HOUSE OF REPRESENTATIVES
23 OCTOBER 2017
The fundamental question before the House today is whether we raise taxes on average Australians or whether we raise taxes on the top one per cent.
That is the central question when it comes to income tax in Australia: should we slug average earners, or is it appropriate for the top one per cent to pay a rate of tax that they paid for the two years until 1 July this year?
The context in which we are debating this is one in which inequality has risen significantly in Australia and indeed across the advanced world. In his recent book with Mike Quigley, Changing Jobs, my parliamentary colleague Jim Chalmers notes:
All up, the top 1 per cent is wealthier than the bottom 70 per cent of Australians.
He notes there evidence from the Australian Bureau of Statistics of real wage growth three times as high for the top tenth as for the bottom tenth. In his important book Capital in the Twenty-First Century, Thomas Piketty outlines the way in which wage and capital inequality has grown across the advanced world. This has sparked a significant debate in the IMF, in the OECD and among economists of left and right about what to do about rising inequality. In his book Inequality: What Can Be Done?, the late Sir Tony Atkinson set out a range of proposals to tackle this, some radical and some more moderate. He talked about the importance of shifting the balance of power among stakeholders, the role that trade unions play in reducing the rise of inequality and the importance of getting policy right when it comes to tackling technological change, an issue that I know my colleagues Ed Husic and Brendan O'Connor are actively engaged in, among many others on this side of the House. The late Sir Tony Atkinson talks about the importance of minimum wages, about capital endowments, about the progressivity of the tax system and about overseas aid.
Yet in Australia we have the extraordinary spectacle of a government that has its head in the sand on the issue of inequality. In a speech back in August, we saw Senator Cormann suggesting to the Sydney Institute that inequality didn't matter in Australia and that anyone who was debating inequality was, by definition, a raging socialist. Well, you'd have to say that to the IMF, the OECD and the armada of experts who say that we have to tackle inequality. As Greg Jericho pointed out in a piece in The Guardian, it is almost a ritual in Australia for Labor leaders to be labelled:
… either a socialist or "more leftwing than [insert Whitlam or some other figure from the ALP past]".
We have seen the member for Curtin arguing that the Leader of the Opposition is more left wing than anyone going back to Calwell, echoing, of course, the comments of Peter Costello that Julia Gillard was more left wing than Jim Cairns. We have seen this tired trope from the coalition time and time again.
But it is pretty extraordinary to be told that Labor are in company with socialists because of our policy suite. Senator Cormann listed five Labor policies in his speech that suggested that Labor had become the new socialists. The first is the proposal for a top marginal tax rate of 49.5 per cent compared to the 49 per cent that was in place under the Abbott government. As Greg Jericho points out:
I always thought the gap between Friedrich Hayek and Karl Marx was greater than a 0.5% point top tax rate. I guess I was wrong.
Senator Cormann suggests that Labor's policy to limit negative gearing is another mark of 'socialism'. You would have to say that to the former member for North Sydney, Joe Hockey, who in his farewell speech from this place urged that negative gearing be restricted to new-build homes. That's a policy which has received praise from Liberals such as Mike Baird, the former New South Wales Premier; and Jeff Kennett, the former Victorian Premier. So they are presumably fellow travellers.
Senator Cormann suggested that Labor's 'attack on self-funded retirees with its planned ban on limited-recourse borrowing arrangements' is apparently another marker of socialism. You would have to tell that to the government's Murray inquiry into the financial system, which, of course, recommended such a move.
We hear from Senator Cormann that the Labor position on the company tax cut is further evidence of reds under the beds, a surprise to anyone who has been looking lately at the economic evidence on tax cuts and growth put forward by the Treasury themselves, which suggests that the boost to personal income of a company tax cut for the top end of town, funded by income tax rises, is 0.1 per cent. Not per year—total.
Finally, Senator Cormann suggests that Labor's policy to tax income distributions from trusts at 30 per cent to prevent income splitting will somehow see a resurgence of socialism in this country. That is, frankly, ridiculous. Every previous coalition Treasurer but this one has taken tackling trusts seriously. Labor's measures simply build on what then Treasurer Howard did when it came to distributions to child beneficiaries. We saw a former Liberal Treasurer, Peter Costello, have similar concerns about trusts and attempt to rein them in. Indeed, Joe Hockey spoke about the excesses of trusts. The current Treasurer is the only Liberal Treasurer who doesn't seem to think that income splitting is a problem. Frankly, worrying about income splitting isn't socialism; it's just good economics.
We have in Australia a level of inequality not seen for three-quarters of a century and yet we have a government that is unwilling to crack down on rising inequality. If you don't do it for reasons of fairness, do it for reasons of financial stability. The latest Reserve Bank statement on monetary policy sets out at the end a number of key uncertainties for the economy. It says:
… ongoing expectations for low real wage growth remain a key downside risk for household spending. The recent sharp increase in the relative price of utilities poses a further downside risk to the non-energy part of household consumption to the extent that households find it hard to reduce their energy consumption; this is likely to have a larger effect on the consumption decisions of lower-income households.
The Reserve Bank recognises that we need to ensure steady income growth in the middle part of the distribution for middle- and lower-income Australians if we're to ensure good growth in Australia. If you want to ensure that middle Australia does well then why would you slug it with a tax rise when you are giving a tax cut to the very top?
Let's be clear about the beneficiaries of the coalition's decision to reduce the top marginal tax rate for those earning over $180,000. The beneficiaries are adults in the top two per cent of the distribution but nine-tenths of the gain goes to the top one per cent—a group which, according to work by Tony Atkinson and me and Roger Wilkins at the Melbourne Institute, has almost doubled its share of national income over the last generation. The top one per cent have had a very good generation. This is important to recognise for those of us who are in the top five, two or one per cent of the income distribution. The top couple of per cent of Australians have done very well over the last generation. They don't need a tax cut.
But middle- and lower-income Australians have not done well. They have seen much slower wage growth. Wage growth has been much slower for cleaners and checkout workers than for financial dealers and anaesthetists. So why does the government want to raise taxes on cleaners and checkout workers and cut taxes for surgeons, barristers and anaesthetists? If you'd looked at the evidence on inequality in Australia—over dozens of studies, over hundreds of article, over many, many important books—you would know that inequality has been on the rise. It is important that policy address that fact. Yet we have a government that is leaving revenue on the table from multinational tax avoidance. We have seen the coalition refusing to tighten debt deduction loopholes used by multinational companies, a measure that would improve the budget by at least $4 billion over the decade. We have seen them fail to move on tax transparency for the top end of town.
We on the Labor side would like to see the tax transparency threshold for private companies brought down to $100 million. Before we brought in these tax transparency laws, those opposite came up with all sorts of excuses. In one particularly absurd suggestion they said it would increase kidnap risk despite the fact that the security agencies and the police had offered no evidence of that. Now that the laws have come in, we've seen them add to the public debate over which corporations are paying tax in Australia. But the threshold is too high. Raising it from $100 million to $200 million took two-thirds of the private firms out of the tax transparency net. Labor wants to see more transparency, not less.
We want to introduce public reporting of country-by-country reports—reporting high-level tax information about where and how much tax was paid by corporations with over $1 billion in global revenue. We want to see greater protection for whistleblowers, allowing them to collect a share of the tax penalty of up to $250,000.
In this government, we have no serious measures on multinational tax avoidance. We just have them trying to claim credit for laws they voted against. In 2012 the coalition voted in the House and the Senate against laws that tightened tax loopholes for multinational firms. If they'd had their way, the $340 million judgement against Chevron this year would not have gone through, the budget would be hundreds of millions of dollars worse off and net debt would be rising even faster than it is already.
The NDIS was fully funded by Labor. You only need to go to Labor's final budget, in which NDIS funding was clearly set out not simply over the forward estimates but over the long term. It is an absolute lie and an insult to Australians with disabilities and their carers to say that the NDIS was not properly funded by Labor. What this bill attempts to do—under the guise of pretending, incorrectly, that the NDIS was not funded—is increase taxes on low- and middle-income Australians. Labor has a better plan. We would close multinational tax loopholes. We would only raise the Medicare levy for those earning above $87,000 a year. We would reinstate the budget repair levy for those earning over $180,000 a year—because why should the income support cuts be permanent and the tax rises on the top one per cent be temporary?
Labor will always fight for low- and middle-income Australians. Labor will always fight for egalitarianism. It is not socialism to believe that inequality in Australia is too high. Sensible economists across the world are recognising this challenge and looking at ways of tackling it. Indeed, work recently released by the International Monetary Fund found that lowering tax rates for the rich will increase inequality. That echoes a series of studies done over recent years, including work by Tony Atkinson and me, showing that about a third of the rise in top income shares in Anglo-Saxon countries is due to changes in top marginal tax rates. Top marginal tax rate reductions increase inequality in Australia at a time when inequality has significantly risen over the last generation. The so-called trickle-down theory is just that—any benefits handed away to the very top won't flow down to low- and middle-income Australia; at best they will trickle. A better approach would be to look after low- and middle-income Australia. That is what Labor's amendments will do. They are fairer and they are better for the Australian economy.