sales tax regime by international standards, and increasing it is an easy win for politicians. It offends no powerful interest groups, and its more regressive excesses can be bought off with compensation. In terms of political capital, it pays for itself. There is also a precedent: international conservative cult act John Key raised the New Zealand sales tax, unlocking the coveted Difficult Reform achievement.

But in Australia, Tony Abbott couldn’t seem to get it right. Just now I’ve been taking a look at his conservative manifesto Battlelines, which feels like recovering the black box from a crash site. In between the pop psychology it invites – (on p.28: “Filled with remorse as the enormities of the previous evening seeped back, I slunk into that blessed plot late the next morning in time to see the long-suffering college gardeners repairing the last of the damage. At least I had been finally cured of the impulse to break things”) – it also shows Abbott’s political inner workings.

Howard introduced the GST for pragmatic reasons, Abbott argues. “It [the Howard Government] supported a goods and services tax, as a replacement for a range of other, less efficient taxes, because it spread the tax burden from earning to spending.” The tax was also consistent with Liberal Party values in two ways. It had a small-l liberal rationale (“lower, simpler taxes”), and a conservative rationale (“The GST gave states access to a growth tax”).

That small l-liberal rationale is a classic: it’s effectively advocating a flat tax, the regressive nature of which is a feature, not a bug (it doesn’t punish “wealth creators”). But it’s hard not to notice that the “conservative” case Abbott advocates isn’t really a conservative case at all. Isn’t a “growth tax” a contradiction in terms for these people?

In the appendix of Battlelines is a piece of draft legislation, one so expansive the author spends a whole chapter justifying it. It’s a variant on those “Abolish the States!?”-style books that come out every now and then (often they’re self-published). But Abbott isn’t going to associate with cranks in print, so he’s careful. The federal government can take control of state administration, particularly in areas like hospitals. But only if it’s in the national interest, and the states are screwing up these things particularly royally (spoiler alert: Abbott believes they will).

Anti-federalism is an odd position to take on the right side of politics. But it’s even stranger when we try to square this with Abbott’s actions in government. Cutting federal funding for health and education was a sure way to have even less control of it at state level. Perhaps the confusion was all part of the systems failure of the Abbott years. But it’s plausible that a GST increase was so desirable Abbott was willing to turf one of the key ideas in his book to get it.

It seems so desirable for the Liberals, in fact, that any old argument will do. Just this year Mike Baird said the states needed to address their revenue problem with an increase in GST, and in the parlance of our times, Tony Abbott “backed his stance”. Scott Morrison has now said that the states must not get any extra money from a GST increase, and the increase must be offset by business tax cuts (a business tax which Abbott would have increased further to pay for the paid parental leave scheme). Dr David Gillespie MP, who had this current mooted GST increase modelled, argues it will raise an extra $130 billion, which could “could pay for a range of benefits requested by his community”.

So depending on who you ask, the conservative or liberal belief is that the GST should be increased, to pay for tax cuts, or spending, or to cover revenue shortfalls, at state or federal level, but definitely not state level, as voters wouldn’t stand for that, except that they are requesting it. We’re supposed to be beyond three word slogans now. Perhaps “lower, simpler taxes” could do with some more thinking through.

 

Today’s a link

  • Rioting – sorry, a “major disturbance” – on Christmas Island after the death of Iranian Kurdish refugee Fazal Chegeni.
  • The trade union royal commission effectively cleared Bill Shorten of wrongdoing, though the news was only released late on Friday evening.
  • You might remember the strange but successful campaign earlier this year to let privately-owned companies dodge tax transparency laws to reduce their risk of kidnappings. Turns out to have been a nice bit of astroturfing.
  • Unlike many Australians, Russian and Chinese spies are very interested in details of Australia’s proposed new submarine fleet.
  • Health minister Sussan Ley has floated some fairly extreme changes to private health insurance.
  • The senate tax inquiry has heard that petrol company Chevron paid $248 tax on a profit of $1.7 billion.
  • Labor has suggested raising cigarette taxes to fund the Gonski education changes.
  • The Australian Conservation Foundation is attempting to challenge the federal government’s approval of the Carmichael coal mine in court.
  • Parliament is sitting today, with the first instalment of “constituency Question Time”. Tony Abbott did not attend.

Richard Cooke

Richard Cooke is The Monthlys US Correspondent and Contributing Editor. He is also The Saturday Paper’s sports editor.

@rgcooke

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