Nick Cater: exposing Shorten the unthinkable
Bill Shorten is skating on thin ice. Should the looming spate of by-elections prove a flop for Labor, Billy ‘liar’ is likely to crash through that ice that has for too long supported him. Dislike for Shorten is growing within the Party as thoughts turn toward Albanese or the hungry Chris Bowen. No doubt many more will compete for the trough.
Nick Cater writes:
To the extent that Bill Shorten’s tax policy could be described as Marxist, it owes more to Groucho than Karl.
“Those are my principles,” the comedian is reputed to have said, “and if you don’t like them I have others.”
Source: News Corp
As Groucho Marx said, if you can fake honesty
Shorten’s income tax cuts for low and lower-middle earners have the hallmarks of populism; a simplistic response to superficial diagnosis of the income stagnation besetting the economy. Labor will deliver “fair dinkum tax cuts”, Shorten told parliament last week, “bigger, better and fairer” than those promised by the government.
Shorten’s previous principles on income tax were outlined in a 2005 tax policy he released as Australian Workers Union secretary.
“Union chief joins call for big tax cuts,” announced the front-page headline in The Age. “Top rate should be 30c, says Shorten.”
Had Peter Costello been reckless enough to adopt Shorten’s proposal, it would have delighted the rich, reducing the tax bill for a $1 million salary earner by $170,000.
Yet this too was “fair dinkum tax reform”, Shorten assured The Age.
“The problem is escalating, as bracket creep drags more unionised wage earners into the top tax trap with every pay rise …
“The top marginal income tax rate thresholds should be raised to create a fair, productive and competitive tax system.”
Shorten’s proposal was a fiscal train crash; the National Centre for Social and Economic Modelling estimated it would blow a $44 billion hole in the budget.
Even so it would be preferable to the unappetising dish Shorten is offering now, one that offers an incentive to stay poor, and further shifts the burden from the millions who pay no net tax and those in the top quintile. It recognised that lowering taxes increases the incentive to work and invest.
By focusing entirely on the bottom end, Shorten’s new plan sends a warning to low-income earners that they will be punished if they get above their station.
Leigh Sales pointed out this flaw when she spoke to Shorten after his speech. What would happen to a teacher who had the audacity to become a principal and was rewarded with a salary of more than $120,000? Where was the fairness in that?
Once again Shorten found himself wedged between his class war and reality. “I’m not going to say someone on $120,000 is an amazing salary,” he conceded.
If $120,000 a year is not the threshold from battler to exorbitance, how about we raise it by 50 per cent? “Is $180,000 a year rich?” Melbourne radio station 3AW’s Neil Mitchell asked Shorten two years ago.
“No it’s not,” the Opposition Leader replied.
Ken Henry provided a solution to the threshold conundrum when he was asked by Labor to review the tax system in 2008. His solution was to simplify the tax scale by cutting out brackets. Henry recommended a flat rate of 35c in the dollar on income between $20,000 and $180,000 a year. It would remove the complexity beloved only by tax agents, and reduce the disincentives to industry and thrift. Its generous tax-free allowance on the first $20,000 kept it progressive. A worker on $40,000 would pay income tax on only half their salary, while someone on $100,000 would be levied on four-fifths of it, and so on.
Scott Morrison promised something similar in his budget last week by promising to abolish the 37 per cent tax bracket entirely in 2024-25. Workers earning more than $41,000 will pay 32.5c in the dollar until they hit $200,000.
Shorten rejected the plan out of hand, which caught no one by surprise, since Labor has rejected just about every other piece of advice Henry had to offer, including cutting corporate tax and abolishing the renewable energy target to mention just two. Morrison’s proposal was “another mate’s rates tax plan from the Liberal Party”, sneered Shorten, that would entrench “growing inequality and a greater sense of unfairness in this community”.
A prodigious ability to argue that black is white is useful in politics, but it will get you only so far. The art of politics, as Robert Menzies famously said, is the art of persuasion, not spin.
Australian voters do not fall easily for confidence tricks, which is why, all things being equal, they will reject Shorten’s package, fair dinkum though he claims it to be. They will be suspicious of what Shorten brags is his trifecta — higher taxes, higher spending and the ability to pay down debt. After all, paying down debt has never been federal Labor’s thing, and if it is to acquire a taste for it, it is unlikely to be under Shorten.
Whatever is driving Labor’s polling results, it certainly isn’t Shorten, a man who became the party’s leader without apparent conviction. Last week’s budget reply speech, almost certainly his last, was a chance to show if he believes in anything, other than himself.
His rating as preferred prime minister dropped in yesterday’s Newspoll to a meagre 32 per cent, eight points behind where Tony Abbott was in 2013 at the same point in the cycle.
It could be that Shorten has exhausted the potential of the politics of pessimism in a nation with a strong cultural resistance to feeling sorry for oneself. Full employment and 26 years of economic growth are not the conditions in which the narrative of haves and have-nots is likely to thrive.
The overwhelming sentiment is aspiration, the hope that every year will be better than the last and the expectation of keeping the rewards of one’s labours.
For a measure of how close last week’s budget comes to hitting that mark, and how badly Shorten may have missed it, look to the millennials, a generation with everything to aspire to.
A clear majority of 18 to 34-year-olds who expressed a preference expect to be better off because of the government’s measures, the biggest tick of approval since the pre-financial crisis budget of 2008. It touches the depths of the populist’s fears. What if his solutions are not popular?
Nick Cater is executive director of Menzies Research Centre.