The stage three tax cuts are dead, not quite buried, rebirthed by Anthony Albanese in an Oprah moment: everyone gets a tax cut!
Read the fine print, folks.
Labor hopes this round of relief – because the proposed changes must traverse the parliament – will create more happy each-way small-time winners than dudded punters who have just lost half the windfall they were promised in the next financial year and beyond.
This switcheroo, which effectively becomes stage four of the previous government’s tax flattening journey, is a throwback to the class politics the nation had largely left behind.
Equality of opportunity for sure, but outcomes flow from toil, smarts, keeping to the law and, of course, luck in the casino of life.
The basic economics of the Prime Minister’s summer surprise are simple and zero-sum: a little for the hard-up many at the expense of the, plainly, undeserving few, under the banner of fairness.
We’ll never know whether the new tax settings will put more pressure on inflation than the old, but that doesn’t mean the Reserve Bank board won’t be watching closely for any sparks in the broader economy.
Be careful, and keep your eyes open, because what you gain from Canberra you might lose if interest rates stay higher for longer.
What does seem clear is that stage four is terminal for economic reform.
Is this good policy to improve the functioning of the tax system?
If your game is redistribution, then yes, churn baby, churn.
Cutting the bottom marginal tax rate from 19c to 16c in the dollar (which applies to income between $18,200 and $45,000) may remove some of the disincentive for secondary earners (typically mothers) to return to work.
But if you want to drive participation, aspiration and innovation, as well as discourage the tax planning industry that enables too many to choose how much tax they pay, while working stiffs on the same income are locked in, this is not the way.
On the evidence here, Labor can’t manage basic fiscal housekeeping by returning bracket creep pilfered over the past few years and building aspiration into the tax system’s design through a modest 30 per cent top marginal rate for 95 per cent of workers.
As a community, we need to make huge changes to the way we fund an ageing society and attract investment, with reform of the tax system at the very top of the to-do list.
We tax income too heavily and wealth very lightly, meaning our young people get a poor deal.
In our needy society, those workers will bear the brunt of funding aged care, health, disability and interest costs.
Labor has taken a political bet to get through to the next election and cut adrift a policy it did not own in its bones.
At the very least, Albanese should have renounced the old plan before assuming office and won a mandate for fresh policy.
Still, this bad faith has been hardwired into our affairs for years, so no one will wake in shock, despite the amorphous “new politics” we often hear about.
Again, such betrayal and base recidivism spells doom for the growth-enhancing policies Australia needs to fund itself and prosper in the expensive years ahead.
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