Income tax cut cost dwarfed by $80b big business handout - Transcript, ABC Canberra

E&OE TRANSCRIPT

RADIO INTERVIEW

ABC CANBERRA

WEDNESDAY, 9 MAY 2018

SUBJECTS: Budget 2018-19; Section 44.

JO LAVERTY: The man who is across all the issues is Andrew Leigh, he's the Shadow Assistant Treasurer and Federal Member for Fenner. Hello, Andrew and thank you for joining us this afternoon.

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: G'day Jo, great to be with you.

LAVERTY: Nice to have you along. Let's start with the budget. We all acknowledge that the cost of living pressure is crippling a lot of Australians, so the idea that those in the middle to low income are going to get a tax break, that's a good thing, right?

LEIGH: Absolutely and we'll support it. What we are concerned about though, Jo, is that the cost of this income tax cut is dwarfed by the $80 billion that the Government would give to multinational corporations. So they're looking to take $17 billion out of our schools and give $17 billion to the big banks. Most of that money is going to flow into the pockets of shareholders rather than the pockets of workers. So, that'll be one of the key battlegrounds in the coming election. Of course we'll support those low and middle income earner tax cuts.

LAVERTY: So that is going to be supported, we've been hearing in the news today that you're going to have a good hard think about it before you offer your support to those tax cuts?

LEIGH: There's a second tranche which is contingent on Malcolm Turnbull being re-elected twice and those tax cuts we don't even know the cost of yet, so it would be irresponsible to make a clear decision on those. The ones that are meant to take effect on the 1st of July this year which are targeted at middle income Australians who have seen  wages stagnate over recent years. They're tax cuts I'm sure people will welcome. They won't make up for stagnant wages. Wage growth is well down on what will be compensated for by this, particularly if you were on penalty rates.

LAVERTY: It sounds very reasonable to say we'll support it but the Treasurer has made it very clear that you have to support part A and part B on July 1st otherwise it's not going to go ahead. So how are you going to be able to confidently say you'll support it?

LEIGH: The Treasurer is taking this ‘Fish Called Wanda’ approach: you've got to do what I say or I'm going to swallow all your goldfish. It's just ridiculous. There is a set of tax cuts due to take effect on the first of July this year with bipartisan support. It would make sense if the Government put those to the Parliament, they'll get bipartisan support, and then we can debate what we plan to do with a set of tax cuts that are off in the mid-2020s.

LAVERTY: But he's already made it clear that he's not going to do that, so where does that leave the lower to middle class income earners who won't that tax break?

LEIGH: I don't think he would be so foolish as to stop them getting their tax cut because he wants Labor to support tax cuts whose cost he can't even tell us. This is a very strange budget, Jo. It's got these tax cuts in the back end where the Government won't tell us the cost. Today in Question Time they were still refusing to tell us the cost of their corporate tax cuts, yet we know the cost to Australian schools, there's $17 billion taken out, we know the cost to Medicare and to hospitals - there's almost a billion dollars that has been taken out there. We know the cost to Canberra - of the 14,044 public service job cuts since the Coalition took office, with more job cuts at the National Library and the National Archives, higher parking fees. So we see in this budget again, a budget that has been pretty bad for Canberra.

LAVERTY: He has outlined the cost for the next couple of years though, right?

LEIGH: We don't know the separate costs of each of these different tranches of tax cuts, Jo. We need that broken down, we also need a bit of distributional analysis because it looks to me as though those later tax cuts would take us much closer to having a flat tax scale which is not something that Labor has historically supported. We believe in progressive taxes, we believe that somebody who is fortunate like myself to be in the top couple of per cent of the income distribution has the capacity to pay a higher rate of tax. That's a pretty critical principle of the Australian income tax system, that your rates steadily rise as your income and your capacity to pay increases.

LAVERTY: Just going back to the corporate tax cuts. The argument that you cut tax and you allow businesses to have more money in their pocket, the money will trickle down to the workers, what do you say to that argument?

LEIGH: It's all in the phrasing, isn't it Jo, ‘trickle’ down rather than flow down. You're seeing it in the United States now where even Republicans like Marco Rubio have acknowledged the money is going into share buy-backs not into wages. These promised wage rises simply aren't eventuating. The independent economist, Saul Eslake, has made the point that if you look around the world for evidence that cutting the company tax rate leads to higher wages, you really struggle to find that evidence. We've got significant foreign investment including from countries which already have lower corporate tax rates than ours — suggesting that the company tax rate is not the only driver of foreign investment. Things like infrastructure spending, the quality of your human capital, those things really matter. Brian Schmidt made the point today that the capping of places at universities does limit our long term productivity and that's one of the other aspects of the budget that really concerns me, the notion that we might soon have a football stadium's worth of young Australians who are stopped from going to university as a result of putting these caps back on university places. And that'll restrict the economy's capacity to grow.

LAVERTY: But doesn't a company tax cut allow those businesses to thrive and perhaps make those entrepreneurs who'd like to get into business makes it that little bit easier for them?

LEIGH: Our company tax rate is clearly one of the factors that drives investment. But if you compare the companies in Australia that pay an effective company tax rate below 25 per cent right now and those that pay a rate above 25 per cent and you look at the number of jobs they have been creating, the companies paying an effective rate below 25 per cent are on net reducing their labour force. It's the companies paying a rate closer to the statutory rate of 30 per cent that are actually increasing employment. The Government's own figures on this suggest that the big business tax cut would deliver only 0.1 per cent higher household income and that's a benefit that flows in the 2030s so it really is off in the never-never.

LAVERTY: Andrew Leigh is the Federal Member for Fenner, he is also the Shadow Assistant Treasurer. This is ABC Radio Canberra. So you've said you will support the Treasurer's proposed tax cuts when they come to the House but I've mentioned the Treasurer said no you have to approve all of it. How is that negotiation going to take place? How are you going to using your fish called Wanda analogy, how are you going to make him not swallow the fish?

LEIGH: I assume it'll happen the way it normally happens with these things, that we get a huge amount of huff and puff and bluster from Scott Morrison and then finally he does the right thing. That's what happened with his attempt to raise income taxes in the last budget, you'll remember that he said that the NDIS would be an absolute crisis if he wasn't allowed to raise income taxes on low and middle income Australians. Labor said no, and in this year's budget he announces that the NDIS is fully funded and he doesn't need to raise income taxes. With the banking Royal Commission you'll recall that he said that this was a stunt, a gimmick, we didn't need to have a banking Royal Commission — but then after nearly 2 years came around to the notion that a banking Royal Commission was a good idea. So, I suspect Scott Morrison will in the end do the right thing, but only after he has exhausted all the other options.

LAVERTY: Can I talk about what's going on with the Members of Parliament and Katy Gallagher the Senator for the ACT. We've heard today that Katy Gallagher in the High Court said that she is ineligible to sit in the Senate and following that, there were four MPs who stood down as well. This is really huge, what's your response to that?

LEIGH: Katy is a good mate and someone who I enormously admire. She has been a faithful servant of Canberrans for 17 years, she's been a community worker, a disability advocate, a Chief Minister, a Shadow Minister and Senator at the Federal level. So I really feel for Katy and her family as a result of this decision. 

LAVERTY: And have you spoken to her?

LEIGH: I haven't today, we've just touched base by text. But I certainly was surprised by the High Court's decision as indeed were legal experts such as Professor George Williams. It does take us in a different direction from where many of us had understood the law. Even if you look at the Australian Electoral Commission's handbook for prospective candidates, it says that dual nationals have to take reasonable steps to renounce. But this goes beyond reasonable steps, it says that if the country has the ability to renounce, you've got to wait until those procedures are followed which is why quite appropriately Justine, Josh and Susan will be resigning effective Friday but recontesting those seats.

LAVERTY: It's such a big turnover of our elected representatives, do you think there should be an election sooner rather than later?

LEIGH: We'd be keen to fight an election as soon as Malcolm Turnbull wants to bring it on, Jo. But you're right, section 44 has now claimed the scalps as a surprisingly high number of people. One wag was saying it's actually called section 44 because that's the number of MPs and Senators who’ll eventually get embroiled in it. You just look at the Coalition side - Fiona Nash, Barnaby Joyce, Stephen Parry, John Alexander - this is a significant impact that this has had. Liberal Senator Linda Reynolds has said we need to change section 44, a section which was written in a very different time and a very different context to the one we have now and of course one which being a Brit wasn't considered being a foreigner.

LAVERTY: One at a time when they put in provisions about lighthouses and telegraphs and all those sorts of things as well. I've got a question here and you're a figures man so perhaps you can answer this for Peter who asks why politicians who are not eligible should not have to pay back all that they were paid during the time that they worked when they were sitting in a job that they shouldn't have had?

LEIGH: The answer to Peter's question is that technically those people have been required to pay back money and there's been an act of grace decision not to reclaim that. That’s done on the fact that they weren't acting in any way to dupe the taxpayer, they were acting in good faith based on the law at the time. If you'd asked most legal experts of their understanding of the law at the last election, they would have said reasonable steps were sufficient. We now understand from the High Court that that is not the case.

LAVERTY: What about those that suspected that they probably weren't going to be eligible and then sat there anyway?

LEIGH: I don't think any of these people suspected that they weren't going to be eligible. I'd say that of both sides and I think this really has caught us unawares. The fact that we've had over a dozen people caught up in section 44 does really speak to the surprise that this has been for the Australian body politic. More than a dozen, 15 now.

LAVERTY: Would you like to see a referendum on section 44?

LEIGH: We probably do need to fix it up at some stage, the Labor platform has actually included changing section 44 for years now. But it's also I think a challenge when you have constitutional recognition of the first inhabitants of Australia languishing on the backburner. It's hard to justify saying we ought to fix section 44 as the top priority.

LAVERTY: How difficult it would be to make it interesting enough for the everyday voter to actually pay attention for it and make change in the first place?

LEIGH: Absolutely right. There are many Australians that are dual citizens and certainly many in the Parliament who discovered that they were dual citizens inadvertently so this is something which could be looked at. I suppose one of the groups of people who are caught by this is people who might want to stand in a snap election who would now find that as a result of the High Court's decision that they needed to wait months in order to go through the renunciation process.

LAVERTY: Andrew Leigh, thank you for your time today and thank you for your excellent fish called Wanda analogy that's very well done.

LEIGH: Thanks, Jo.

ENDS

Authorised by Noah Carroll ALP Canberra


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