the “barbecue stopper” of work, welfare, family and tax policy reform
that Tony Abbott put on the agenda about two years ago? It’s where much
of the genesis of the current tax debate lies. And it’s only a barbecue
stopper because the chops are burnt, the dog’s nicked the sausages and
there are bull ants in the coleslaw.

Yesterday, Federal Cabinet
decided not to introduce a back-to-work test for single parents and
disability pensioners as a way of cutting the $20 billion welfare bill
– yet. The Age, however, reports today
that “tougher activity tests could be imposed on the 700,000 people now
claiming the disability support pension – not just future applicants –
after the Government yesterday ruled out creating ‘two classes’ of
welfare recipients”

Seven hundred thousand people – that’s a
lot. Add in their friends and family and how many votes are there? Is
the beer also warm at the barbecue?

Did Abbott put too much on
the agenda? Is the Government trying to do much? There are already
suggestions that Joe Hockey’s new Human Services portfolio is creating
turf wars rather than better co-ordination of health and aged care and
other government services. Are Treasury and the social policy
departments at war?

The issue is turning out to be a big no-no
for the Government and is creating the first real impression of cracks
in its monolithic unity.

Now we have the intervention of ACT
Senator Gary Humphries. The former ACT chief minister is urging the prime minister to increase spending on social problems
rather than cutting tax. “We are a very low-taxed country, so to start
arguing for more tax cuts after what we have achieved already is to me
an irresponsible use of taxpayers’ money,” The Age has him
saying. That sounds like a gift for Kim Beazley, who has been wacked
over the head by the prime minister and the treasurer for using that
very line. Now the Government’s own backbench is running it.

same article has Victorian MP Russell Broadbent calling for the tax
issue to be taken off the political agenda. “I don’t think we should be
talking about it because it cost me my seat in the 1993 election, then
again in the 1998 election… I mean give me a break, enough is
enough,” The Age has him saying. Brilliant. Just what the PM and treasurer want.

The Government has created expectations it lacks the political will – and courage – to meet. In The Australiantoday, ANU economics professor Ross Garnaut spells out what’s really needed:

“A reform of taxation rates that established a flat 30 per cent
marginal effective tax rate for all corporate and personal income,
including capital gains, would be most advantageous for people at the
bottom of the income range, and most disadvantageous for Australians on
the highest incomes and with the greatest wealth. Contrary to popular
perception, it would be progressive, as well as being highly
advantageous to incentives for greater labour force participation. It
would have the additional advantage of removing the gains from
conversion of personal into corporate income. Raising the rate of
taxation on capital gains (it would need to be on real rather than
nominal gains) would have the incidental effect of greatly reducing the
distortions in capital allocation that have spurred the housing and
associated consumption boom.”

As Sir Humphrey would say, “Very courageous”. Yet if the prime minister
can’t undertake this sort of reform, he mightn’t keep his job.
And if Peter Costello can’t find a way to implement it, he may never
get the job he wants.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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