My Dailky Advertiser Op Ed column for Tuesday 16 July 2019
by ray goodlass
Tax cuts will be a national disaster
Over the past couple of weeks I’ve been pondering the implications of the recent passage of the government’s package of tax cuts through both houses of our national parliament. It is the third tranche, large cuts for very high income earners, that has me concerned, even though it’s not due for a few years.
The outcome of my deliberations is quite frightening for our national well-being, but before I explain how and why let’s look at how our politicians responded to the government’s omnibus bill.
The members of our Liberal/Nationals coalition government naturally enough supported their own package of bills with reckless abandon, rashly promising not just an instant cash splash but also a golden future for all of us.
The ALP was much more circumspect, arguing sensibly and strongly that the second level of cuts should be brought forward to take effect immediately, so as to provide a much-needed stimulus to our faltering economy.
Despite this concern the ALP waved the bills through both houses, but at least the Labor states wrote to the federal Coalition demanding “urgent confirmation that the commonwealth government’s surpluses will not be built on funding cuts to hospitals, schools and infrastructure”.
Cross-bench members were bought off by some rather paltry pork-barrelling, which may or may not eventuate, given the vague wording of the government’s offers.
Only the Greens, accompanied by House of Representatives member Andrew Wilkie, had the fortitude to firmly resist the temptation of the government’s easy money, accusing them of attempting to “bribe” Australian voters, by “giving away cheques like a breakfast TV show trying to increase ratings”, and, of course, of putting at risk future funds for social services including, but not limited to, health and education.
So now let’s look at why and how these tax cuts, especially the third tranche, will be so detrimental to our society. As an Editorial in the Saturday Paper noted, the cuts are “the greatest assault on the safety net from which Australian life is built.”
The problem with these cuts is that the revenue base which provides for our health, education and social welfare is being shredded. Our 46th parliament has destroyed the social compact that keeps this country stable.
The budget states that government spending as a percentage of GDP will decrease from 24.9% in 2018-19 to 23.6% in 2029-30.
The Grattan Institute undertook a separate analysis, which projected GDP growth over the decade and calculated that a 23.6% spending to GDP ratio implies that government spending will be $729bn in 2029-30.
If the current level of 24.9% continued, the government would be spending $769bn. So the shrinkage in the spending to GDP ratio implies the government will need to cut spending by about $40bn a year by 2029-30.
The Grattan Institute has warned that “achieving such a reduction would require significant cuts in spending growth across almost every major spending area, during a period when we know that an ageing population will increase spending pressures, particularly in health and welfare”.
So the government’s assumptions are heroic but totally unsustainable. They show an extraordinary indifference to reality. More than that, they are indifferent to need. People will be worse off under these cuts. They will face greater hardship, have less access to health and to quality education. The people worst affected did not vote for Scott Morrison. Half the country didn’t. The damage done is near irreversible. It is infinitely easier to cut taxes than to raise them. This is a triumph of greed and political cowardice.
The cuts are an expression of the conservative neo-liberal economic theory that puts unregulated capitalism above the social good. It includes the notion of trickle-down economics, which is well known to be a con job, as the benefits do not flow down to the workers. As Leonard Cohen sang, “Everybody knows, the rich get richer and the poor stay poor”. They are a lie through which governments give money to the rich while pretending they are helping the poor.
They also show a fundamental misunderstanding of the purpose of taxation. You don’t pay tax in exchange for services. You pay tax for a society. Under Morrison we will see the extinction of what was once the ‘commonwealth’ of Australia.