Inequality and the 'politics of envy'

August 4, 2017
Treasurer Scott Morrisson entreats us to believe that inequality is getting better when most studies shows it is getting worse.

Federal Treasurer Scott Morrison says inequality in Australia is falling, and accuses Labor of pursuing a dishonest campaign based on the "politics of envy". Morrison claims Opposition Leader Bill Shorten's statement that inequality has reached a 75-year high is a "lie".

But the governor of the Reserve Bank Phillip Lowe, not known as a radical, has contradicted the Treasurer, saying on July 26 that inequality had "risen" in Australia, especially in the area of "asset wealth". He also criticised the low increases in wages over recent years, saying that higher wages would help economic growth.

The OECD's most recent economic survey of Australia said inequality was worsening. "Households in upper income brackets have benefited disproportionately from Australia's long period of economic growth," the report said.

Even voters in Morrison's own southern Sydney electorate of Cook overwhelmingly believe inequality is a worsening problem and the government must do more to address it. A poll conducted in the electorate on July 27 found nearly 85% believe it is important for the government's policies to reduce inequality.

Moreover, a Guardian Essential survey released on August 1 showed a clear majority believe economic inequality is rising and strongly support progressive changes to the tax system and firm measures to limit tax evasion and avoidance.

The survey showed 82% of those surveyed supported forcing multinational companies to pay tax on Australian earnings; 61% supported increasing the income tax rate for high earners; 71% favoured introducing a "Buffett rule" forcing wealthy people to pay a minimum 30% tax rate; and 86% supported preventing companies and wealthy people from minimising their tax liability by sending funds offshore.

So what does Morrison mean by the "politics of envy"? He means ordinary people are jealous they are not rich enough to be able to "arrange their affairs" to rip off the tax system and too poor to afford their second, third or more investment property, based on gaming the negative gearing and capital gains tax rorts.

Shorten has declared that plans to tackle inequality would be the "defining mission for a Shorten Labor government". In a speech to the NSW ALP Conference on July 30, he pledged, as part of a policy against inequality, to introduce a minimum 30% tax on discretionary trust distributions to people over the age of 18 if Labor wins the next federal election.

Discretionary trusts allow high-income earners to distribute money to family members on lower incomes and tax rates, and thus reduce their own tax liability.

Labor says the crackdown on "income splitting" will affect only 2% of taxpayers, but will raise $17.2 billion over the next 10 years. The policy would not apply to farming or charitable trusts.

The Australia Institute estimated that trusts hold $3.1 trillion in assets, with 51% of the revenue flowing to the richest 0.43% of the population.

Discretionary trusts are an inequitable tax rort that costs the federal government billions of dollars a year in forgone tax. Labor's policy is one step in the right direction. While the Coalition tries to paint Shorten's plan as radical, it was former Coalition Treasurer Peter Costello, who declared in 1998 that trusts were being exploited by the rich so that “the community subsidises the wealthy taxpayer”.

However, any move by Costello or former Treasurer Joe Hockey to tackle the thorny issue of trusts was quickly squashed within the Coalition. One reason for this could be that 47% of Coalition MPs have an interest in trusts, a proportion far greater than the 22% of Labor MPs or 5% of the general population who have family trusts.

No doubt, Shorten's highlighting of inequality is in part a response to the groundswell of support for Jeremy Corbyn’s progressive social and economic policies in Britain and the upsurge against austerity and neoliberal policies around the world. But, more importantly, it is a reaction to the anti-austerity movement at home.

Green Left Weekly has been campaigning ceaselessly against the politics of neoliberalism and capitalist austerity for 26 years. We pledge to continue that campaign, including pressuring Labor to keep its promises on taxing family trusts, restoring penalty rates and taking a tougher position on corporate tax avoidance.

But we need your help if we are to spread the word about the anti-austerity more widely. You can contribute to the Green Left Weekly 2017 Fighting Fund online here. Direct deposits can also be made to Green Left, Bendigo Bank, BSB: 633-000 Account number: 160058699. Otherwise, you can send a cheque or money order to PO Box 394, Broadway NSW 2007 or donate on 1800 634 206 (free call from anywhere in Australia).

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