25 January 2024

Albanese shows he is a leader for taxing times

| Ian Bushnell
Join the conversation
47
Hon Anthony Albanese MP, Prime Minister of Australia

Prime Minister Anthony Albanese says the new tax policy will be fairer, with most of the benefits going towards the bulk of taxpayers. Photo: Michelle Kroll.

Should a government be held to election promises if circumstances change?

Prime Minister Anthony Albanese’s overhaul of the Stage 3 tax cuts so more of the benefits go to middle-income earners instead of high-income earners has provoked a clutch of broken promise headlines, but in the light of what has happened since the election, should people really be that surprised?

Pandemic after-effects, supply and fuel shocks, war-induced inflation, a spike in interest rates and a cost of living crisis – the landscape has changed dramatically since the election.

Despite pressure from the party and some economists to scrap the Coalition-legislated tax cuts, Albanese and Treasurer Jim Chalmers consistently said their position had not changed.

READ ALSO Where are the cheapest veggies in Canberra?

Albanese has made a point of meeting election commitments, so the intention on this one was also to stay the course.

But the pain being experienced by low and middle-income earners as housing costs – mortgage repayments or rents – eat up more of their incomes, along with other staples, demanded a response.

The government could have abandoned the tax cuts altogether, arguing they were unsustainable, inflationary and essentially unfair, given most of the benefits would go to high-income earners.

Instead, Albanese can say that he is still retaining a tax cuts program but that it is fairer, won’t be inflationary (according to Treasury and the Reserve Bank) and will provide real relief to those struggling to make ends meet (about $800 extra to most taxpayers).

It will also provide a more progressive tax system than the flatter one envisaged in the Coalition’s Stage 3 program.

It is a calculated risk because the Opposition unsurprisingly has turned up the outrage dial, saying Labor went to the election on a lie and has betrayed voters.

Expect that outrage to be carried all the way to the next election.

But it will be hard for the Opposition to campaign against a tax policy that puts more money in the pockets of more Australians who actually need it.

What both parties should be talking about is real and lasting tax reform, not just tinkering with the income tax scales.

If Australians want the services they expect, housing to be cheaper, and an effective defence policy, then that will have to be paid for, and that burden shared more equitably.

It is a conversation that Australians need to accept and be a part of.

In 2019, Labor took a program to the people only for it to succumb to an Opposition fear campaign.

Albanese wasn’t about to make the same mistake in 2022, and strategists will probably argue that serious tax reform, in which there will have to be losers, is a suicide mission, given the Opposition’s unyielding negativity.

Yet without it, governments will always struggle to do their job and inequality will become even more entrenched.

READ ALSO As online threats continue to grow, cybersecurity experts say ‘shoestring’ efforts no longer cut it

Company tax rates, tax concessions, GST and other possible measures should all be on the table.

Albanese could seek a mandate for reform, but that would require a grown-up, reasoned debate that puts self-interest to one side.

For now, will voters who may not receive as big a tax cut as expected begrudge those less well-off who will now do better?

Today is Australia Day. Amidst all the ballyhoo about dates and flags and patriotism, it’s as good a day as ever to reflect on whether the fair go is still part of our national character.

And yes, leaders need the flexibility to respond to what is changing around them.

Join the conversation

47
All Comments
  • All Comments
  • Website Comments
LatestOldest
devils_advocate11:50 pm 29 Jan 24

1) people make decisions about working at the margins.
2) a persons average tax rate doesn’t matter. What matters is how much tax they will pay on the next dollar of income they earn (the marginal rate)
3) taxes distort incentives to work.
4) at very high rates – eg 47% – taxes discourage people from working.
5) the people it discourages from working are mainly the most productive (yes, your value as a worker is equal to your hourly rate of pay. That’s how markets assign value).
6) people may withdraw their labour from the economy, thereby losing both the tax revenue and their highly productive labour
7) or they may go overseas to a jurisdiction with a fair tax system
8) or they may engage in increasingly more aggressive tax minimisation strategies
9) lmao at Australia what a joke

@devils_advocate
It seems the real joke is your grasp of income tax history and its effect on workers.

The highest tax bracket has been 45c in the dollar since 2006–07 FY. It was reduced from 47c in the dollar – which became the highest income tax bracket in 1990-01 FY, when the 48c in the dollar bracket was removed. So can you show, how productivity has decreased from those PAYG workers, in that category, since then please? Or perhaps you can demonstrate the mass exodus of workers, on these incomes, to overseas jurisdictions (with a supposedly “fair tax system”) in that time.

“yes, your value as a worker is equal to your hourly rate of pay”.
Let’s hope you never need to seek the services of registered nurses, emergency services workers, child care workers, aged care workers and teachers – many of whom would love to be earning enough to fall into the 45c tax bracket. I guess it doesn’t matter because, according to you, there is no value in the work they do.

devils_advocate3:56 pm 30 Jan 24

@Justsaying

“It seems the real joke is your grasp of income tax history and its effect on workers.”

Lmao

Guess you don’t have to pay either the Medicare levy or the Medicare levy surcharge or the excess superannuation contribution surcharge

Well done I guess?

@devils_advocate
… and your point being?

devils_advocate5:38 pm 30 Jan 24

@Justsaying

My point being

a)you claim that others have a poor grasp of tax history

b) you don’t even know what percentage rate of (nominal) taxes workers pay on their income (no, calling something a “levy” doesn’t change the fact that it’s a tax)

Lmao

I could go into the effective marginal tax rates associated with selectively withdrawing benefits such as child care subsidies and the like but that would go straight over your head

devils_advocate11:10 am 29 Jan 24

In some cases it is better to stick to your original commitment even DESPITE the circumstances changing. ESPECIALLY when that commitment relates to people’s long-term financial planning.

The added bonus of people being able to rely on your words is also valuable.

I’m wondering what circumstances have actually changed from both when they made the election promise in 2022 and continued to claim their position hadn’t changed right up until last week?
Even in their own admission, seeking Treasury advice on options to change the policy in months prior, whilst publicly claiming full commitment to it.

It’s not like most of the core economic and price indicators are wildly different from what was predicted since the election.

Probably Chalmers inserted a new backbone into Albo, stiffened his sinews etc.

I wouldn’t think breaking key election promises would be described as having a backbone, pretty much the opposite.

Standard political expediency to do whatever they believe will best keep them in power at any particular point in time.

No, you wouldn’t think that. Too bad.

William Newby3:34 am 29 Jan 24

The $20 billion Labor just threw on the inflation bon fire will deliver little substance other than a popular RobinHood headline for the week. All this money will do is keep inflation where it is, and also the cash rate where it is, this sugar hit will cost us ALL more than it is actually worth.
Real leaders make tough decisions not popular decisions.
The evil mega rich that Labor speak of, those earning over $180,000 generally make their earnings via registered companies and pay little to no tax already, 30% at most.
This one time stunt shows Albanese is not a man of his word, and has not thought this one through.

If you strip away the politics and just look at the policy, then the government did the right thing. In changing circumstances, Albo corrected course. What’s the big deal?

devils_advocate3:57 pm 28 Jan 24

The big deal is he walked away from an election promise, which if implemented would have made the tax system slightly more fair in rewarding hard work while still very progressive.

Given the scope of what Prime Ministers can do, there are few deal bigger than this.

“You had one job…”

devils_advocate9:30 pm 27 Jan 24

Good to see the politics of envy are alive and well. Guess I’ll have to think of more creative ways of minimising my liability now.

There’s a limit on how much charity a PAYG earner can sustain what with the cost of living pressures and so forth.

Oh for a proper debate about taxation.

The current government have shown once again that for all their bluster about integrity in politics and doing things “differently” that they are no better than those opposite.

Apparently key election promises are only as important as how many votes you can buy at any specific point in time.

This is all about the politics and once again our leaders think that blatantly lying is acceptable. As long as they think they can spin it or buy enough votes for it not to matter, all is good.

Regardless of what you think of the specific taxation decision, we should expect better of our politicians.

Martin Keast12:44 pm 27 Jan 24

I think the ‘elephant in the room’ is the out of control government spending that successive governments seem unwilling to address. We have a big and growing government which is the reason why more and more taxation is required. Such expenditure hurts the economy by diverting money into unproductive areas (administration and regulation and compliance costs) rather than investment in wealth-producing projects.
The size and intrusiveness of government must also be addressed, instead of squabbling about which part of the community should pay more – all these schemes are fundamentally unjust as wealthier people are being penalised for their success, an approach which is a tone of envy at its heart. We need to do better and live within our means.

Albanese is crowing about the Stage 3 tax cuts plan, but what he fails to say is, what plan would he have had, if not for the coalition to come up with it in the first place. I’ll tell you – nothing, nada

Labor governs by fear.
Occasionally you use a carrot, in the case it was the carrot they took last year.

HiddenDragon9:00 pm 26 Jan 24

A real Labor leader would have had the guts to go to the 2022 election – by which time there were already plenty of Australians “doing it tough” – with a tax plan similar to what has now been announced and quite likely would have ended up with a better majority because the Liberals are still struggling to mount a persuasive defence of the merits of their tax plan when there is a more broadly-appealing alternative on offer.

What was announced yesterday wasn’t about Albanese being a leader for “taxing times”, it was about him finally yielding to his Treasurer (after appearing to defend the Liberals’ Stage 3 tax plan only days earlier) in the full knowledge that he will personally wear the great bulk of the anger and criticism from this “broken promise”, “back-flip” etc. etc, and will thus be that much easier to cut down when the time is right.

I see the whinge-o-meter has ticked up a bit.

More people will soon have more net income than they have now. That is the dreadful outcome.

Capital Retro6:32 pm 26 Jan 24

Amazingly Charmaine, most of those people live in a Labor held seat where there is to be a byelection in a months time.

Albo is a leader for political timing, not just taxing times.

Capital Retro, if “most of these people” live in Dunkley then you are proposing that the adult working population of said electorate is no fewer than three million, on the calculation most generous to you.

Amazingly, your comment is silly, on any reading.

Capital Retro5:06 pm 30 Jan 24

I am flattered that you have taken the time to forensically analyse my comment.

Strange that the usual “pile-on-gang” haven’t said anything though.

devils_advocate4:34 pm 26 Jan 24

1) election promises now mean nothing, and the gutless media will not hold leaders to account.

2) people on lower incomes have a higher marginal propensity to spend (wealthier people tend to save more of any additional incomes). These additional tax cuts for lower income earners will add more fuel to the inflation fire. Where did RBA or Treasury suggest otherwise?

3) the stage 3 tax cuts were not tax cuts at all, they were giving back (part of) what had been taken by bracket creep.

4) as pointed out by the Treasury architect of the original tax reform package, the punitive tax rates above 30% will encourage higher income earners to structure their affairs to avoid tax.

So a huge own-goal by albo.

@devils_advocate
“election promises now mean nothing”
So you obviously have no knowledge of one John “core / non-core promises” Howard? Selective memory perhaps?

“ These additional tax cuts for lower income earners will add more fuel to the inflation fire.”
So you’d be ok if the Stage 3 cuts were totally removed then? Good idea.

“ the stage 3 tax cuts were not tax cuts at all, they were giving back (part of) what had been taken by bracket creep”
Sounds like a call for indexation of the tax bracket thresholds. Good idea.

“ the punitive tax rates above 30% will encourage higher income earners to structure their affairs to avoid tax”
So close the loop holes, starting with capital gains concessions and negative gearing

devils_advocate10:13 am 28 Jan 24

@Justsaying

1) the “both sides” argument is both useless and devoid of intellectual merit. I’m a labor voter, BTW.

2) pointing out that tax cuts for lower income earners is inflationary, in no way suggests stage 3 tax cuts should be scrapped. In fact the opposite. Higher income earners are likely to save the

devils_advocate2:41 pm 28 Jan 24

3) yes automatic indexation of ALL tax thresholds would obviate the need for all this pointless and disingenuous discussion about tax “cuts”

GrumpyGrandpa2:49 pm 26 Jan 24

Albo and the ALP voted in favour of Stage 3. They went to the election with Stage 3 signed off, legislated and he’s supported it unwavering, until recently.

Personally, I never supported Stage 3. I thought it was really bad legislation, however, Albo made a commitment. He should have honoured it and found another way to support those at the lower end.

It’d be a very brave and foolish Albo, should he now look at company tax rates, tax concessions, GST and other possible measures as suggested by the author.

Bill Shorten lost an unlooseable election based on his proposed changes to concessions on property and shares. Albo too, would be out on his ear if he tried it.

If he tried to introduce change prior to the election, without the prior support of the electorate, he’d suffer an bigger defeat than Shorten.

No one likes sneaky untrustworthy politicians and after his failed Referendum and “broken promise” on Stage 3, Albo needs to keep his nose clean between now and the election.

Balance needed12:52 pm 26 Jan 24

It’s rather quaint and cute how upset people still get when a politician lies or breaks a promise. As the wonderful emporer/philosopher Marcus Aurelius said a very long time ago: we should be ashamed of ourselves if we get upset when a fig tree produces a fig.

Sadly, when i read your articles it looks like you are a stooge for the labor party.

Stephen Saunders11:45 am 26 Jan 24

Agree, this looks like a win for Albanese, who has Dutton wedged. Even a small win for voters, dare I say. But let’s look at reasons why Albanese suddenly did a U-turn.

Because of his disastrous policies, particularly on housing, immigration, and energy, disregarded voters were marking Albanese right down in the polls.

The Treasury talking points – fake housing accord, fake migration reform, fake grocery review, fake cost-of-living relief – simply weren’t cutting it. And that is why he has ditched the Stage III “promise” – because he was plummeting in the polls.

Welcome to welfare Australia

Tax cuts are welfare? Well some of the highest income earners still aren’t happy with the amount of welfare they are getting…

Isn,t it when someone on 180k pays seven times more tax than someone on 50k is that a welfare handout

Daily Digest

Want the best Canberra news delivered daily? Every day we package the most popular Riotact stories and send them straight to your inbox. Sign-up now for trusted local news that will never be behind a paywall.

By submitting your email address you are agreeing to Region Group's terms and conditions and privacy policy.