Broken tax promise sets stage for fresh spin

Stages one and two of the tax cuts – for low and middle-income earners – have already been applied. So why are the stage three tax cuts so often viewed in isolation rather than as part of a series?

On this page three weeks ago I noted that Anthony Albanese and Jim Chalmers “may well be rewarded for their deception” over the broken promise on the stage three tax cuts. It would be naive to think they didn’t already know they’d probably get away with the backflip before making the announcement. Modern politicians rarely do anything before internal party pollsters have done their research. Most politicians know how to lead only when they follow.

The first published polls the week after the backflip was announced confirmed voter self-interest trumps integrity in politics.

Most of the press gallery happily waved through the breaking of the promise. Readers can decide for themselves if they think the gallery would have been so forgiving had the Morrison government, or any other Coalition administration, done the same thing.

The newly designed cuts do give more taxpayers a bigger tax cut before bracket creep in the years ahead strips away that benefit. Because stages one and two cuts targeted lower and middle-income earners, stage three was designed to give tax relief to higher-income earners. In isolation that looks less reasonable than it otherwise is.

Stage three deliberately was delayed by Scott Morrison because he hoped to use it as a political wedge against Labor ahead of the 2022 federal election, as well as to avoid the hit to the budget the lost tax revenue would have across the forward estimates. It was cynical politicking by Morrison, unusual for such a principled politician.

Labor thwarted the first goal by committing to the cuts, even though it was open to reneging on the promise much earlier than the Prime Minister and Treasurer are admitting to now. By delaying the introduction of stage three, Morrison was putting in jeopardy the chances of it taking effect if Labor won the election. So, (mis)management of the implementation of stage three is just another thing Morrison managed to stuff up. The politics of Labor backflipping on stage three could have been vastly different if repealing it would have raised taxes that already had been cut for millions of voters.

Labor is banking on the public’s already low opinion of the political class (driven even lower after the bin fire of the Coalition’s nine years in office) protecting it from any meaningful fallout, but it wants to lock in the popularity of its broken promise just to be safe. Which is why this week we found out it is embarking on a $40m taxpayer-funded advertising campaign to sell the changes.

Don’t expect the campaign to reflect on the broken promise, however. It will be an exercise in unmitigated spin, with ad agencies crawling over each other for the luc­rative contract to craft the most superficial ads that serve the most partisan interests. All funded by your tax dollars.

This is precisely why any debate about wider tax reform also needs to include a discussion about how governments spend taxpayer money. When in opposition, both sides of the major party divide condemn the use of taxpayer money being spent to fund political advertising, only to flip the other way and justify such misuse when they get into power.

We’ve seen it time and time again. John Howard’s Work Choices ads are a standout; so too Labor’s “education revolution” campaign during the Rudd and Gillard years. The Morrison government didn’t hold back when spruiking stages one and two tax cuts, spending almost $30m selling the changes. Proving that inflation really is out of control, Labor has upped that quantum to $40m to spin its stage three backflip.

The arms race of escalating spending on government advertising represents a bipartisan misuse of taxpayer money, but it’s nothing compared with what gets spent on everything from new rounds of defence procurement to ever rising National Disability Insurance Scheme outlays. Not to mention unnecessary duplication between the commonwealth and the states.

The fact the tax take that covers such spending is disproportionately drawn from income tax receipts is good reason to look at reforms that spread the load better: consumption, wealth and rent taxes, for example. The ageing of the population increases the urgent need to do so before the fiscal strain on a diminishing working age population becomes too great.

But we can’t ignore the need for a debate about the role of governments, which naturally leads to a discussion about government spending.

The share of GDP that goes into government coffers as taxation has grown over the decades to match the ever-rising share of government spending as a percentage of GDP. In other words, government is getting bigger, injecting itself into more spheres of people’s lives and more often. It is therefore taxing us much more than it used to. It may be that Australians are comfortable with that, accepting it as a by-product of good government equating to a more robust safety net and better services. Or voters may be more individualistic than we culturally realise: keen to retain a greater share of their earnings even if it lowers the remit of government spending.

But the reaction from the voting public also may be a more nuanced one than this binary choice presents. Who doesn’t want government to spend more efficiently, target payments better and cut out anything that’s unnecessary as part of a social liberal spending agenda? Banning partisan puddle-deep “information campaigns” surely would be something most voters want.

We never seem to find ways to change the political culture, such that the misuse of taxpayer money stops. That’s because of the bipartisan defence of the status quo when in government. It’s part of what political scientists Richard Katz and Peter Mair described as the cartelisation of political systems. In Westminster two-party systems like our own it can manifest as major parties manipulating the rules to maintain their dominance.

Which is why it is up to the teals and other members of the crossbench to call out the bad behaviour rather than wave it through. Or, worse, be captured by a system that rewards joining the other muddy pigs as they get stuck in at the trough. Whether that be the perks with which they reward themselves, the misuse of taxpayer money for partisan gain or wasteful spending that, if it were more efficiently allocated, could lower the government’s dependence on higher taxes.

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