A new tax, praised by policy nerds but distrusted by the general population: it’s not hard to pick the analogy between carbon pricing and the GST. George Megalogenis gave it a full treatment three years ago, and I’m sure he wouldn’t have been the first.
But the parallels have never seemed as strong as they do now. The Gillard government is starting to plumb the same depths of unpopularity as the Howard government did in the GST period but, as Peter Brent pointed out earlier this month, if it runs its full term it will have a similar gap between implementation and the following election as Howard did with the GST, and might therefore hope for the same electoral vindication as he received in 2001.
And last month Arthur Sinodinos gave a fresh twist to the analogy by suggesting the government should abandon carbon pricing and increase the GST instead — giving it the opportunity to achieve the same unpopularity but without actually doing anything about climate change (evidently a plus from Sinodinos’s point of view).
But much of the commentary on this issue — including the three pieces cited above — is marred by what I have long regarded as a myth, or at best a half-truth: that the implementation of the GST was smooth and uneventful, that public opinion quickly came around to its inevitability and that the scare campaign against it was unjustified.
That may be how it looked to pundits who (as I put it a while back: “don’t do their own tax returns, don’t run small businesses, and don’t worry much about the cost of living.” But the results on the ground from 2000 and 2001 told a different story.
John Howard was fortunate that there were few electoral tests in the second half of 2000, immediately after the GST came in, but even then the opinion polls and local elections showed that all was not well. Then in early 2001 state elections in Western Australia and Queensland and a federal byelection in Ryan recorded massive swings against the Coalition, and the polls showed that it was facing electoral annihilation.
Labor only started to lose ground when two things happened: Howard started furiously back-pedalling, overhauling the GST administration and throwing around other electoral bribes, and Labor’s Kim Beazley, as was his wont, started tying himself in knots as to what he would actually do with the GST when he won government, failing to rule out increases in income tax.
Those were enough to save Howard’s bacon in the Aston byelection of 10 years ago, but the swing of 4% was still enough to presage defeat for a government sitting on a wafer-thin margin. Opinions differ on this, but I remain firmly of the view that Labor would have comfortably won the November 2001 election were it not for the deus ex machina of Tampa followed by the September 11 terrorist attacks. (As it was, Labor came much closer than most people remember, with 49% of the two-party-preferred vote.)
The element of truth in the “GST success” myth is that its impact was not primarily on ordinary taxpayers. Those who were hurt most were small business operators, suddenly confronted with masses of additional paperwork. The main problem was the bureaucracy, not the price increase.
And that’s where the analogy with carbon pricing breaks down. There’s no reason why a properly designed carbon tax should require any extra administrative burden on the vast majority of businesses; it will only affect the minority who are actually engaged in carbon pollution. And if ordinary consumers aren’t hurting, there will be much less of a constituency for any promise to repeal it.
So if Julia Gillard can actually get her scheme through parliament and into operation (by no means a foregone conclusion), she may yet be able to avoid the electoral blowback that almost consumed the Howard government.