Comment

Paul Bongiorno
The stage three tax cuts – building trust with the right decisions

While some in the well-heeled crowd at last Sunday’s Australian Open men’s singles final indulged in the good old ritual of booing the prime minister when his name was announced before the trophy presentation, Treasurer Jim Chalmers was being congratulated by strangers at Brisbane Airport.

The jeers towards Anthony Albanese were seized upon by the usual suspects in the media. They were taken as confirmation his redesign of the stage three tax cuts had riled Australians – especially the people in the crowd, who could afford to pay between $2000 and $6000 for their seats. To these media outlets, the change was a broken promise.

Albanese didn’t see it that way and rightly noted his predecessors suffered the same sort of caterwauling in previous years, for no other reason than that’s what the crowd does. In regional Tasmania and Queensland after the announced changes, the prime minister’s experience mirrored that of the treasurer: people were happy something was being done.

Stereotyping the tennis crowd as angry Scrooges flies in the face of a poll by The Australia Institute that found about half of Australia’s highest income earners on more than $200,000 back the redesign.

The survey shows nearly two-thirds of all voters think it is more important to adapt policy to changing economic circumstances, even if it means breaking an election promise. Teal independents report similar feedback in some of the wealthiest electorates in the country – places where people will receive less back as part of the new package.

Institute executive director Richard Denniss says the institute’s research shows “the Morrison-era stage three tax cuts are bad economic policy, and even voters on the highest incomes recognise that”.

Zoe Daniel, in the Melbourne seat of Goldstein, says a quick poll of 1600 constituents showed almost 77 per cent supported the change to boost middle-income tax cuts, despite 27 per cent having taxable incomes above $180,000.

These voters are smart enough to realise that come July 1, when the government is hoping to have its amendments passed through the parliament, even these higher income earners will be paying almost $4000 less tax than they are now.

That’s a point that has the Greens up in arms. Adam Bandt says the unfairness of the original stage three cuts has only been partially addressed. The new package still mostly benefits the wealthy. “The top 20 per cent get 50 per cent of the benefit, but the bottom 20 per cent only get 0.4 per cent,” Bandt said. “The Greens will fight for more for low- and middle-income earners.”

The government is aware getting anything through parliament this year will be much harder. A minister says the Greens and the independents will want to make sure everyone notices them the closer it gets to the election, which is due early next year.

Midweek the treasurer upped the pressure on Opposition Leader Peter Dutton to support the revamp, releasing an analysis of its impact on voters in all 55 Coalition-held seats. Chalmers said about 3.4 million people, or 85 per cent of taxpayers in Liberal and National seats, will be better off than they were under the Morrison plan from five years ago.

The pressure on Dutton to back the redesign is already coming from some National Party MPs, who represent a number of the poorest electorates in the country. Frontbencher Anne Webster, of the seat of Mallee in regional Victoria, says she would not stand in the way of Labor’s tax reforms, even though she says they represent a failure to stand by a promise.

Like her leader, David Littleproud, Webster accuses Albanese of “class warfare”. The logic of this is hard to follow given that the highest earners still get a $4500 cut compared with the lowest getting only $354. If it is warfare, it is asymmetrical in favour of rich people, few of whom the Nationals represent.

According to Guardian Australia’s economics writer, Greg Jericho, the latest tax statistics show only 1.5 per cent of people in Littleproud’s electorate, Maranoa, earn more than $180,000 – and yet the Nationals leader says people on that income aren’t earning a lot of money in this day and age. Littleproud’s constituents would have every right to wonder who their member is speaking for.

Other regional members of parliament believe their support for the changes are a no-brainer. The newly independent Russell Broadbent, whose seat of Monash has more than its fair share of lower-income earners, will be voting for the amendments. Broadbent finds himself agreeing with the Greens that the tax cut for the highest income earners is still unfairly high.

Labor’s Shayne Neumann, who holds the seat of Blair, just west of Brisbane, says of his 82,000 taxpayers, 72,000 will benefit more than they would have and the rest still get a cut. Neumann believes that overall the new package will benefit Labor. He says it “puts money in people’s pockets and appeals to decency and a fair go”.

The Newspoll early next week will be eagerly watched as an indicator of voters’ acceptance of the government’s explanations for the breaking of Albanese’s word after he so staunchly defended the election promise not to touch the stage three cuts. Indeed, he boasted his word was his “bond”, giving the opposition its only real ammunition as it flails around for a response that doesn’t look like voting against a tax cut for every worker.

Dutton is left to revive the scares successfully employed by Scott Morrison in the 2019 election against Labor’s then proposed tax reforms. Although this government has not mentioned negative gearing, capital gains tax or franking credit reforms, the opposition leader, aided and abetted by the Murdoch media, has pretended those policies are back on the agenda.

Dutton says you can no longer believe anything Albanese or Chalmers say on their future tax intentions. It hasn’t dawned on him that he lacks the clout of incumbency. Governments are in charge; oppositions can only promise and decry. What we now have is a template for the sort of approach Albanese and Chalmers will take to the election, especially their rejection of the idea that tax reform can only mean cutting taxes for big business and higher income earners, with middle- and low-income earners bearing the brunt.

Any change must be fairer and be seen as delivering a benefit for Australians, not taking something from them. Albanese contrasted his change of position – he doesn’t call it a broken promise – with the performance of the Abbott government in 2014.

Not only did Tony Abbott break promises on health and education, dramatically cut social programs and cut funding for the ABC and SBS, he also imposed an unannounced tax, called a deficit levy, on higher income earners. The ABC’s Nemesis documentary this week was a dramatic reminder of that chaotic episode.

Chalmers told his Monday news conference the government is “not contemplating or considering resurrecting the policies” taken to the 2019 election. Albanese, showing signs he has learnt from making statements that do not allow for changing circumstances, told a persistent interviewer “we haven’t considered any changes to negative gearing”. He said what he has been focused on is “cost-of-living relief in the immediate sense”.

Hopefully Albanese’s reluctant modifying of stage three marks a watershed moment, not only in his leadership but for the tax debate we need to have. Western Australian independent Kate Chaney, unencumbered by the mindless political football that tax reform has become between the major parties, says she supports the changes on balance.

Chaney thinks the government “was in a difficult position” and says “no one likes broken promises”. But, she adds, “the reality is we are just frozen on tax reform and we can’t actually say you can never change your mind ever on anything”. She said when circumstances change “we also need to be able to change policy”.

Rationally, that’s when policy should be changed – and this is not to say the promise would be a lie. While some in Labor believe Albanese should have arrived at his revised position last year, they are not accusing him of lying. They know he always intended to keep his promise, and say it was only when he and the government were mugged by reality, sharpened by the looming Dunkley byelection on March 2, that they moved. His cabinet colleagues say once the prime minister saw Treasury’s analysis he did not hesitate to embrace the shift as the fairest and most effective.

Another independent, Allegra Spender, told the National Press Club the government can’t go to the next election without saying what it would do about tax reform. The opposition, she says, will have no credibility if all it does is say no without any alternative proposals.

Albanese and Chalmers clearly believe the way to build trust is to make the right decisions. Voters display this trust when they believe the prime minister will make a big call in their interests.

Albanese expresses it as “putting people before politics”. If he loses the next election, it will not be because he has broken an election promise; it will be because he lost the confidence of a majority of Australians, who need to believe they can trust him to lead a government that best looks after them.

The voters in Dunkley will give the first insight into his progress.

This article was first published in the print edition of The Saturday Paper on February 3, 2024 as "Stage three strikes and it’s gone".

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