There was a moment this week that summed up the Turnbull government’s predicament. It occurred just before Treasurer Scott Morrison revealed that any savings from the welfare cuts in his “omnibus” bill would be directed to funding the NDIS.
“We need to have a competitive tax system in order for our companies who employ millions of Australians to remain competitive,” he declared, citing the Reserve Bank governor in support.
Malcolm Turnbull has made his views clear on whether there’ll be company tax concessions.
This was Morrison’s way of spruiking the government’s proposed business tax cuts. Which might have been fine had it not been placed immediately before he announced he’d be relying on welfare cuts to fund care for the disabled.
Translated into the crude language of politics, it becomes something like, “We’d like to tax companies a bit less, so if we’re going to help disabled people, young unemployed people are going to have to pay for it.”
Or, translated into the language of Nick Xenophon: “Pitting battling Australians against Australians needing disability support services is dumb policy and even dumber politics.”
Perhaps that’s a little unfair, given the government later clarified that it did not intend to hold disabled people to ransom, and would find an alternative way to fund the NDIS if necessary. But that only raised an even more befuddling question. If that was true, then why mention the NDIS at all? Why haunt this omnibus bill with an irrelevant spectre?
Suddenly, the government was in a hole it could only keep digging. A day later, confronted with the bill’s impending death, Morrison argued that the result of all this obstruction could only be greater debt, or raised taxes.
In normal circumstances that’s just a statement of the obvious. But in these circumstances, it sounds like a determination to make struggling individuals pay taxes that companies won’t. It is precisely this opening through which Opposition Leader Bill Shorten drove his truck this week.
“The leadership of this nation has got to make a choice about taking from a family on $60,000 or $70,000 a few hundred dollars a year, or giving a $50 billion tax cut to large corporations,” he said.
Whatever the government does from here, that will be the play. It doesn’t matter that Shorten once supported business tax cuts himself. It doesn’t matter that the companies that would feel the most immediate tax relief would be small businesses, not the multinational corporations Shorten revels in pointing at. And it doesn’t matter that the family benefits now being targeted is the kind of middle class welfare Labor tried in government to reduce, to enormous howls of protest from the Coalition.
Prime Minister Malcolm Turnbull has manoeuvred himself into a similar corner to his predecessor Tony Abbott. Photo: Andrew Meares
What matters is that, today, any cut the government proposes will immediately be measured against its tax cuts for business. And the government will lose that contest.
It will lose because the benefits it points to are abstract, trickle-down benefits of the “jobs and growth” variety. This is not the political moment for such ideas. This policy is one of the past 30 years of economic orthodoxy: that doing right by business means doing right by everyone.
Finance Minister Mathias Cormann: categorically stated the government had no intention of changing capital gains tax concessions.
But the world is presently in revolt against this doctrine. Right now, it’s more inclined to believe that any savings business makes will go towards enriching those at the top, not rewarding those at the bottom. That’s what happens when people see continued economic growth but stagnant wages. And it’s especially true when the available modelling suggests the gains of these company tax cuts are paltry for such a large investment: a long-term boost to national income of less than 1 per cent. Measured against the kinds of productivity measures people intrinsically like – say, education, health and childcare – the electorate’s preference is obvious. Especially when 50 billion is such an intimidatingly large number.
Malcolm Turnbull must know this. “Fairness is absolutely critical,” he declared as a new Prime Minister in November 2015.
“Any package of reforms which is not and is not seen as fair will not and cannot achieve the public support without which it simply will not succeed.”
At the time this was a clear reference to the failed Abbott government, which impaled itself upon its debut budget. Now it reads like he’s commentating on his own policies. Turnbull has manoeuvred himself, far less sensationally, into a very similar corner to Abbott.
Abbott’s unshakeable sin of unfairness was built around proposed GP co-payments and the denial of unemployment benefits to young people, while proposing almost nothing that would target the wealthy.
It doesn’t help Turnbull that his omnibus bill is partly a vehicle for exhuming some of Abbott’s “zombie measures” that were never officially dumped.
Neither does the government’s steadfast refusal to consider even modestly trimming other concessions such as negative gearing or capital gains tax. It flirted briefly with the former, and quickly moved to deny reports this week it was considering the latter. It’s true Turnbull can at least cite his action on superannuation tax concessions for the wealthy in a way Abbott couldn’t. But with each of Turnbull’s attempts at reform, this increasingly seems a fig leaf that can’t quite cover his nakedness. As it stands, this government is becoming defined by business tax cuts that seem so out of tune with the season. They were the Turnbull government’s central policy offering at the last election. Now they’re its central problem.
Waleed Aly is a Fairfax Media columnist and a presenter on The Project.