Broken tax promise raises important values questions

Fundamental to the debate over Anthony Albanese’s decision to backtrack on the legislated stage three tax cuts is the question of what sort of society we are and what do we want to be. As a prosperous nation, will we continue to be a place where people from all walks of life and backgrounds know that if they work hard they can make a good life? Or do we want a society where government decides that it will always be better at spending taxpayers’ money than those who have earned it.

Aspiration is what drives effort and there are clear differences on display from the political classes. Anthony Albanese told the National Press Club on Thursday his government’s definition of aspiration was much bigger and broader than just highest income levels. “It is inclusive, not exclusive. When no one is held back and no one is left behind, everyone is lifted up,” the Prime Minister said. This is used to justify things like higher subsidies for childcare and a bigger welfare state.

Opposition Treasury spokesman Angus Taylor said while many love to hate higher-wage earners, they are the ones who are disproportionately important in paying taxes, in creating jobs and investing in the economy, and taking risks. “Everyone has that opportunity but this is a disproportionately important group in creating a strong economy, and so we have to make sure the incentives and rewards are there,” Mr Taylor said.

This is a philosophical and political divide that voters must always consider. The breach of trust in breaking an election promise not to change the stage three tax cuts is another issue Mr Albanese must now overcome. It is a challenge made harder by his pledge before the last election to champion a different sort of politics that was more transparent. It is reminiscent of Kevin Rudd’s 2007 pre-election declaration that he was a fiscal conservative, before proving otherwise once in office. The stage three tax debate is a throwback to the sort of envy politics that distorts arguments about fairness and pits one group of voters against another.

Rather than being unfair, OECD research shows Australians are by nature aspirational. Australia has among the highest intergenerational earnings mobility across the sample of 24 OECD nations. Sixty per cent of all households pay no net tax after government transfers. But high-wage earners are disproportionately punished, with a 2020 study by the Australian Taxation Office showing 3.6 per cent of Australians were earning more than $180,000 a year but they were paying 32 per cent of all net income tax. The 20 per cent of Australians earning over $90,000 a year were paying 68 per cent of all net income tax.

By changing the legislated stage three tax cuts, the Albanese government has ensured this will continue to be the case. It will also raise an additional $28bn from financial year 2024 because of bracket creep.

The way in which the tax decision was made emphasises the pressures on Mr Albanese since the failure of the voice to parliament referendum. As Paul Kelly notes on Saturday in Inquirer, Mr Albanese has reverted to Labor’s old-style redistribution politics. It is cynical because it calculates voters will forgive a broken promise in exchange for a small cash settlement that will be clawed back by government in bracket creep. It has opened itself up to the demands of the Greens, who do not even pretend to represent the aspirational ambitions of middle Australia.

When given the chance, voters have rejected the politics of envy. The challenge is for Peter Dutton to stay focused on delivering true reform that rewards effort and values aspiration.