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Tax Cuts and Other Wedges

There has been a disturbing urgency on the part of the Turnbull government to slash personal and corporate taxes prior to the next election, due by May 2019. Disturbing because this frenzy of tax cuts really don’t have their major impacts on our economy until fully implemented six years hence when the flattening of the personal income tax rates take place and the proposed big business corporate tax cuts to 25% take effect, in 2024.

Why the urgency, why can’t we wait a few years and, if future government revenues are as good as predicted and debt repayment is on schedule and the deficit is under control and we are adequately funding healthcare and education and the myriad of other services we rely on, then start looking at these tax cuts ?

Is it solely to wedge Labor into the future ? This certainly seems to be part of the coalition strategy, as an incoming Labor government in 2019 would, if all these cuts go through, be faced with a revenue strait-jacket imposed by their coalition predecessors for the whole of their first and second terms. They could not initiate meaningful social reform measures because a former coalition government had given away and severely impeded ongoing revenue streams.

Labor have the very difficult and potentially election losing alternative of pledging to roll back the tax cuts when in office. But, as we are already seeing, this is fraught with difficulty as part of the wedge is to portray Labor as a high taxing party contrasted with the very competent and generous coalition.

As Michael Pascoe noted in his article for the New daily this style of politics fits the definition of conservatism identified by John Kenneth Galbraith : ‘The modern Conservative is engaged in one of mans oldest exercises in moral philosophy; that is the search for a superior moral justification for selfishness’

The choices for Labor are fundamental to their chances of forming government next year and it will take clear enunciation by Shorten and a perceptive and receptive electorate to expose the truth and to understand that the coalition strategy of cutting taxes so far in advance of supporting economic data are politically motivated and are imprudent and potentially reckless.


15 comments

  1. Lurline O'Brien

    This is what the outgoing liberal government did in Victoria when they signed contracts for the east west link 3 weeks before the election, knowing that Labor had no intention of going ahead with it. Then the electorate had the gall to blame Labor for the costs of cancelling the contract.

  2. Alpo

    Shorten only needs to promise to revert the priority of personal tax cuts and repeal big businesses tax cuts, as they don’t need them. Reverting the priority of personal tax cuts simply means increase the cuts down below the income distribution, so that lower earning individuals get a few thousands back, whereas those up above get a few hundreds back. The current Neoliberal legislation does the opposite.

    Turnbull and his Government are now forced to defend big companies and high earners…. Good luck with that. Trying to show themselves as the “paladin” of the battlers and helpers of the small corner shop …. is just laughable. Nobody believes that crap anymore. The Liberals are the party of the 1%, Big Companies and Multinationals…. that’s a reality that is becoming well entrenched in the mind of a relative majority of voters.

  3. Keitha Granville

    Simple way to help low income earners – make the tax free threshold $25,000, and then once you earn over $100,000 drop it back to $18,000. The the top earners don’t get to reap extra benefits as well as a tax cut, and those at the bottom of the pile get to keep most – in some cases all – of their earnings.

  4. totaram

    Alpo: they are still trying to show that “Bill Shorten wants to cancel the tax-cuts to small business” where they have redefined small businesses to be those earning (profits?) between 50 m and 200 m a year. So they are defending high earners but pretending it is thee “middle class”. It is the same with ScoMo trying to tell us that those earning above 180,000 per annum are middle class.

    You can catch these tricks in the comments on blogs and social media as well.

  5. jamesss

    I find it quite disturbing to see political parties offering carrots to the populous while having no intention of
    fulfilling their obligation at all. The country could be in a depression within six years (or sooner) the way the economy is performing. They are dreaming!

  6. my say

    This government has done so much damage to Australia , we will never recover
    How can you promise Tax Cuts in the never never,not knowing what the economy
    is going to be like,
    We have the low and middle income earners,living on a mere pittance ,while the big end of town
    gorge on wealth,
    Our country cannot survive another term from this dangerous government ,but i feel for the Labor
    Government if they get elected,trying to get Australia back on its feet

  7. Jennifer Demas

    Much as I loath it, have to listen intently, because half no all of the time, the loquacious Turnbull has no idea on any idea, but hell can he verbose. He uses these impressive sounding absolutely meaningless words (i.e. agnostic, cannot future proof, equip etc as he dismantle the social fabric and snookered 21st century Australia) ) that sent the journos into all pentecostal rapture, suppose they also have no idea what it means or is and they make a crust out of spinning the English lingo, go figure.

  8. etnorb

    Sadly, yet just another typical example of just how “off” this bunch of inept, lying, flat earth, right wing, obscenely overpaid under performing bloody so-called “liberal” party really is! And they are led by the chief effwit, Talkbull! It does seem as though they are deliberately forcing onto Labor what will be a giant noose around their necks for any sort of realistic attempt at helping people on Welfare, Pensioners & low paid workers etc with any sort of realistic monetary assistance or reform packages, which this country really needs after being screwed by the effing libs for years now! And this bloody rabble still want to give ALL their obscenely wealthy industrialists, pastoralists, mining magnates, press barons etc tax cuts, when a great percentage of them do not pay any or very little taxes now, WTF??

  9. John L

    Standard Conservative governing practice. First term – gorge themselves and their mates at the publics expense, second term, (they always seem to get at least 2 terms), carry on wrecking the joint so any incoming Labour government is totally on the back foot trying to repair the damage, whilst screeching about what a mess labour are making. This normally convinces the dunderheads to vote them back in again. Then rinse and repeat, driving the country into the ground all the while blaming labour…. and so it goes.
    Jeez, people are stupid.

  10. Jaquix

    The Libs went quiet all of a sudden about the company tax cuts. I suspect this is part of the secret agreement hinted at in parliament, and weakly denied by Turnbull (with a cat licked the cream look on his face by the way). With Pauline Hanson. Goes like this. She will stick to her 3rd position, of No Tax Cuts for Big Businesses. That will get her through the Longman byelection, looking good to the voters there who dont approve of them. And also help the Qld LNP of course. Then after the byelection, lo and behold, Pauline will do another Big Backflip, and announce she will vote with the Libs, because they have promised to “go hard on Multinationals”.

  11. Jaquix

    If you havent already seen it, I recommend you check out Bill Shorten’s speech to Parliament on 27 June. Ignored by msm and ABC of course. On YouTube. Sorry I cant do a link, but the date should help.

  12. helvityni

    Jennifer Demas, his very favourite word is ‘ensure’, often he repeats it few times in one sentences.. Sadly I’m not ensured at all..

    Jaquix, it’s my take too on the Pauline/Mal story, they are so predictable…

  13. Kronomex

    Shorten backflipping on his scrapping of tax cuts is going to mean that we won’t hear the end of it from Trembles and Crumbs…er…Co (and Rupert) getting stuck into him for the foreseeable future. He was doing so well until this.

  14. Terry C

    Great article mate.

  15. Judith

    It does seem like part of liberal policy – to put the incoming government into a difficult situation where winning becomes an undesirable option and the position of governing becomes a balancing act. The solution lies with getting more 18-25s into the voting pool. They won’t get upset when tax concessions for multi million dollar businesses, property moguls & mining companies are repealed.

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