Labor is pushing ahead with Stage 3 tax cuts to benefit the wealthy, but with so many Australians struggling to make ends meet, IA founder and publisher Dave Donovan argues that the timing couldn't be worse.
An Albanese Labor Government will deliver tax relief for more than 9 million Australians through the legislated tax cuts that benefit everyone with incomes above $45,000.
~ ALP website (Accessed 8/8/22)
GOOD OL' “tax relief”, eh?
Sounds good, doesn’t it? Like your credit card will be getting a nice massage after doing yet another double shift working outside your wallet.
The noun for cutting taxes used to be, funnily enough, “tax cuts”, but the marketers in charge obviously felt that “tax relief” suggested more of a positive, happy ending. Was it more suggestive of the money shot voters are looking for from their political masters/masseurs?
Of course, back in the old days, the Labor Party believed in progressive taxation, which was seen as a way of redistributing income throughout our society from the relatively better off to those who were battling. In fact, it wasn’t just the Labor Party that believed in this policy, it was a widely accepted central plank of our system.
For instance, under Bob Menzies, the top marginal tax rate was as high as 75% and averaged, throughout his drowsy decades as Prime Minister, at around 67%. Even under John Howard’s long and lacklustre tenure as Treasurer in the Fraser Government, the top rate was almost always above the 60% mark.
Australian top marginal tax rates: 1950 to current rate
Of course, it was also Hawke and Keating who restarted the Australian economy after the desultory stagflation and economic stagnation of the Fraser/Howard years, through cutting tariffs, opening up the banking system to international competition, privatising several government-run businesses, slashing tariffs and implementing – with the assistance of the Australian Council of Trade Unions (ACTU) – Australia’s infamous wage freeze.
This was a little unfair, since Hawke and Keating also rejuvenated Medicare and Keating as PM brought in compulsory superannuation for workers ─ an initiative that has secured a comfortable retirement for a generation of working Australians.
Nevertheless, Bandt has a point, especially given Keating brought the flat rate of corporate tax down from 49% under Fraser/Howard to 36% when he lost government.
Australian company tax rate changes (1980-2013) annotated
But now, with the tide of neoliberalism slowly, inexorably ebbing away, after economists like Thomas Piketty and many others have shown what we can see with our own eyes – that cutting taxes for rich people and their corporations simply leads to greater income disparity – it is not even lifting all boats but anchoring the littler boats to a rock near the shore, while those on limited incomes struggle to stay afloat amongst perilous seas, fearful always of going down in the next maelstrom.
Moreover, downright affluent Australians with incomes in excess of $200,000 will have their top marginal rate slashed even further, to 45%.
So much for the progressive taxation system, income redistribution and all that old-fashioned stuff that is now becoming new again, after the Global Financial Crisis (GFC) and a decade of global economic tidal waves.
Taxes have become steadily less progressive, more regressive around the world over the past 40 years, dramatically worsening inequality.
Research by Thomas Piketty for his book “A Brief History of Equality” shows that in the U.S., the top 1% has gone from 9% of total income in 1970 to 22% today, while the share of the bottom 50% has gone from 21.2% to 13.2%. No wonder they’re not happy.
And now we have the Albanese Government promising to push through the previous Liberal Government’s planned tax cuts for wealthier people. Cuts that will eliminate the 37% rate and put those Australians with an income between $45,000 and $200,000 onto a flat 30% tax rate.
Now is not the time to be slashing taxation rates. Australia has a more than trillion dollar public debt right now after years of Liberal Party corporate welfare. And for adherents of Modern Monetary Theory (MMT) – who maintain that public debt is irrelevant and that taxation serves merely to limit money supply and thereby control inflation – well, I’ve got news for you: inflation is at record highs. Cutting taxes for well-off people is simply going to stimulate demand, which is going to force up inflation even more. It’s a dumb idea.
A little while ago, before the 2022 Election, I discussed the fact that despite record company profits being recorded in Australia in recent years, wage growth has flatlined and inflation has skyrocketed. There are some illuminating graphs in that article, too.
It’s understandable that the Albanese Government doesn’t want to go back on its election promise of lowering personal tax rates, but here’s a better idea. For now, while lower-income Australians struggle under the oppression of booming fuel and power prices − not to mention the cost of lettuce, for Pete’s sake! – why not delay the third round of tax cuts, which are due in 2024, until the next term of Parliament, at the earliest? Instead, put the money saved in the budget into helping Australia’s more disadvantaged people, not the wealthiest.
The Albanese Government recently refused to raise the poverty payment we allow Australia’s poorest people – the unemployed – which hadn’t risen in real terms since Bob Hawke’s first year in power, 1983. We know the unemployed are not “working Australians”, as such, the Labor mantra, but most would be if they could find meaningful jobs.
Have a heart, Albo, and prove you are not a neoliberal in yours.
Most importantly, Albanese should consider creating a conversation about getting corporate tax rates back to more sensible levels. Hell, maybe a progressive company tax rate system might be worth considering for a progressive prime minister.
Paul Keating was known to show leadership by having public conversations about important matters of public policy. Perhaps Prime Minister Albanese could show that sort of leadership too, and that he cares about all Australians, not just the ones in his own tax bracket.
IA founder David G Donovan writes a Tuesday column, almost every week. Follow Dave on Twitter @davrosz. Also follow Independent Australia on Twitter @independentaus, on Facebook HERE and on Instagram HERE.
- Three reasons to feel cheerful — about being an Australian since May
- Full employment: The promise Albanese must keep
- Repealing tax cuts: Albanese needs to forget Murdoch, act now and be bold
- Labor must reverse Morrison's submarine bungle to protect nation
- Where's Albo? Not on holiday with Dutto and ScoMo
Support independent journalism Subscribe to IA.