Passage of income tax cuts a big win for Turnbull

Malcolm Turnbull has had a big win politically and legislatively on the Coalition’s $144 billion 10-year tax package.

It will be a huge boost to Coalition morale and momentum going into the winter parliamentary break, which will be dominated by the five by-elections on July 28.

The by-elections are a dry run for the government’s personal income tax package and any retreat in Labor support will be seen as endorsement for the Coalition’s “aspirational” tax cuts and reform, which do away with a large slice of regressive bracket creep for taxpayers improving their pay.

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Pauline Hanson’s eye on one of those by-elections — Longman in southeast Queensland — has caused her to frustrate the Coalition’s remaining $35.6 billion company tax cuts but to give the green light to personal income tax relief for low-to-middle income earners from July 1 and for those earning more than $120,000 up to $200,000 even greater relief in the years to come.

Labor is now committed to a big-risk election strategy of seeking voters to support a platform that involves repealing law that takes away future tax cuts from those earning more than $95,000 a year.

The ALP is now in a reverse position of Paul Keating in 1992 — before he won the 1993 election — when he assured voters his tax cuts weren’t just a promise, they were “L-A-W, law”.

It is now Scott Morrison and the Coalition offering L-A-W tax cuts in three tranches through to 2024 and Labor declaring they are irresponsible, uncosted and unfunded and they will repeal the tax cuts for those earning over $95,000.

It’s a big call from Bill Shorten and Chris Bowen that will face an immediate test in the by-elections, where voter support for One Nation — which, like Labor, opposed the higher company tax cuts but supported the entire personal income tax package — will be as much a test for the ALP as Coalition support.

It is extraordinary that the potential voter support for an unpredictable and dysfunctional party at a single by-election in Queensland, a by-election One Nation cannot hope to win, has dictated the entire course of Australia’s tax policy over the next 10 years.

However, as it plays out between the major parties there is no doubt there is a distortion in the political and policy debate fed by the dysfunction that is the Senate today.

It should also be noted that Keating was humiliated when he had to repeal the second tranche of his L-A-W tax cuts because of budget difficulties.