Opinion Pieces

Labor’s tax cut U-turn a big defeat for Jim Chalmers

Labor’s tax cut U-turn a big defeat for Jim Chalmers

With the shadow treasurer overruled on taxes for political reasons, Andrew Bragg asks who is in charge of Labor’s economic policy and what is its growth agenda?

The shadow treasurer, Dr Jim Chalmers, has had a big internal defeat on tax policy.

Finally, Labor has adopted the Morrison government’s plan to cut taxes for working people and keep taxes on housing as low as possible.

In late 2019, Jim Chalmers said there was “absolutely no reason” to pass the stage three tax cuts, saying that to do so “makes no sense”. Alex Ellinghausen

For political reasons, Labor has adopted our plan, but Labor is without an agenda for growth.

They have sneered at our plan on patent boxes and have opposed productivity-boosting reforms on super.

Wouldn’t it be better if there was a genuine contest for growth? Australians would be better served to see a contest on growth, not just mimicry.

There are two ways of viewing this latest Chalmers defeat.

The foolish optimist would say Labor has seen the light of economic rationalism and finally abandoned the morbid statism of their past.

The realist would say they are cowering desperately before an electorate that doesn’t believe in them and a caucus that doesn’t believe in themselves.

The realist would say they are cowering desperately before an electorate that doesn’t believe in them and a caucus that doesn’t believe in themselves. I am a realist.

It is easy to spend all of one’s time pointing out inconsistencies and disagreements on the opposing side. I certainly do not begrudge Labor for playing host to vigorous internal disagreements and fiery factional debates.

Any political movement aspiring to command a majority of the electorate, not least my own, will have to play host to differing, even conflicting, ideas. Accommodating these ideals can lead to inconsistencies and unsatisfactory compromises. I make no complaints about this.

But there is something distinctly pathetic about Labor’s ideological paralysis when it comes to forming an economic platform. In opposition for eight years, they can’t figure out what to say about the most rudimentary aspects of economic policy.

Until very recently, Dr Chalmers was emphatic in his opposition to stage three income tax cuts. He made no secret of this. In late 2019, Chalmers said there was “absolutely no reason” to pass them, saying that to do so “makes no sense”.

‘Two years of dithering’

In May 2020, he modified his position somewhat, saying: “We have raised concerns with stage three of the income tax cuts”. By June, he tempered this stance, saying: “We’re not big fans”.

Last week, Dr Chalmers announced his fourth position on this policy, saying: “We haven’t made a final decision on those tax cuts”.

On Monday, after two years of dithering, the Labor Party announced their fifth position on stage three tax cuts, with Anthony Albanese announcing that the ALP would not oppose them.

The tax cuts are legislated to begin on July 1, 2024, and will apply a 30 per cent rate to all annual income between $45,000 and $200,000.

This is their fifth policy position.

Negative gearing

What’s to say there won’t be a sixth? Or a seventh, or an eight? The ALP caucus is consistently unable to form a coherent agenda on any major policies.

If it takes them two years to decide what they think about the government’s major tax policy, what’s to say they won’t spend the next two years continuing to bicker among themselves?

We also received the news that Labor would leave negative gearing unchanged. After losing two elections with a policy of raising taxes on housing, the ALP decided to abandon their attempts at a new housing tax.

Chalmers’ housing tax suffered the same fate as Bob Hawke’s temporary fiddle to negative gearing in the 1980s.

I wonder how this makes the shadow treasurer feel. In the past, he’s made no secret of his intention to tax property investment at a higher rate. In fact, he has said: “We’re very proud of it”, and: “We intend to stick with it”.

Once again, Dr Chalmers has been overruled by the leader of the party in the name of political, not policy management.

As I said earlier, there’s nothing inherently wrong with vigorous internal disagreement.

Any broad-based political movement, which can make a credible claim at forming a majority government, will be sustained by vociferous ideological conflict.

However, the disagreements in the Labor Party are fundamentally intractable - evidenced by the fact that the MP charged with putting forward their economic agenda seems to have no control over their platform.

This all leaves open the question: what is Labor’s economic platform? And who is leading it? It can’t be Dr Chalmers, who seems to have been overruled quite extensively on these matters.

But the biggest question for Labor remains: having now agreed to our tax cuts, what will they do to promote growth? We want to see a genuine contest for growth, not just mimicking policy for political expediency.

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