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.