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Backing Liberals’ ‘Flat Tax’ Agenda a Bad Move for Labor

Figures in the ALP – even including Senior figures in the Left – are rationalising the decision to back the hugely regressive Morrison income tax cuts in the final instance. The rationale (given by senior Left figure, Kosmos Samaras) is that workers do not begrudge the wealthy a tax cut, even though they do begrudge an increase in Newstart. He concedes it reluctantly, calling it “confronting”. For many adapting to the mindset of these people (including ‘working class Tories’) is more urgent than actually trying to win the argument. Or winning those people over on balance on other issues – despite their prejudices.

So now Labor has gone so far as to pass the controversial ‘Phase Three’: which moves us towards a ‘flat tax’ with those in $45,000 to $200,000 all on the same rate. This is worse than Blairism; This is capitulating to Thatcherism.

Phase Three alone will come at a cost of $95 billion over the first five years’.

And even before this ‘Phase 2’ will cost almost $4 billion a year.

Now the Median wage (ie: middle income) is only approximately $53,000 a year. Though If you ONLY take FULL TIME wages that equates to $65,577 a year.

But this is NOWHERE NEAR $120,000, say – which is well within the top 10 per cent.

If people on undoubtedly high incomes do not pay their fair share of tax how will the social wage survive – let alone expand? If the ALP does not stand for the social wage what does it stand for? Without the social wage Labor utterly turns its back on the Whitlam legacy. And at least Hawke gave us Medicare.

If we effectively back a flat tax we may as well not exist.

Labor lost the recent election for many reasons. Clive Palmer’s money. A deceitful tax scare campaign on ‘retiree taxes’ and ‘death taxes’ that were nowhere on Labor’s radar. A failure to communicate complex policies. Media bias. The character assassination of Shorten (especially by Palmer) and a ‘flat’ performance by the Labor leader in the final days.

What this shows it that we need to be careful how we frame our next Campaign. Simpler but still progressive tax reform. Rescind phase three and increase progressive tax by somewhere between 1% to 1.5% of GDP. Include a progressively structured Medicare Levy increase. Make the connection between the tax reform and the social insurance/social wage reforms we want to make. Aged Care Insurance, Medicare Dental, Child Care. Keep on emphasising we’re only talking 1% to 1.5% of GDP. Sell the ideas of social wage, collective consumption, social insurance.

Also: Attack the Liberals relentlessly. Push them hard on the need for cuts under their plan and where the cuts will come from. Use relatively simple negative and positive ideas and slogans – that will ‘cut through’.

As for bracket creep; after adjusting for fairness we need to index the lower brackets. And when the Libs say ‘politics of envy’ – don’t just take it – fight back. $90 billion of cuts over five years is massive. It’s not ‘envy’; it’s about justice and it’s about survival. Emphasise that lower and middle income earners are $53,000/year and under taking the median as a guide (or again: approx $65,000 if you’re only considering full time workers).

When we cut taxes for people on $100,000, $200,000 and higher – we are cutting health, education, aged care, and the social safety net. Make sure everyone understands this. And also people on lower thresholds are paying proportionately more of the tax burden. Which is the point (ie: towards a ‘Flat Tax’).

These days even The Age is beating the Liberal drum relentlessly. But if we become a Party that no longer sets agendas; but rather REACTS and capitulates to media spin campaigns – we may as well give in. You’re basically saying ‘Blair was Right’. And that the cause of a genuine Centre-Left is hopeless. But even Blair increased tax modestly for his programs. A flat tax is closer to Thatcher than Blair.

If deregistering unions becomes ‘popular’ do we give in to that too?

We can make tactical and strategic changes without full on capitulation.

I made the argument thereafter that if workers support the Morrison tax changes it is because they don’t understand what it will cost them in the long run. And the ALP wasn’t making that case very strongly either.

For Samaras this was being ‘patronising’ to workers; and he retorted “yes, those poor uneducated workers.” The implication is that he thinks workers backing the cuts know exactly what they’re supporting.

This was my response:

So you’re saying people understand Medicare, welfare, public health, schools, public infrastructure, universities, the ABC – are going to be slashed; and they think a tax cut of maybe $10,000 a year or more for someone on $150,000/year is the better option?

People are immersed in popular culture. A Current Affair inciting hatred against the unemployed and unions. The Herald-Sun selling the narrative of the ‘everyman ScoMo’. Yes, there are working class Tories out there. But even still: we have to actively contest the argument. The Liberals will govern against most workers’ interests, and we need to communicate that. And somehow begin the work of rebuilding an outlook of solidarity.

I’m no Leninist, but it’s interesting to consider what he had to say here. Before the meaning of ‘social democracy’ shifted Lenin pointed out the need to impart ‘social democratic consciousness’; but that this did not arise ‘organically’ from the class struggle, but had to come from the revolutionary party.

Today we have very little left in the way of a class struggle compared with the past. The Accord had something to do with it. So did deindustrialisation. So we don’t have class consciousness among many, let alone ‘social democratic consciousness’.

That said, an old style vanguard party is not the answer. We need a mass party. But a mass party which – like a vanguard party – is capable of leading, mobilising and educating. And is complemented by sympathetic social movements which it builds strong ties with.

Social Media is a ‘leveler’; but the Conservatives dominate the old media. Over the long term the decline of traditional media will strengthen our hand. If we don’t completely roll over into a Party of Liberalism in the interim.

Samaras suggested I was being ‘patronising’; but remember a lot of workers voted for Hitler too. Would it be ‘patronising’ to say they were wrong? A lot of working people are convinced by the tabloid propaganda. Again, if deregistering the CFMMEU becomes ‘popular’ do we back that? Or do we fight back; actively strategizing with everything we’ve got?

Yes people got it wrong. No, they didn’t fully understand the implications of voting Tory. They don’t know what over $20 billion in cuts a year will look like. Van Badham of The Guardian supposes that before too long that will escalate to a figure of $40 billion.(there’s a likely recession, and the mindless drive for a surplus ‘no matter what”) It’s partly our fault for not making enough of an issue of it. Our job is to expose that social cost. And when it comes to the next election oppose Phase 3. Which alone will cost well over $200 billion across a decade after inflation (more if you accept Van Badham’s assumptions).

So for those who think it’s a good idea to back the tax cuts how about you explain where you think they should make the Budget cuts.

Jacquie Lambie has also totally sold out; backing the shift towards a flat tax in return for just over $150 million in relief for public housing debts.

Samaras again backed Lambie on the basis that public housing was a crucial issue in Tasmania, and the money would assist the homeless. Their circumstances are desperate; and no-one is saying nothing should be done.

But with the money forgone from the tax cuts (for just one year) we could provide Lambie with that money much more than 100 times over. Whatever relief the vulnerable get from this, other vulnerable people will pay down the track more than 100 times over in the space of just one year by the time Phase 3 kicks in (in 2024). And after that the vulnerable get nothing.

Many people who think about and understand the consequences of this will end up voting Greens or other Left groups out of desperation unless Labor gets it together and commits unambiguously to rescind Phase 3 upon re-taking government. It’s true in the end that Labor did not have the numbers to stop the legislation; but ‘taking a stand’ was crucial for morale and for Labor’s credibility. As well as contributing to a debate which may influence public opinion into the future.

For those who agree to let the tax cuts to go through instead of addressing aged care, dental, childcare: how about saying EXACTLY where you want Morrison to make the cuts? More than $20 billion a year is a LOT of money. It’s not enough to say ‘cut red tape’. Frontline services will be damaged critically.

And before anyone attacks me: We are coming within a cat’s whisker of a Flat Tax. And that is the politics of Thatcherism. ‘Politics’ is about ‘political capital’; and progressives who are about social and distributive justice – not just identity politics – will see this as a betrayal. It could colour peoples’ idea of Labor for years if not decades.

That’s what we should have thought of before we voted for this package; even if some people have the intention of trying to revisit the issue come the next election. (The legislation re: Phase Three is not due to take effect until 2024.) No doubt ‘pragmatists’ will try and head any such move off in any case when the time comes.

 

References

https://www.news.com.au/finance/work/how-much-do-you-need-to-earn-to-be-rich-in-australia/news-story/cd7e6647199773c56ad5a9270c7aab87

https://www.sbs.com.au/news/coalition-labor-to-talk-tax-cuts-as-scott-morrison-returns-from-holiday

https://www.budget.gov.au/2019-20/content/tax.htm

https://www.news.com.au/finance/work/how-much-do-you-need-to-earn-to-be-rich-in-australia/news-story/cd7e6647199773c56ad5a9270c7aab87

https://www.smh.com.au/business/the-economy/you-need-how-much-to-be-uber-rich-our-top-earners-are-taking-home-more-20150511-ggyzom.html

https://www.theage.com.au/politics/federal/labor-to-vote-against-coalition-s-full-tax-package-20190624-p520ox.html?fbclid=IwAR2Kkf9LvM8IaCCZouoLd0w_MKMUccweNoxzFekSELP8e0ym2wJexI69RxQ

https://www.ato.gov.au/general/new-legislation/in-detail/direct-taxes/income-tax-for-individuals/personal-income-tax-plan/

https://www.smh.com.au/politics/federal/jacqui-lambie-names-the-157m-price-of-her-support-for-income-tax-package-20190703-p523tl.html

https://www.theguardian.com/commentisfree/2019/jul/05/labors-support-for-tax-cuts-is-an-unfathomable-betrayal-of-principle

 

This article was originally published on ALP Socialist Left Forum.

 

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28 comments

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  1. whatever

    I don’t think they are influenced by Thatcher in this case.
    Flat-Tax Fantasyland is something that the National Party hillbillies have long talked about. RWNJ Larry Pickering has been preaching the Flat-Tax gospel for years.
    Like the ‘Bradfield Plan’, it is just a sketchy idea from the 1930’s that they used to talk about every 5 years, or so……as if they suddenly had discovered a brilliant new economic strategy.

  2. Dr Tristan Ewins

    It’s the sort of thing Thatcher would do. Friedman, Hayek, Ayn Rand – they all wanted a minimalist state. And even in that context opposed any kind of ‘progressivity’ ; ie: supported flat taxation. These people were Thatcher’s idols. Most importantly: this is very significant progress towards Flat Taxation IN PRACTICE.

  3. Phil

    Great article.

    Flat taxation is the Tories wet dream.

  4. Baby Jewels

    “workers do not begrudge the wealthy a tax cut, even though they do begrudge an increase in Newstart.” If this is true, I think you just hit on why this country has gone to the dogs. It’s people! Actually, I think workers DO begrudge the wealthy a tax cut when there are SO many struggling in this country. And from what I’ve read, people DO want an increase in Newstart. Sadly, we have only the Greens to oppose this creeping sickness that’s threatening to overwhelm us completely and the LNP have convinced the populace that the Greens are the devil’s children.

  5. Andreas

    And all this debate while numerous multinational companies earning billions in Aus are not paying any tax whatsoever. Dah…

  6. Alpo

    “Backing Liberals’ ‘Flat Tax’ Agenda a Bad Move for Labor”…

    INCORRECT!… Labor didn’t back a “Flat Tax Agenda” at all!! What are you talking about?

    In fact, the voters will be able to stop the third tranche of the tax cuts by voting Labor at the next election!

    Had Labor voted against this package (as the Greens did) they would have been accused of striking against the lower and middle income earners, which would have been damaging to the ALP. The Greens can do whatever they like, they are irrelevant anyway.

  7. Dr Tristan Ewins

    We passed Phase three ; we can only rescind that if we win government ; and like now there will be pragmatists who will urge us not to do so when it comes to the crunch. Phase three represents progress towards a flat tax – with those on $44,000 to $200,000 paying the same top rate. Labor may have had a strategic rationale ; but in the mean time the move is utterly demoralizing. If Labor ‘locked in’ to rescinding the cut that would go some way towards restoring morale. Labor could not stop the policy ; but they could have taken a stand, and given our supporters a reason to take heart. What we should be doing is demanding details on Budget Cuts incessantly between now and the next election.

  8. Wayne Turner

    Labor’s gutless crap of: We will get rid of it,if we get in is all bull – Firstly they have to get in.They would buckle when in,and they said the same about the GST.ALL TALK,NO GUTS.

    WE ARE SCREWED. USA 2 = AUSTRALIA.

  9. Keitha Granville

    Tax free threshold of $25000and income splitting to single earning families with a stay home mum. Then we might get some fairness in the system. Dropping the tax rate for people on the top levels simply allows more money to be squirrelled into schemes for tax avoidance.

    But it’s all about that now, only ever about what the aspirationalists want. The rest of us can just crawl away and die.

  10. Florence Howarth

    Labor could not stop the third tranche. The only choice they have was to vote for or against the whole package. They have made it clear they don’t support the third.

  11. Pere Duchesne

    Lets face it.

    The reason Labor lost the Unloseable Election and several others this century, is because it is less and less trusted by the public, for two reasons.

    One is factional infighting leading to the dominance of white collar life experienced deficient staffers.

    Also contributing, a commensurate decline in an understanding of Labor values at the high echelons as the party has become poll driven, scrapping over the spoils of defeat such as passing ineffectual alterations to Tory legislation, the whistle blowers/ journalists protections being only the latest example of many. Disastrous legislation has been routinely waved through as Labor seeks to preserve the appearance of rational opposition and probity with token resistance as ideological dependency on bosses ideologies, laying down the terms of discourse solidifies. Rather, fighting for credibility on crucial issues like FTA disclosure and Surveillance legislation, where it has bought into, consciously or unconsciously, the National Security, Clash of Civilisations and Market economics alibis for oligarchic domination would have been more fruitful, but Labor itself now seems to genuinely believe the worst of Blairite and Cheneyite ideas both here and offshore actually have some basic in fact rather than as obvious alibis for false consciousness driven plunder.

    The lack of values of some State governments has only consolidated an impression of lack of imagination and scruples that even the most witless voters sniff the air suspiciously at.

    It is true that Labor actually deserved to win the last election however. It did deserve a chance to retrieve credibility in the public estimation against an LNP government already PROVEN devoid uf of ANY merit. But things have deteriorated so much over this century that the public was always going to be susceptible to the massive consent manufacture blows rained down on it by the like of Palmer and Murdoch.

  12. whatever

    Much like the last two Federal Budgets there is the MSM running a rapturous account of the new low-tax Nirvana we have been delivered, but there isn’t any actual, popular enthusiasm out there.
    Corporate Tax cuts are all they really care about, and it still looks like a Recession out there.

  13. Leonie Parker

    “Many people who think about and understand the consequences of this will end up voting Greens or other Left groups out of desperation unless Labor gets it together and commits unambiguously to rescind Phase 3 upon re-taking government.”

    Yep, I for one, am thinking this way. I haven’t been a Labor voter all my life, but I have been for at least the last 20 or so years. I won’t be voting for them again unless there are some big changes. The Greens are looking much more likely to be getting my vote from now on, even though I understand why Labor did what they did. They don’t want to cop the blame for the LNP’s ‘mandate’ not getting the green light.

    Well, wake up Labor, as far as the right is concerned, you will cop the blame for everything that is wrong with the world anyway, no matter what you do or don’t do. You might as well stick with your principles and vote against bad policies when you see them no matter what – or maybe abandon said principles altogether and play the game the same way they do. I fear that if you don’t you will never see Government again, at least not in my lifetime, and I haven’t got all that much longer to go.

  14. Pere Duchesne

    The damage Labor does reinforcing repressive memes of social exclusion and theft of the common wealth is the worst aspect of the siding with Tory policy on issues of fundamental principle involving rational economics and ecology, civil liberties and basic Habeas Corpus legal principles.

    Are they utterly without intelligence or actually soulless?

  15. Harry

    Federal taxes SHOULD be progressive and scope for avoidance must be reduced. The tax threshold at which any income tax is paid should be substantially raised, perhaps to $50k, to stimulate the economy and to reduce inequality, as suggested by one of the few truly progressive, non neoliberal parties in this country, the Real Democracy Party.

    When are we going to wake up and realise that federal taxes do not fund and are not needed for federal spending ?! We do not need to go after the wealthy and the big end of town to fund federal programs and this only perpetuates the class warfare that permeates politics and usually results in mildly reformist parties such as Labor relegated to mostly impotent opposition for many terms.

    Our income taxes, GST, CGT etc do not fund defence spending, they do not fund education or unemployment benefits etc .

    https://era-blog.com/2016/12/05/paying-for-public-services-in-a-monetary-sovereign-state/

    And

    RealDemocracyParty.net.au

  16. Baz R

    Hey true blue, don’t say you’ve gone…

    It’s a waiting game now. Corporate lovin’ government; consumption obsessed plebeians, we are all connected to the commercial bitch tube.

    How did Australian culture get so fcked that it wants corporations to be the new institution? *trump..cough

    Up next, 5G Towers, Roundup lawsuits and water crises.

    Jump the ditch and move to NZ.

    …so you’ll be back later on….

  17. Dr Tristan Ewins

    Raising the tax free threshold to $50,000 would narrow the base too much. It sounds good distributively – until you work out the revenue shortfall. We want progressive tax. And at the upper levels we want rates to be reasonably steep. But we’re also promoting ‘social insurance’ and ‘collective consumption’. That is: people preparing in advance for contingencies like unemployment or aged care through the tax system. (though in a progressively structured way) Or with ‘collective consumption’: When we consume collectively – for instance through the Pharmaceutical Benefits Scheme – we end up getting a better deal collectively. A tax free threshold of $25,000/year fully indexed may be doable if compensated for elsewhere.

  18. Terence Mills

    The fact that a government in place for three years from 2019 to 2022 can dictate the fiscal policy of a government yet to be elected in 2022 in disturbing.

    Labor cannot go to the 2022 election with a policy of repealing the stage three tax cuts – or more accurately stage three cuts to revenue – unless the situation is dire and of course the coalition will point to everything being fine with perhaps a concession to economic headwinds from the global economy.

    We need to be clear that this move by the Liberal party was desperation politics and a brazen appeal to
    self-interest masquerading as tax reform ; what Labor took to the election was tax reform. What the Liberals gave us was tax cuts to be matched at a later date with cuts in spending and services.

  19. Dr Tristan Ewins

    With the associated Budget cuts the situation will be dire and Labor Must withdraw the tax cuts.

  20. Terence Mills

    Tristan

    Wasn’t this the coalition ploy all along, expecting Labor to vote against the stage three cuts and then using this at the next election to show up Labor as being opposed to ordinary Australians being able to ‘keep more of their money’ ?

    Then they used Orwellian language to give their legislation credibility :

    Treasury Laws Amendment (Tax Relief So Working Australians Keep More Of Their Money) Bill 2019

    Labor have been effectively wedged and in the circumstances they could only put up amendments which they knew would be defeated and then vote the wedge through. To do otherwise would have given this mob too much ammunition to take to the next election.

  21. Dr Tristan Ewins

    I disagree ; if we made the argument consistently that the Libs wouldn’t split the bills ; and this will mean tens of billions in austerity , I think that could cut through – if we were incessant in pressing the argument between now and then,

  22. Dr Tristan Ewins

    We could even have moved our own tax cuts legislation to show our bona fides even if that wouldn’t pass. And then the ball would be in the Coalition’s court.

  23. Stephengb

    Look I am disappointed with the antics of the ALP who seem to be in permanent shock mode, but come on folks we seem to be getting all hot under the collar about a decision to try and maximise the tax relief to,the low and middle oncome earners (a fiscal decision designed to stimulate a flagging economy) whilst trying to minimise the crapolla that would be sl7ng at them by the Right if they had voted no when the legislation was going to be passed anyway.

    At least on this way the ALP will not have stood in the way of tax relief to the low and middle income earners, will not have stood in the way of an ecomnmic stimulus package that takes effect immediately.

    Of course yes they have voted to give a greater tax relief to,those who don’t need it, but that will not take effect for 5 years. Meanwhile if one day is a lot in politics imagine the amount of politics that will how over the next 5 years.

  24. Claudio Pompili

    Tristan, you nailed it, however, I’m not as optimistic as you are for the ALP brand. Labor’s lurch to the Right kicked into gear big-time under Hawke/Keating’s embrace of neo-liberalism. Bomber Beazley’s finessing of small-target strategy and focus group pragmatism fed the cancer. Since then Labor has abandoned reasoned argument and compelling narratives in a race to the bottom.

    Labor’s support for last week’s Coalition’s Tax Package bill, that will increase inequality and undermine our progressive taxation system, was a step too far.

    This, in addition, to Labor’s bipartisanship on: support for Adani and fossil-fuel industries; off-shore and mandatory detention; sycophantic foreign policy and participation in US illegal wars; the installation/permanent rotation of US marines on Australian soil; draconian national security and privacy legislation; the re-introduction of user-pays university fees; the suppression reasonable increases in welfare benefits; the abandonment and demonisation of Australian citizen whilsteblowers Julian Assange and David Hicks before him; the continuation of LNP discriminatory NT Intervention and Cashless Welfare card legislation; and the promotion of the nuclear industry by SA Labor and its NFCRC, along with Bill Shorten’s accommodation for revisiting the legislation, are just some of the long list of examples of the ALP’s repositioning to the Right.

    I’ve been a Labor supporter all of my working life but no longer. The modern ALP no longer reflects my values.

    I will be voting Greens and other progressive/Left parties or independents but will ensure that neither ALP/LNP get my secondary preferences.

  25. Dr Tristan Ewins

    Labor is preferable to the Conservatives and at the end of the day people have to preference them ahead of the LNP if they want to avoid the worst of outcomes.

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