Opportunity for real tax reform goes wanting

Feb 6, 2024
Canberra Parliament House in Sunrise at Lake Burley Griffin.

I very much doubt that Anthony Albanese will be losing much sleep from opposition claims that he is a liar, or not to be trusted on anything after his volte face on tax cuts focused at higher income earners. That’s even if you regard as a lie an election promise which is subsequently not followed to the letter.

His new policy proposal is in practical terms likely to be popular with an overwhelming proportion of the population, because they will receive more after his abandonment of the Morrison-legislated program of tax cuts than by his adhering to it. Second, although the very highest earning taxpayers will be somewhat worse off as a result of his changes, they will still be getting a substantial tax cut. Moreover, he has a good argument that the burden of inflation on the living costs of working Australians was a new circumstance justifying a change of policy, even though he had not previously intended to do so.

Albanese and his Treasurer, Jim Chalmers, are probably also celebrating their cleverness in seriously wedging the opposition, and any attempt to go too far with efforts to defeat the new measure. It would be difficult to roll back, at least without snatching away the tax payments going to lower and middle income earners, who had not been going to benefit on this, the third tranche of the coalition’s tax reforms. Funding for the cost of this generosity would come from winding back the extent of tax cuts for those on high incomes (with quite a bit left over).

The opposition could bind itself to a complete restoration of the selective tax cuts – at massive extra expense – but that would hardly be politically smart, since most taxpayers would get nothing. Best for the opposition to grumble loudly about broken promises, or lies, but to wave the new measures through. It was the opposition, after all, which had been loudly making noises about the need for relief for taxpayers with extra costs of living. On the face of it it was a nice political fix by Albanese, perhaps more cheering for his supporters after a disappointing 2023, and a few reverses at the hands of Peter Dutton.

It reminds me, however, of a fabulous inswinger from the late Fred Truman, which narrowly missed skittling and seriously wounding a fellow member of the Fast Bowlers Union, albeit an Australian. The batsman said to Freddie, “Great bowl, mate.” Fred said, “Ay, it was wasted on thee.”

Good politics in short, but by no means necessarily good policy. Paul Keating once argued that good policies almost inevitably meant good politics, but he did not necessarily mean that the mere thinking through and adoption of fresh policies meant that the measures would be successful and popular. For him, there was more to politics than tactics, or putting one over the other side, least of all in some tactical skirmish pulling the rug from under them.

Making good policy and politics is a long and drawn out process

Good politics is about recognising the need for better policies. Establishing the facts and what was wanted from different outcomes. Talking to people and interests likely to be affected, and listening to, and dealing with their points of view. Forming coalitions of support around some propositions, with some compromises and trade -offs for those likely to be adversely affected. Creating partnerships, and committing players to the desired outcomes. Dealing in advance with some of those able to create a climate of opinion about the need for changes, and the outcomes that should be looked for.

The good politics would then move to unveiling it for public discussion, complete with documentation, examples, rationales, and patient and respectful treatment of possible alternatives. No doubt there would be opportunists, particularly politicians, who would misrepresent the proposals or seek to make them sound ridiculous by exaggeration or misrepresentation, including of motives. These might be dealt with scornfully, but not at the expense of recognising that some in the process were wanting to be convinced, rather than abused.

And at that stage, with the proposal now on the table, the good politics had scarcely begun. It needed to become an item on the public agenda. Something being discussed – in the media, in the news and in the commentaries. Talked about, contradicted, counter-contradicted, argued and debated – and out in the community, and in the constituencies of those who would be affected as much as among the chattering and the political classes. Until, to lift a metaphor from another type of Keating teaching, every parrot in every pet shop was talking about it.

At just the time the debate seemed exhausted, with the proponent absolutely exhausted and sick of repeating themselves, one had got about half-way there, Keating would say. It would just be the first evidence that the question was now on the public agenda, and that it was being talked about and argued among those who stood to lose or gain. Those who relaxed at this stage of the struggle could see the case go by default, or be overtaken by some other cause, some completely different policy proposal on another issue altogether, or some deliberate distraction or unpredictable event.

Those lobbying for doing nothing, or warning of dangerous consequences, would now be met by those with a stake in the better policy. The politician or policy proponent who stayed the course would often find that the proposal had acquired some momentum of its own, and now had new champions, sometimes unlikely ones, who could see how it fitted in with other policies and was the most appropriate response to new circumstances. Along with the process, usually, would also come some respect – whether for being fair dinkum, for being interested in something more than point-scoring in parliamentary debates, for having substance, and doggedness and for willingness to engage.

It goes without saying that winning such debates may involve strategy and tactics. But it does not usually depend on secrecy and secretiveness, on claims to inside knowledge or higher authority, or in disrespect to players and citizens. It works, rather, on the idea that good legislation and good policy depends on the active consent of the community – a community which has been informed by the debate, and which, after the debate, can see most of the misrepresentations, falsities or scaremongering that might have become involved.

I cannot pretend that Keating always exemplified such tactics, or that he ever set down, on any one occasion, the arguments I have summarised here about the good politics of making good policy. But no one who has even listened to him could doubt his commitment to debate and reason. Or the value of some of his other ideas – including his hand grenade theory of breaking log-jams.

Most “achievements” of modern governments do not endure. But sometimes we see brave and lasting change after engaging the whole population.

If one goes back over 50 years of lasting and substantial policies in Australian government, it is amazing how many of them followed such long and intense efforts to engage with the constituencies and the wider community, rather than quick and dirty deals between big players, and a lot of political shortcuts. Many other measures, claimed to be revolutionary new policies and approaches, foundered for just the lack of engagement.

To take some examples, administrative review laws- the Ombudsman and FOI legislation- were on the agenda for years, ending up as the achievement of which Malcolm Fraser was most proud. Much of the rights-creating, anti-discrimination legislation and occupational health and safety legislation of the 1970s and 1980s, followed similar paths.

Bob Hawke’s restoration of Medicare, the wages accord, restructuring of the economy and many of the administrative reforms of the 1980s and 1990s involved public discussion that sometimes seemed endless. John Howard followed similar processes with the GST, but not with industrial relations, and those IR initiatives did not last because he took short cuts including ruthless use of parliamentary numbers to cut off debate. Much of the early work of Julia Gillard and Kevin Rudd on carbon pricing was exemplary, but it fell apart (after the achievement of its being legislated) when Tony Abbott pulled the rug on any cooperation with the process or the debate..

Perhaps the lasting reform of the 2010s was the National disability Insurance Scheme, which under Bill Shorten in the Rudd and Gillard government was a public agenda item, one to which ultimately the coalition became committed. By contrast, many of the schemes and proposals that emerged from the Abbott, Turnbull and Morrison governments may not last long because of the short-cuts taken with sharing the information, engaging with the players and keeping the public informed about what was going on.

The Albanese government, if it is to live long enough, may lay down some lasting memorials, perhaps in restoring integrity in government and, perhaps, in re-fashioning Medicare for modern times. It may even draw praise for restoring the fiscus, although, as I have often warned editors, no one ever became famous in a good way for coming in under budget.

But the Albanese record is in many respects a disappointment, not least for the restoration of secretiveness, and surprise in discussions, and in its timidity. It goes only for piecemeal and incremental change, rather than attempting to make fundamental reforms to an edifice that is no longer sitting comfortably on its constitutional, fiscal or administrative foundations.

There could hardly be a better example than tax. Basic tax reform has been on the public agenda for at least 40 years. The debate extends over rates of tax, and how it should fall on different income groups, as well as on companies and artificial entities such as trusts. It goes to the mix of taxes over incomes, to taxes on consumption , and taxes on assets, especially land. There have been many inquiries. The most significant, probably, was the Ken Henry inquiry, because it went in with an open mind even as spoiling politicians attempted to disrupt its work by demanding that politicians rule subjects – such as higher GST rates, or land taxes, in and out of the equation. No doubt some of the figures in its reports need reworking, but its broad points are still good. Not surprisingly for objective information underlying good policy recommendations, very little of the report is seriously on any government’s agenda. Usually it serves only as a bogeyman.

None of the “reforms” in the Albanese and Chalmers re-setting of the tax scales involve any sort of fundamental change at all. They do not flirt with the nature of the tax burden and the tax mix, and may, indeed, make changes more difficult in future. Lower income families have plainly received some extra assistance with higher living costs, but almost all families (except the very well off) have lower incomes in real terms than they did a decade ago. Their situation will further deteriorate, not improve, in future years.

Our current tax debate involves almost no discussion about the effective exemption of the family home (of whatever value) from considerations of wealth or implied income, the effect of decades of real increases in the value of houses that has driven most young people out of the market, and the inexorable shift of assets whereby the oldest third of Australians – the most lightly taxed – control more and more of the wealth of the nation.

We need more than cunning and fiddling at the edges.

Among neo-Liberals, lower taxes and a smaller proportion of the national income going to government has been dogma for more than 40 years. One can expect that the very rich want much lower taxes, and greatly reduced government activity. The ordinary taxpayer may sometimes be swayed by such rhetoric, but has not stopped demanding more and more services. The general cost of government services – in health, education, law and order welfare and defence, for example – is steadily increasing, and government must find more sources of revenue, or more debt, to pay for them. Efforts to rein in expenditure by privatisation and contracting out have generally not been successful, and certainly have not reduced the size of the bureaucratic footprint.

It takes politicians of courage and vision to initiate genuine public discussion about such matters. They may even need to be good tacticians too. In the past we have had politicians up to the task – Keating and Howard, for example. One cannot describe anything coming from the Treasurer, or the Prime Minister, as in that ballpark. They are simply buggering about, and congratulating each other on their cunning.

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