Tax is the first battleground of the election year – but who will Labor be fighting?

The Christmas edition of Senator Helen Coonan’s newsletter only reached Crikey last week – you know what the mail is like at this time of year – but a couple of lines leapt out and grabbed us straight away.

There, in bold, the Assistant Treasurer had said: “As the policy debate hots up, be wary of those bearing gifts and promising pots of gold at the end of the rainbow”.

You mean like the Howard Government at every Budget since 2001, Senator?


Dear prudence


Taxation and expenditure are going to be big, big issues as this election year gets underway – and there’s already murmurings that the ladies and gentlemen of the fourth estate won’t be able to simply watch the debate from the side over the next few months.

Some say that Laura Tingle’s dramatic “boring old man” spit at the PM last month wasn’t just hubby’s perpetual crankiness rubbing off – she clearly has nothing against geriatrics, after all – but simply a sign of frustration at what John Howard has got away with on this front. George Megalogenis supposedly has plenty he wants to say on the topic, too.

Bring it on, we say, as the time might just be ripe for some major re-writing of history.

All Crikey readers know how the wicked Malcolm Fraser strayed from the paths of financial righteousness – despite the urgings of his Jiminy Cricket Treasurer. But now that he’s PM, isn’t Howard behaving in much the same way?

It makes you wonder what his position really was in the first place.


QED, OECD?


The OECD has raised more issues to consider over John Howard’s tax record.

Last Sunday, the News Limited rags ran strong with a piece by Christine Wallace that said figures from the economic forum showed Australia was the fourth worst country in the developed world for rewarding effort through the tax system.

Now we know Paul Keating gave him one years ago, but John Howard should be wearing those stats like a crown of thorns.

We’ve spent more than three-quarters of a decade under a Government that is supposed to support individual choice – and gone through a supposedly major tax reform process – and that where we are? Jesus!

Labor Family Services spokesman Wayne Swan said the Government’s own research showed that a million Australian families faced marginal tax rates of 60 per cent or more – almost double, he claimed, the number before the introduction of the new tax system in 2000.

However, there have been v-e-r-y mixed messages since then on what Labor’s own policy will be.


Bob’s worth


On Wednesday, Labor’s Finance spokesman Bob McMullan was busy preaching fiscal rectitude in the Sydney Morning Herald and on AM.

McMullan said he wants the Labor Party to be in a position to challenge the Government over its spending priorities.

“I think [the Government’s] going to go on another spending spree like they did before the last election,” he said. “We shouldn’t be reluctant to attack the Government about that.

Amazingly, for a politician, he added: “If we want to be free to attack the Government about it we can’t commit the same folly ourselves.”

However, over at the Age, there was something that sounded very different. There, that very same day, Annabel Crabb reported “Federal Labor leader Mark Latham is expected to renounce his support for tax cuts aimed at higher-income earners at this month’s Labor Party conference, averting a brawl over tax policy. Mr Latham has reassured union leaders that he is committed to increased spending on services ahead of tax cuts.”

That sounds like “Labor leader caves into public sector unions” – and that ain’t news, even in the middle of the silly season. It’s just plain sad.

McMullan appeared on AM that morning but has had nothing to add since then – and Latham’s stayed mum. So what is happening?


Once is happenstance…


Well, one thing that is definitely on is the ALP National Conference, in Sydney from the 29th to the 31st of this month. That will be the real starting point for this election year – and Mark Latham’s first big test as Opposition Leader.

Latham says on his party’s home page: “I believe in an upwardly mobile society where people can climb the rungs of opportunity to a better life for themselves and their family. I believe in hard work and reward for effort. I believe in a Government that is there to help the people who are doing the right thing – the people who are getting stuck in, doing things the fair dinkum Australian way.”

That surely means that he cannot believe in the tax system as it currently stands. Remember what he said last November? “If parents are raising children and they have a mortgage, especially if they are living in expensive cities like Sydney, Melbourne and Brisbane, then nobody should pretend that $65,000 is a huge amount of affluence. People who work hard … deserve to be rewarded.”

However, have a look at what the Age went on to report last Wednesday:

“Mr Latham has reassured union leaders that he is committed to increased spending on services ahead of tax cuts.

“And he indicated that any tax cuts under a Labor government would be directed first to lower and middle-income Australians.

“A Labor frontbencher told The Age yesterday that Mr Latham’s canvassing of tax cuts for higher-income earners had been part of his job as shadow treasurer, but as leader he now recognised that such a policy would be divisive among Labor MPs and traditional Labor voters, who the party wants to win back at this year’s election.

“Mr Latham raised eyebrows on the left of the party in November when, as shadow treasurer, he said Labor should examine tax relief for people in the top tax bracket.

“His comments drew stinging responses from shadow ministers, including Victoria’s Lindsay Tanner and Anthony Albanese of NSW, who said it was not appropriate for Labor to be addressing relief to high-income earners…”

Still, that same day McMullan said it was important the ALP maintains a significant amount of the large Budget surplus the Coalition has collected.

He also said Labor will gain additional funds by cutting back on what it sees as inefficient government services, such as the baby bonus.

He’s chosen an interesting figure to invoke – Bob Hawke’s finance minister Peter Walsh.

“We had our economic credentials well established [in the 1990s], but they took a beating at the time of the recession,” the Sydney Morning Herald quoted him saying. “It is a hard task to establish your credentials as economic managers in opposition, but I am sure we can do that.

“There are no big and easy savings. Every dollar of taxpayers’ money goes to someone, and they invariably like receiving it.

“But if we are to allocate resources to our high-priority areas of health, education and children, we have to move them from somewhere else.

“The only alternatives to re-prioritising are raising taxes or running into debt. Neither of these policies is appropriate for the first term of an oncoming Labor government.”

McMullan says the party needs to resist the urge to say yes to all comers.

“Peter Walsh knew that if you try to stand for everything, in fact you stand for nothing.”


Twice is coincidence…


Swan jumped into the debate again on Friday with a major opinion piece in the Australian that seemed to echo Latham’s November comments.

“The OECD report, Taxing Wages, Taxing Families, confirms Labor’s critique that the relationship between reward and effort for low and middle-income individuals and families has been severed. According to the OECD, Australia is the fourth worst nation at rewarding single-income families for their hard work, taking an average of 61.5 cents from their overtime each pay week. That is 22.4 cents more than the OECD median.

“One million Australian families earning between $30,000 and $80,000 odd a year are paying these punitive marginal rates of tax.”

Note the $80,000 ceiling? That may well become significant.


The third time it’s enemy action


There was more from Labor on tax in the Australian on Saturday.

“John Howard’s battlers are going backwards, with new tax research showing that lower and middle-income earners suffered a reduction in real incomes of up to $430 a year between 2000 and 2001,” it reported.

“Analysis of Australian Taxation Office figures carried out by the Opposition, which adjusts earnings against increases in the cost of living, has found the incomes of Australia’s middle class shrank by between $150 and $430 a year.

“The figures also show the gap between the rich and poor has widened, with the incomes of the wealthiest 5 per cent of taxpayers increasing by $4159 a year in real terms over the same period and their average taxable incomes increasing from $146,661 to $150,820.

“Australian taxpayers on the average middle income of $31,066 lost $150 a year in real terms over the period, their income falling to $30,916.

“Further up the middle-income scale, the largest decline was suffered by those in the $50,000-to-$55,000 bracket, whose average taxable income fell from $52,471 to $52,041.

“Even those towards the top of the middle-income bracket suffered a decline. Those in the $63,000 to $80,000 band saw their average taxable incomes fall $245 from $70,470 to $70,225. “

And there the figures end. We just get quotes from Swan again.

Latham has said nothing direct on the subject all week. It looks pretty damn clear as if a conference compromise is being brokered.

Despite its own record, the Government will go all out to label Labor as a tax and spend party in this election year.

The Treasurer has constantly ridiculed Labor’s economic credentials as the tax debate has emerged. He constantly refers to the high interest rates and high debt levels of the Hawke and Keating years.

However, more and more commentators are pointing to the failure of the Howard Government to deliver a fairer tax system – and how the “reform” agenda the PM is tentatively rolling out is more than two decades old.

The Costello profile in the Sydney Morning Herald this weekend had absolutely no sign of any alternatives coming from the Treasurer or his supporters.

So if Latham has something up his sleeve, he – not Costello – will have a very good claim to be John Howard’s successor.

Here’s hoping his party have realised this.

Hillary Bray can be contacted at [email protected]

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