PM’s breach of faith on tax cuts could prove to be politically fatal

Anthony Albanese ahead of Labor’s caucus meeting in Canberra on Wednesday. NCA NewsWire / Martin Ollman

Anthony Albanese’s rewriting of legislated stage three tax cuts is a bigger broken election promise than Julia Gillard’s vow there would be “no carbon tax” and even outdoes John Howard’s backdown on his promise that there would “never ever” be a GST.

The Prime Minister has taken a huge gamble in the rewriting of the tax reforms, in which he has ­trashed his credibility and claim that “my word is my bond”, and banked on popular support for a short-term and retrograde “fix” to the tax system to regain political momentum and carry the ­Dunkley by-election.

It is his biggest political/policy decision so far and will have real consequences which will be vital to his leadership and the outcome of the next election. Certainly he could not have won the last election without supporting the stage three tax cuts.

Albanese’s move is not only a sneaky breach of faith but also cynical repudiation of the fundamental reform intention of the tax changes, which were designed to eliminate the anti-aspirational and productivity-dulling effect of bracket creep that pushed more and more taxpayers into higher tax brackets and provided lazy money for governments.

It is a betrayal of political trust and a repudiation of his own arguments supporting the equity and economic benefits of the proposed tax changes which Labor supported in parliament and pledged to at the last election.

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At least Gillard’s broken word on a carbon tax did not entail ­negating legislation she supported at the previous election, and Howard took his dramatic new position on GST to the next election and didn’t just announce it from his prime ministerial office.

Gillard had made her promise out of a desperation not to lose the election and fend off a strong ­attack from Tony Abbott over ­carbon reduction costs, while Howard decided to shift drifting political focus back to a huge ­policy agenda and make the next election about economic management.

(Gillard’s deal with the Greens on the carbon tax permanently damaged her standing and cut Labor’s support while Howard’s tax reform fight cost him more than 20 seats at the election.)

There are elements of both ­Albanese’s predecessors’ plans in his rewriting of the tax system: he has been campaigning for a month to convince people he’s concerned about the cost-of-living impact on middle Australia in an effort to staunch ebbing support and; he has opted for a huge, attention-getting policy.

He conflated the tax cuts with inflation and diverted attention from the other drivers of rising costs such as Labor’s transition to renewable energy.

There are also echoes of the decisions taken by Paul Keating in the 1990s to renege on the L-A-W tax cuts and Kim Beazley’s as opposition leader opposing tax cuts for people earning $80,000 on the basis they were well off.

Even people who may be getting promised tax cuts don’t like the idea that tax promises can’t be trusted and even those who don’t earn the Albanese wealth level of $150,000 now would like to in the future.

As for the charade of calling an emergency meeting of all Labor MPs and senators at a cost of about half a million dollars for consultation, Albanese left them looking like sideshow alley clowns with gaping, mute mouths as he promised every child a gift.

Just as he did with his priority call for a referendum on an ­Indigenous voice to parliament, Albanese has manacled those same colleagues to his cause and made it impossible for any who may think it is not a good idea to speak out.

Every Labor MP is now as complicit in this tax decision as they were in the referendum failure.

What’s more, the real negotiation on legislative changes shifts any influence from Labor MPs and senators to the Greens and teals who are already lining up to demand even greater burdens on higher-income earners despite holding seats with the highest proportion of people who will be hit hardest by the broken promise.

There is no doubt Albanese’s image will suffer among some voters and the loss of faith could, like Gillard, prove fatal to his leadership, but this is not to say it won’t achieve his short-term aim of drawing back lower and middle-income voters who have been ­attracted to Peter Dutton’s ­appeals to working families.

This is particularly the case for the leadership test of the Dunkley by-election to be held in the Ides of March.

There is also a longer-term prospect of voters at the next election, who have got bigger tax cuts, being wooed away from the ­Coalition’s commitment to the tax cuts as they were promised.

Even Abbott’s victory in 2013 and subsequent repeal of the carbon tax had to recognise the difficulty of removing benefits that have been given and left the compensation for low-income earners in place for a tax that wasn’t there.

Albanese has ensured that the urgent pre-parliamentary meeting demonstrates an unqualified new direction for Labor policy and politics, especially for the short-term, but the risk remains that a short-term fix will produce long-term and fatal damage.