The tide has turned on the tax debate
by Richard Denniss
[Originally published in the Australian Finacial Review]
Some political parties are coping better with the social and technological transitions that are reshaping Australia than others. Just as Kodak couldn't adapt to the digital era and Nokia couldn't adapt to the smartphone era, it's not obvious that all of Australia's current political parties will survive the seismic shifts rocking the economy and the electorate.
Take the Liberal-National Coalition, for example. More than 20 years after the ALP introduced rules to ensure women were preselected into winnable seats – boosting the number of female federal ALP MPs to almost 50 per cent – the Coalition has just 21 women among the ranks of its 105 federal MPs. There are even those suggesting that Peter Costello would make a good replacement for the retiring Minister for Women, Kelly O'Dwyer.
For 20 years the Coalition has led the charge against climate scientists and renewable energy investors. But while climate and energy policy might have been C-grade political issues back when Peter Costello was Treasurer, today they are A-grade issues for voters and big business alike. It would be fascinating to hear Peter Costello's explanation of why his government did so little for so long to either rein in the market power of the privatised electricity companies or the emissions rising from their cooling towers.
And then there is tax. After 20 years of neoliberalism the Australian public no longer believes that the best way to fund high-quality health and education services is by cutting taxes for high-income earners or that the best way to create jobs is to cut the company tax rate for big business. Much to the chagrin of some commentators and company directors, Bill Shorten has zeroed in on the fact that he can deliver tax cuts to middle Australia, spend more money on the essential services used by middle Australia and deliver smaller budget deficits than the Coalition – as long as he is willing to close some very expensive tax loopholes that deliver enormous benefits to a very small number of voters. Needless to say it was Peter Costello who introduced many of the expensive tax concessions that Bill Shorten is now trying to close.
The world has changed dramatically since Peter Costello was Treasurer. Despite this, there are plenty on the conservative side of politics who still think defending tax loopholes for the rich and cracking down on welfare for the poor is a winning political strategy. Maybe they are right. But regardless of the fact that the polls suggest otherwise, the best thing for a democracy is a healthy debate about alternatives.
Australia is a big country with a land mass 20 times the size of Germany and an economy about the size of Russia's. We spend more on defence than Indonesia, Malaysia, Singapore and the Philippines combined. We are big enough to shape global events, which presumably is why we fight in so many foreign wars, but we are not big enough to stand in the way of history. Modern economics increasingly focuses on the fact that government policies can shape economies but they can't stop economic change. Just as "wars on drugs" don't work, well-designed policies can work to capture the benefits of technological transitions.
An overwhelming majority of the Australian public wanted marriage equality and, despite the best efforts of the conservatives in the Coalition, they got it. Many of those same conservatives are determined to stand in the way of reforms to allow voluntary euthanasia, legal abortion in all states and sensible drug policy reforms like pill testing. And while they may succeed in delaying those changes in the same way they delayed same-sex marriage, what is certain is that doing so will further harm the electoral prospects of their party.
On the economic front, an overwhelming majority of the public want to see subsidies for coal removed, subsidies for renewables increased, tax loopholes for high-income earners reduced and incomes for the poorest Australians increased. As with the social agenda, there is no doubt there are some conservatives who are principled enough to fight to their last parliamentary seat defending the status quo. Which is fine.
Democracy is about choices. Political parties make choices in the lead up to election day and voters make choices on election day. There is no "right" amount of tax to collect nor "right" way to regulate drugs. But there is a right way to conduct elections and that is to present voters with clear choices. There is no doubt the Coalition seem determined to do that.
Richard Denniss is chief economist at The Australia Institute @RDNS_TAI