Two reactions to Opposition Leader Bill Shorten’s Friday speech about inequality and the need for tax changes illustrates why Labor is again preparing to pursue a risky strategy of advocating significant tax reform ahead of the next election.

As Crikey noted on Friday, any mildly controversial tax policies would elicit a scare campaign from the Coalition. Treasurer Scott Morrison was promptly reported as warning of death taxes and inheritance taxes from Labor, presumably under the impression such ideas were so politically toxic even the mildest association with them is fatal. But in the current environment, does anyone really think, say, an inheritance tax set at a high threshold (the Tory government has a $700,000-equivalent per person threshold in the UK, and double for couples; it applies only to the amount over the threshold and doesn’t apply to spouse inheritance) would be fatal? 

The other was from the Financial Review today, which in an editorial railed at Shorten for claiming that inequality was worsening in Australia. The Fin wants Shorten to drop the “empty bromides” and instead cut wages. “Australia’s alternative leader should focus on the real issues that affect the prospects of those he claims to represent. The bigger problem is that Australia’s inflated post-mining boom cost base is now being exposed by increased competition from abroad by the likes of Amazon and more fully integrated global supply chains.” Shorten should thus copy Bob Hawke and “[restore] profits and job growth by deliberately cutting real wages”.

[How will neoliberals respond to the populist onslaught?]

If this is the best the chief organ of neoliberalism in Australia has got — demanding real wage cuts to lift corporate profits — then the populists have got it made, because it simply reinforces their central message that the current economic system is delivering for the few while failing the many. After a generation of the share of income shifting from workers to companies, if the answer from neoliberals is “more please”, that will only further antagonise the electorate.

Shorten’s message — that there’s a two-tier tax system where most of us are stuck in economy but the wealthy get to take advantage of a much friendlier first-class tax system — will resonate in a disillusioned electorate. The government’s response, that Shorten isn’t interested in growing the economy, has the problem that for much of the electorate, the economy hasn’t been growing in recent years because their wages haven’t grown.

[Turnbull’s ‘conservative’ quandary is all about the N-word]

Instead of death duties, it seems Labor will pursue trusts. The ATO has been going after trusts more aggressively in recent months, but trusts remain a massive rort exploited by farmers and small businesses — to the tune of hundreds of billions of dollars. The Liberals know what a rort trusts are — that’s why Joe Hockey proposed taxing them like companies in 2011, before retreating under heavy fire from the Nationals and regional Liberals. But it’s also a widely used rort, with some 800,000 trusts in existence. Most users of trusts wouldn’t vote Labor if their lives depended on it, but that doesn’t mean they can’t wage a noisy campaign in defence of small businesses, the farming way of life, families, kiddies, etc. The tax dodgers at News Corp will shriek “class warfare”. Doubtless there’ll be variations on a theme we saw during the election campaign last year when Malcolm Turnbull and Scott Morrison promised to protect property-owning one-year-olds from the depredations of Labor.

The government will be hoping it plays out differently this time: Labor adopted a high-risk strategy on negative gearing and capital gains tax reform and the Coalition was entirely unable to make them pay for it. The electorate has moved further since then and Labor knows it can pull off a big-target strategy.

Don’t think, though, that the government won’t be thinking hard about how it too can further respond to where the electorate is going on this. On superannuation tax concession reform, the government went from preparing to attack Labor’s reforms (it’s your money, not the government’s) to going further than Labor proposed, albeit at the cost of an internal fight. There are opportunities for everyone in the rotting carcass of neoliberalism.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey

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