Labor’s capitulation on tax is an attack on us all

August 19, 2021

Amid the distraction of the pandemic lock-down and Olympics, the Australian Labor Party quietly dropped its opposition to the Coalition’s tax cuts.

It represents an historic abandonment to any commitment to a progressive taxation system.

At the beginning of this year, Labor abandoned its 2019 election promise to end franking credit tax refunds for company tax paid on dividends, where these were more than the tax paid on that income.

Labor seems more determined than ever to promise little, hoping the next election will land in its lap without offering any meaningful change.

Retreat and defeat, dressed up as pragmatic “smart” politics, is what the Labor leadership does best.

However, the damage to the cause of equality and wealth redistribution caused by this latest surrender cannot be overstated.

Labor no longer opposes the Coalition’s stage three tax cuts — the creation, in 2024, of a single “flat” marginal 30% tax rate for annual incomes between $45,000 and $200,000.

This “reform” will reduce marginal tax rates by 2.5% for those on typical wages, by 7% for those on incomes above $120,000 and by 15% for those above $180,000.

In other words, the more highly paid receive the biggest tax reductions, including those raking in more than $200,000, who will still pay less on their first $200,000.

Once implemented, you can be certain that the Coalition will insist on the “need” to cut services, or hike up consumption taxes, like the GST, to make up for lost revenue and thereby disproportionately shift the tax burden to those on lower incomes and wiping out their 2.5% income tax cut.

Will Labor trail along with this too?

Three decades ago, a flat income tax was championed by conservative think-tanks. It was the cornerstone of the 1987 “Joh for PM” circus, when Queensland Premier Joh Bjelke-Petersen launched an ill-fated assault on Canberra and split the Coalition vote.

Back then, not even the Liberals dared to openly support a flat income tax. But, in an echo of the way in which Pauline Hanson’s 1998 call to physically repel asylum seekers has become bi-partisan consensus, Labor now has a tax policy that Bjelke-Petersen would be proud of!

Labor has also scrapped its proposal to remove negative gearing on existing housing.

For those well-off enough to borrow to buy investment properties, these business losses can still be counted against their income earned as employees or sole traders, while allowing them to buy property and reap capital gains.

Furthermore, Labor plans to leave in place a discount of 50% on the nominal incomes from sales of investments — capital gains — for tax purposes.

With inflation low, this has meant the real value of this speculative income is partly untaxed, a tax advantage only the wealthy who own a disproportionate part of such assets can really benefit from.

When former leader Bill Shorten advocated Labor oppose the now-dumped stage three tax cuts, he correctly denied he was anything like former British Labour leader Jeremy Corbyn.

Dumping even this modest reform and endorsing the destruction of the progressive income tax system is a massive gift to the wealthy at a time when inequality is growing rapidly.

Who is Labor trying to appeal to?

Just 10% have earnings above $120,000, a similar proportion negatively gears and those making significant capital gains or getting excess franking credit would be fewer still. Serious aspirants to any of this would be another thin layer. Even combined, this is no electoral majority.

Pundits seem to think Labor is avoiding negative media and the risk of losing votes by going “small target”.

This might work. However, it only makes sense if the sole agenda is to win an election but not win it in order to make change.

Ultimately, such a course strengthens the political influence of the Coalition, regardless of who wins the election.

Labor has never been anti-capitalist: it has always served the interests of big business well, both in government and in opposition.

Labor provides an essential service to capitalism, peddling the illusion of a common national interest which unites working people and big business, while also diverting and pacifying movements for change, especially the unions.

Nevertheless, in previous elections Labor has come to office riding the waves of progressive politics and popular resistance.

Labor’s 2007 campaign and election victory were partly based on two significant, if short-lived, mass mobilisations: the Reconciliation bridge walks and the Your Rights at Work campaign against WorkChoices; plus the rising environmental and refugee rights movements.

“Kevin 07” almost looks exciting now compared to the Anthony Albanese leadership.

Labor is now not even seeking to surf into office on the back of anything other than dissatisfaction with Prime Minister Scott Morrison.

The danger for Albanese is that, unless he decisively pulls ahead in the polls, the corporate mass media might swing in behind the Coalition again.

More importantly, we must not give an inch to Labor’s retreat. That is the road to further defeat.

Our job is to put pressure on Labor, both at the ballot box and in the streets. Serious swings to the Greens and socialist candidates in the next election would be a good start.

But, both before and after that, building movements for serious action on climate change and social inequality are more important than ever.

[Jonathan Strauss is a member of the Socialist Alliance.]

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