FLAT TACKS

Paul Bon­giorno on Scott Mor­ri­son’s lack of vi­sion

The Saturday Paper - - Front Page - Paul Bon­giorno PAUL BON­GIORNO is a colum­nist for The Satur­day Pa­per and a reg­u­lar com­men­ta­tor on the ABC’s RN Break­fast.

As trea­sur­ers go, Scott Mor­ri­son is no Paul Keat­ing.

He’s not even a Peter Costello when it comes to wit and mak­ing speeches. Mor­ri­son is dully com­bat­ive and unimag­i­na­tive. Even his own side found lit­tle that was in­spir­ing in Tues­day night’s na­tion­ally tele­vised bud­get ad­dress. His open­ing lines bombed badly, trig­ger­ing spon­ta­neous mirth from the Op­po­si­tion benches. But what he was about to un­veil was no joke.

For some rea­son, Mor­ri­son led with rhetor­i­cal ques­tions: “What have you achieved? What are you go­ing to do now?” When the La­bor laugh­ter died down, he re­vealed a seven-year plan to flat­ten Aus­tralia’s pro­gres­sive tax sys­tem. It is the most rad­i­cal as­sault on one of the cor­ner­stones of the Aus­tralian fair go. The cur­rent sys­tem is based on the idea that those who earn more can af­ford to pay more tax. But flat tax is beloved by uber-con­ser­va­tives. It is cham­pi­oned by Pauline Han­son and was a ma­jor pol­icy driv­ing the in­sane “Joh for PM” cam­paign run by then Queens­land premier Joh BjelkePetersen in 1987.

Mor­ri­son judges that his pro­posal to de­liver four tax brack­ets rather than five, with the mid­dle rate of

32.5 per cent run­ning from $41,000 all the way up to $200,000, is in line with Lib­eral and Na­tional party val­ues, as he told the House when he in­tro­duced a bill to en­shrine his plan in leg­is­la­tion. He is ask­ing the par­lia­ment to make L-A-W tax cuts, to come fully into ef­fect in 2024-25. That’s six bud­gets and two fed­eral elec­tions away. Paul Keat­ing’s leg­is­lated tax cuts be­fore the 1993 elec­tion didn’t sur­vive long after his vic­tory, as eco­nomic re­al­ity bit hard.

Vot­ers are be­ing asked to buy a pig in a poke. Mor­ri­son wants them to take him on trust. This is de­spite the fact he is a trea­surer whose bud­get last year did not fore­see the mas­sive rev­enue in­crease that ma­te­ri­alised over the past four months, a rev­enue lift that Trea­sury has baked into its fore­casts for the for­ward es­ti­mates and pro­jec­tions out to 2025. In all bud­gets, as­sump­tions are con­testable, but some of the key ones in this bud­get are close to un­be­liev­able.

The $140 bil­lion cost of de­liv­er­ing the full tax pack­age is un­funded. Even Mor­ri­son ad­mits it’s im­pos­si­ble to do this so far out. He is as­sum­ing the “good times will role on”, as The Age’s eco­nom­ics edi­tor Peter Martin says. The trea­surer is ap­par­ently re­ly­ing on wages growth to boost his rev­enue from work­ers pay­ing more in­come tax. One of the most con­tentious claims is that wages growth will climb from 2.1 to 3.5 per cent, along with con­sumers open­ing their wal­lets. Martin says th­ese fore­casts were re­leased as the Bureau of Statis­tics re­ported that re­tail sales had been flat for the past three months, “mean­ing the turn-up will have to be dra­matic”.

Anal­y­sis by The Aus­tralia In­sti­tute says that the govern­ment’s con­tin­u­ing labour poli­cies will sup­press fu­ture wage in­creases. “This in­cludes its own 2 per cent cap on wage in­creases” for hun­dreds of thou­sands of fed­eral pub­lic sec­tor work­ers. The govern­ment is “re­strain­ing wages growth for its own em­ploy­ees to barely half of what it hopes for the whole econ­omy”.

The in­sti­tute mod­elled the dis­tri­bu­tion­ary ef­fects of the tax plan when it would be fully op­er­a­tional in its seventh year. It shows “the ben­e­fits flow over­whelm­ingly to the high­est in­come earn­ers who get 62 per cent, while just 7 per cent of the ben­e­fit goes to the 30 per cent of Aus­tralians on the low­est wages”. TAI cal­cu­la­tions claim some­one earn­ing $40,000 a year will get a tax cut of $455 a year, while some­one earn­ing $200,000 will get a tax cut of $7225 a year.

Robert Deutsch of the Tax In­sti­tute thinks the abo­li­tion of the 37 per cent tax rate and the broad­en­ing of the 32.5 per cent one is very ex­pen­sive and dam­ag­ing to the pro­gres­siv­ity of the sys­tem. A more colour­ful as­sess­ment comes from for­mer trea­surer Wayne Swan. He says what it amounts to is a “Trump-like race to the bot­tom in tax, where the govern­ment in­tends to con­tinue to starve some of the pro­duc­tive in­fra­struc­ture in our econ­omy – par­tic­u­larly ed­u­ca­tion and train­ing”. Swan warns that the govern­ment is try­ing to cam­ou­flage a mas­sive re­struc­ture of the per­sonal in­come tax sys­tem, “which I think the Aus­tralian peo­ple will not buy”.

But in an am­bit claim that is de­signed to bring on a stoush with the La­bor Party, Mor­ri­son says his three­stage tax re­form plan is “all or noth­ing”. The first stage of the plan will de­liver four mil­lion low-in­come Aus­tralians the full $530 tax off­set from July this year. They will re­ceive it as a lump sum in July the fol­low­ing year, when they do their tax re­turns – that is, after the elec­tion.

Ten mil­lion Aus­tralians will share in the re­bate, but it re­duces to zero for in­comes above $125,000.

La­bor says it will back the 2018 tax off­set but beyond that, Bill Shorten says, “the govern­ment’s en­gag­ing in a mas­sive hoax on Aus­tralians”. Mor­ri­son and in­deed Mal­colm Turn­bull’s re­solve will be tested in the Sen­ate. On the com­pany tax cuts a sim­i­lar ul­ti­ma­tum crum­bled when they were forced to set­tle for tax relief for com­pa­nies with turnover up to $50 mil­lion. They are still bat­tling to de­liver for the banks and other ma­jor cor­po­ra­tions. Mor­ri­son hinted in his post-bud­get Press Club lunch that he is open to ne­go­ti­ate, by say­ing he wasn’t pre­pared to “hy­poth­e­sise about the Sen­ate”.

But Shorten upped the ante in his bud­get re­ply speech on Thurs­day night. He has gone fur­ther, with more gen­er­ous tax cuts while at the same time promis­ing to match the govern­ment’s bud­get sur­plus next year. Shorten is gam­bling on vot­ers ac­tu­ally mean­ing what most of them say when they tell poll­sters they sup­port higher taxes to fund bet­ter ser­vices in health, ed­u­ca­tion and in­fra­struc­ture. This is the spend­ing the govern­ment derides and at­tacks La­bor over.

There’s no doubt it is Lib­eral holy writ to de­scribe tax cuts as giv­ing the peo­ple’s money back to them and that “they know best how to spend it”. One thing is for sure: they won’t be spend­ing it on roads, schools, hos­pi­tals or the mil­i­tary. Shorten makes no apolo­gies for the fact his bet­ter fis­cal po­si­tion is based on clos­ing down tax loop­holes and multi­bil­lion-dol­lar con­ces­sions.

So far, Shorten’s ar­gu­ments on neg­a­tive gear­ing, cap­i­tal gains tax dis­counts, fam­ily trusts and share­holder cash hand­outs have been res­onat­ing. He ze­roes in on hous­ing and rental af­ford­abil­ity as a fair­ness is­sue, where first home buy­ers’ taxes are used to “sub­sidise prop­erty in­vestors to buy their fifth and 10th prop­erty”. He is crit­i­cal of adult fam­ily mem­bers us­ing dis­cre­tionary trusts to min­imise their tax while “ev­ery­one else has to pay the nor­mal tax rate”. He says “it’s not sus­tain­able to pro­vide in­come tax re­funds to share­hold­ers who don’t pay in­come tax”.

There will be an early elec­toral test of th­ese com­pet­ing visions and ar­gu­ments as the cit­i­zen­ship fi­asco has claimed four more vic­tims. Three La­bor MPs and Re­bekha Sharkie of Cen­tre Al­liance (for­merly the Nick Xenophon Team) are gone. Join­ing the pa­rade will be La­bor’s Tim Ham­mond, who quit for fam­ily rea­sons, mak­ing it two by­elec­tions in Perth. The trig­ger this time was the High Court defin­ing clearly what “all rea­son­able steps” means, rul­ing La­bor’s Katy Gal­lagher was in­el­i­gi­ble to sit in the Sen­ate be­cause the re­nun­ci­a­tion of her Bri­tish cit­i­zen­ship was not com­plete when she nom­i­nated.

Shorten faced a hos­tile news con­fer­ence mid­week be­cause of his cock­i­ness last year that La­bor’s vet­ting pro­ce­dures were fool­proof and he could give a rolled­gold guar­an­tee his MPs would not get caught out like the Lib­er­als, Na­tion­als and Greens had been. He was adamant he and the party had acted in good faith on strong le­gal ad­vice and he had noth­ing to apol­o­gise for. He claimed the High Court had de­vel­oped a new “stricter” cit­i­zen­ship test. This is some­thing At­tor­ney-Gen­eral Chris­tian Porter dis­putes. La­bor re­fuses to re­lease its le­gal ad­vice. The court has made it re­dun­dant any­how, just as it did on the ad­vice that made Mal­colm Turn­bull so sure then deputy prime min­is­ter Barn­aby Joyce would be ruled el­i­gi­ble.

Shorten says he will make the by­elec­tions a ref­er­en­dum on the $80 bil­lion cor­po­rate tax cuts. The govern­ment is sure to try to make them a ref­er­en­dum on Bill Shorten. Porter says Shorten has al­ready failed a test of char­ac­ter by avoid­ing trans­parency and accountability last year when he didn’t re­fer his MPs to the court along with the Na­tion­als. He said he acted like a “trade union leader”. Th­ese are three very dirty words in the Lib­eral lex­i­con.

The Lib­er­als are brief­ing jour­nal­ists that their re­search shows Shorten is un­pop­u­lar and was a neg­a­tive in the Ben­ne­long by­elec­tion. Shorten shrugs off th­ese at­tacks. His pre­pared­ness to take the pol­icy fight up to the govern­ment has shielded La­bor from his un­pop­u­lar­ity for the past 18 months in the opin­ion polls. In­deed, the lat­est poll av­er­age has La­bor main­tain­ing its lead, now slightly ex­tended to 4 per cent.

But there’s no doubt the stakes are high for

Shorten and Turn­bull. Th­ese by­elec­tions are hap­pen­ing

• at a most in­con­ve­nient time for both of them.

SHORTEN SAYS HE WILL MAKE THE BY­ELEC­TIONS A REF­ER­EN­DUM ON THE $80 BIL­LION COR­PO­RATE TAX CUTS. THE GOVERN­MENT IS SURE TO TRY TO MAKE THEM A REF­ER­EN­DUM ON BILL SHORTEN.

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