Tax is looming as the make or break issue. Is that a good thing?
It’s looking like tonight’s budget will be the last before the next election – that means we can expect something thick with sweeteners.
So I’d be looking for tax cuts. I’d expect the Coalition to make one last push for company tax cuts, as well as introduce some personal income tax cuts as well.
That’d be nice, but can we bake it in? Would Labor fight them on it?
Already tax is looming as a key battle ground, and one of the few areas where you can separate tweedle-dum from tweedle-dee these days.
If Labor’s smart, I think they’d roll with the personal tax cuts – match them more or less – and thereby kick that ball completely out of bounds. That would then leave company tax cuts as the only issue – a debate where they seem to be enjoying the run of play.
Bill Shorten is already framing the narrative:
“Unless Mr Turnbull takes his multi-billion monstrosity, his reverse donation to his buddies, out of next week’s budget, the next election will be a referendum on the Liberals’ tax handout to the big end of town.”
‘Tax hand-out to the big end of town.’ Ouch.
And so far, the cross-benches and most of the public, seem to agree with him.
It’s one of the key tricks when talking about tax. Everyone thinks that they personally, should pay less tax. But it’s another thing altogether to think that ‘everyone’ should pay less tax.
Many people also think that rich people should pay more tax, though no one thinks of themselves as rich.
(I personally think of myself as rich, but that’s because I actively cultivate that mindset. I know a lot of people with a larger net worth than me still labouring under a poverty mindset.)
And that’s why Morrison’s response is swing and a miss:
“At this election there is a clear choice between lower taxes under the government and higher taxes under Labor.”
“Higher taxes under Labor” isn’t electoral poison, unless people know that we’re talking about higher taxes for them. Higher taxes in some general sense aren’t really going to move the needle.
It’s going to annoy people like me who are philosophically in favour of small governments, but how many of us are there. A couple of dozen?
And so the Coalition has it’s work cut out for it.
The first thing I would say (I know there’s some political strategists reading this blog), is that you have to neutralise the ‘big end of town’ attack. And the truth is that for most people ‘big end of town’ means ‘banks’, and they couldn’t possibly more on the nose than right now.
And the way you limply stalled and blocked the Royal Commission is too fresh in people’s minds.
Solution? Go hard on the banks. Kick ‘em while their down. They’re too shell-shocked to do anything about it, and people will be literally cheering from the grand-stands.
The bank-levy is probably the mechanism of choice. That was popular when it came in last year.
So ramp it up just as the company tax cut is taking effect, leaving the banks no better off.
(They can’t complain too much.)
That way you get to be the hero, and dodge the criticism that these tax cuts are a hand-out to those who deserve it least.
The other thing I’d do is go hard on personal tax cuts. A recent Per Capita survey found that people in every income group above $80,000 now believe they pay too much tax. That’s up from almost none a year ago.
And that’s a reality. The effective tax rate is increasing.
So you’re speaking to a lived experience there – a real pain point in the community.
And then as much as possible, let the corporate tax cut ride on the coat tails of personal tax cuts. As much as you can, bundle them together. Make it clear they’re coming from the same philosophical place.
(Though it would have been good if you started with personal first, but oh well, what’s done is done.)
I’m still not convinced that the government can sell this one. They don’t have an amazing track record.
But tonight’s budget will give us a sense of how they’ll do.