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Mark Latham's tax policy does not sit comfortably with Labor's heartland

By Tristan Ewins - posted Wednesday, 26 November 2003


By comparison, any real tax cuts aimed at Australians living on above-Average Weekly Earnings will come from the budget bottom line. Quite directly, this will result in reduced social expenditure, and the imposition of further regressive user charges in education, health, aged care and basic infrastructure including roads.

In this way, such tax cuts must ultimately come at the expense of the majority of Australians. When social services in Health, Education, Aged Care and elsewhere, are not provided for by the State on the basis of progressive taxation, with contributions made on the basis of “capacity to pay”, demand for such services does not simply disappear. Instead, provision of such services usually reverts to the market, where the cost of services is determined by supply and demand.

In this context such user charges comprise the equivalent of a regressive flat tax. At best, a two-tiered system is created: private affluence and public squalor – where the public system is progressively marginalised, as are those who depend upon it. At worst, those on average incomes find themselves paying a greater proportion of their total income for basic services, while those on lower incomes and welfare are simply priced out of the market altogether. Hence US-style health care, where capacity to pay determines life and death.

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If there are to be tax cuts of any sort, then they should be in the form of tax credits or rebates, aimed at benefiting only those on Average Weekly Earnings and lower, while at least maintaining public revenue (and hence outlays) in real terms. This, then, should be coupled with a progressive restructuring of the PAYE tax scale to restore distributive justice. Such reform could finally be complemented by the indexation of the lowest PAYE tax brackets, enabling protection from bracket creep for those on lower and average incomes.

Labor Shadow Treasurer Mark Latham has pointed to the demographics of three marginal Liberal seats: Aston, Casey and Hughes, where median incomes range between $45,000 and $65,000, in an attempt to bolster his plan to slash the top PAYE income tax rate. However while Aston is a true marginal, 2001 election figures put Hughes at a 6.1 per cent margin, with a total of 40 electorates within closer “striking range”. In the 2004 election, therefore, neither Hughes nor Casey are likely to play the decisive role.

Conservative political commentators, plying a deceptive agenda, are prone to point to average full-time adult earnings of about $48,000 a year to construct a “snapshot” of the “average Australian”. Such figures, however, ignore those Australians who are unemployed, welfare-dependent, or in part-time or casual work. This considered, according to the 2001 Australian Census, the “average Australian” survived on $300-$399 a week. Even assuming a figure of $400/week, this would place the “average Australian” on barely $20,000/year.

According to The Age (20/11/2003), “Confidential Labor Party research” suggests that a “squeeze’ on the cost of living will be a “potent election issue”. In the opportunist drive for tax cuts, Latham ignores the electoral (and social) impact of failing to deliver substantially and qualitatively better health, education and aged-care programs to middle and lower-income groups, the unemployed and the welfare dependent.

Furthermore, he ignores the tangible benefits in regard to “cost of living issues” that would be provided by an expansion of the social wage from which the vast majority of Australians would benefit. If Labor is to maintain, let alone expand, Australia’s social wage, and thus govern in the interests of the majority of Australians, if cannot afford to provide real tax cuts to those on average full-time adult earnings, let alone the relatively wealthy.

Failing to address the question of revenue will inevitably relegate Labor to merely “tinkering around the edges” in regard to health, education, welfare, aged care and other concerns. When Labor talks about committing about $2 billion to Medicare and Higher Education, it ought to be remembered that this is in the context of an economy of well over $700 billion. Meanwhile, John Howard’s recent tax cut, providing a mere $4 a week to certain voters (which was passed by Labor in the Senate) abandoned a source of revenue sufficient to fund Labor’s entire Higher Education strategy.

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Labor should take heart from successive studies demonstrating the willingness of voters to pay tax in the event that such revenue is linked with clearly identifiable “social goods” in health and education. Rather than moving again onto the back foot, into a “harm minimization” approach characterised by a bidding war on tax, Labor needs to be setting the foundations for a real social-justice strategy that provides a comprehensive and qualitative alternative to the Conservatives.

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About the Author

Tristan Ewins has a PhD and is a freelance writer, qualified teacher and social commentator based in Melbourne, Australia. He is also a long-time member of the Socialist Left of the Australian Labor Party (ALP). He blogs at Left Focus, ALP Socialist Left Forum and the Movement for a Democratic Mixed Economy.
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