Break faith on tax cuts, and kiss trust goodbye

Treasurer Jim Chalmers has been at the ‘vanguard of the push to break the promise’. Picture: NCA NewsWire / Gary Ramage

It is becoming increasingly clear Labor intends to break its promise to retain the legislated stage three tax cuts. The argument being mounted for doing so is that, as economist John Maynard Keynes once said, when the facts change I change my mind, what do you do?

However, sometimes the facts don’t have to change for politicians to change their minds.

Labor wants you to believe the facts have changed since it pledged to retain the stage three tax cuts. Let’s test that assertion.

Rising inflation, rising interest rates, global economic headwinds: these are the excuses Labor is planning to use to justify breaking its promise.

The only problem is that these economic challenges were well known during the election campaign when Labor reiterated its pledge to stand by the tax cuts.

During the campaign Anthony Albanese said he wanted to be “upfront with people”. Contrasting his trustworthiness with Scott Morrison’s known penchant for bending the truth, Albanese said on the campaign trail: “I want to make sure we don’t create circumstances whereby there’s a view that we’re going to do things that we’re not going to. We are not going to interfere with the legislated tax cuts.”

A pretty clear-cut and categorical commitment, you’d have to say. Yet fast forward a matter of months and Labor is already laying the groundwork for breaking that commitment.

Jim Chalmers has been at the vanguard of the push to break the promise.

On Wednesday Finance Minister Katy Gallagher joined in, saying: “We haven’t changed our position yet.” Yet.

The following day, Assistant Treasurer Stephen Jones claimed “there are different opinions in Labor” when it came to the tax cuts. There long have been, but that didn’t stop the leadership team promising to keep them.

In a vacuum there are good policy reasons to junk the stage three tax cuts, but such reasons for doing so can’t be disconnected from the fact if Labor goes down that path it will never to be trusted again. Its promises become worthless, its claims of reinstating trust in politics are over.

After voting for tax cuts shortly after the 2019 election, had Labor then refused to commit to keeping them during the election, that would be justifiable. It would have given voters a chance to judge Labor for such decision-making.

But having deliberately pledged not to repeal the cuts (which are due to take effect in 2024), to now break that promise would be catastrophic for the trustworthiness for this government. And it would give the Coalition in opposition serious political ammunition.

It would make Julia Gillard’s broken promise that “there will be no carbon tax under a government I lead” look like little more than a throwaway line she didn’t honour.

It would make Tony Abbott’s “no cuts” commitment on the eve of the 2013 election a mere media misstep.

To be sure, the current Labor government was at pains before the election this year to make it clear that it was not for turning when it came to the income tax cuts already legislated.

Albanese even used cost-of-living pressures Australians were facing as a key reason to keep the legislated tax cuts: “given the increase in rent and housing affordability issues”.

Such circumstances are all the more apparent now, after monthly interest rate increases since the election in May and with inflation continuing to rise. In a joint statement in July last year, Albanese and Chalmers confidently pledged: “An Albanese Labor government will deliver the same legislated tax relief to more than nine million Australians as the Morrison government … Labor in government will uphold the legislated changes to personal income taxes … providing certainty and clarity to Australian working families.”

Not any more, it would appear. With Labor safely ensconced in government and riding high in the polls the party brains trust is putting their heads together in preparation to justify a backflip.

But the Keynes excuse for a change of action doesn’t apply here, for the reasons already stated. In fact, the updated budget position for the previous financial year revealed last week highlights lower debt levels – to the tune of $50bn – compared with when Labor promised to retain the tax cuts.

But the deception attached to a backflip on this issue might go deeper. Who is to say it wasn’t a planned move, kept secret before the election? It is entirely possible Chalmers always planned to break the promise Albanese made, making doing so that much more deceptive.

It is incumbent on the Prime Minister not to let his Treasurer turn him into a liar. If Albanese is serious about building trust in politics he can’t walk away from such an iron-clad election commitment. Or, if he feels that doing so is a necessary evil for good policy reasons, he must show voters the respect of returning to the polls first, before junking the tax cuts.

If that means an early election, so be it. If it means repealing the tax cuts after they have already taken effect, having campaigned to do so at the next election, that too would be politically palatable, as messy as doing so would be.

But saying one thing before the election only to do the exact opposite after it, when the only fact that has changed is Labor winning an election without having to justify its plans, is representative of everything that is wrong with politics.

This week Sussan Ley gave us an insight into the rhetoric the Liberals will use come the next election if Labor does indeed break its promise: “This is tax relief that millions of Australians were promised, millions of Australians are expecting and millions of Australians are owed,” the deputy opposition leader thundered. That’s 2.6 million Australians, to be precise. A large chunk of the electorate to deceive so flagrantly and so quickly.

While I can understand the new government’s concern that people on incomes of $200,000 getting a $9000 tax cut isn’t especially “fair” when someone on $100,000 gets around $1400, that is something the party should have thought harder about before standing by the tax cuts at the election last May.

It is certainly not fair to voters to mislead them with election promises that aren’t genuine. Labor should have been true to the “fairness” mantra before polling day, not merely after it.

Peter van Onselen is a professor of politics and public policy at the University of Western Australia and Griffith University.