Friday, April 15, 2016

Today by Sean Kelly


A taxing week
The government is doing its best to confuse voters

Source

We stand for lower taxes, Labor stands for higher taxes.

That’s a common Liberal pitch. It’s clean, sharp, and widely accepted. The Liberal Party’s website lists “lower taxation” as one of the achievements of the Howard government, even though analysis of tax-to-GDP ratios suggest taxes then were relatively high. It’s an easy sell.

Scott Morrison seems to be shifting away from it, though, in a manner that has become depressingly predictable for the treasurer: clumsily.

Yesterday Morrison said “Of course there will be revenue measures in the budget”, a phrase widely interpreted as meaning tax increases in some areas.

Uh-oh, the government thought. Better fix that up.

Cue Finance Minister Mathias Cormann, normally relatively sensible, who made clear last night that the government in fact would not be lifting taxes (Transcript: “Will the budget be lifting taxes?” “Um, no.”), before saying that the budget would in fact raise revenue “in a way that is better”.

Labor, on the other hand, “wants to tax more and to tax badly”.

Lower taxes vs higher taxes is simple to understand. Bad taxes vs better taxes is confusing as hell.

Cormann added other words which actually mean something, like “efficient” and “less distorting”. I’m glad he’s willing to talk intelligently about economics, but with not long left until a possible election he and the government need to worry about talking to voters, not economists, who can make their own minds up about the government’s tax plans.

The other formulation which both Morrison today and Cormann last night trotted out was that the “tax burden” would be lower, which is a way of saying that the tax-to-GDP ratio will not change. This is a good commitment to give, but, again, not readily saleable, because it comes right back to their first woolly argument: we want to cut these bad taxes so we can jack up these good taxes.

Now, if the government were actually willing to have an intelligent conversation with voters that would be great. I would welcome a discussion of distortionary taxes, and what is and isn’t good for the economy. In fact, our country needs that type of approach, a point Katharine Murphy makes well here, George Megalogenis makes here, and Paul Kelly makes every week or so.

But, as it is, the government has argued both that we should have lower taxes, and that it's somehow OK for the overall tax burden to stay where it is. Both can’t be true. Morrison now admits he wants to raise some revenue while continuing to insist that Australia has no revenue problem.

Given the lack of economic coherence to the government’s lines, and their determination to treat us all like fools, the least one could hope for is political coherence. 

It’s not as though the prime minister isn’t capable of delivering a lucid line. Here’s the opening of a 2005 Sydney Morning Herald article reporting an interview with the then backbencher, a few months before his notorious tax paper was released:

The richest man in Parliament wants his Point Piper neighbours to pay more tax – to make room for tax cuts for everybody else.

Malcolm Turnbull, the new Liberal MP for Wentworth worth an estimated $125 million, says the poor are paying too much tax while the rich can avoid it altogether. In his first substantial interview about policy since the federal election, Mr Turnbull has challenged his own government to think boldly and crack down on “the black art” of tax avoidance.

Continuing a transformation from merchant banker to people’s representative, he told the Herald: “You hear some people wandering around saying you should have a tax cut at the top and fund it by cutting social welfare. This is a ridiculous sort of proposition.”

The economics, then, were pretty muddy too, but the message was clear – so much so that it made life difficult for then PM John Howard. Which isn’t so different to right now, when Bill Shorten’s uncannily similar message is making life difficult for the current Liberal prime minister.

Ah, history. You can’t say it doesn’t have a sense of humour.

 

Today’s links

Sean Kelly

Sean Kelly was an adviser to prime ministers Kevin Rudd and Julia Gillard.

@mrseankelly

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