Treasurer Jim Chalmers says Albanese government ready to overhaul the tax system
After months of acting coy and playing down expectations of what it might do to shake things up, the Albanese government has officially opened the door to big, beautiful, and maybe even brave tax reform.
Big? We don't quite know that yet. Beautiful? Beauty is in the eye of the beholder, so the jury is out there. Brave? They will have to be brave because the backlash is coming, and it could get ugly.
The word reform is so overused as to be meaningless, but if it is to be meaningful, it will have to involve some losers. That's where the ugliness lies.
Treasurer Jim Chalmers declared last week that limiting the narrative to "ruling things in or ruling things out" has had a "corrosive impact" on policy debate.
On that, he is dead right. Journalists (yes, I'm putting my hand up here) must also take responsibility for sometimes seeking to box in politicians and, as a consequence, short-change the country by limiting the scope of our debate.
But the biggest perpetrators of boxing in are politicians themselves — so afraid of their shadows, they have shut down debates as soon as they start.
You get the sense watching the treasurer that he has played his cards not only carefully, but expertly.
For some time, he has let the temperature and pressure rise and the debate rage outside of the government, letting others build a case for structural change to the way we tax.
By letting others do the heavy lifting — making the case for change — from think-tanks, to independent politicians, to millennials on a tear about boomers and their elaborate holidays — he has walked into a political climate that is open to change.
It is no longer 2019, when in the wake of Bill Shorten's loss, Labor went into the fetal position.
Labor's timidity may finally be evaporating. The demographic shifts among Australia's voting base also help Labor.
With Gen Y and Z now the biggest voting blocs, the losers are outnumbered. The preconditions are there for change.
This week, the treasurer was pressed on his one existing proposal that changes the tax treatment of superannuation.
Chalmers refused to budge on his contentious plan to raise taxes on people with more than $3 million in superannuation, as he signalled he was open to cutting income taxes as part of wider tax reform.
The reform has a chorus of critics — some making reasonable points about the design of the tax — but the treasurer is on steady and solid ground on the politics, and he knows it.
New polling conducted by pollsters Talbot Mills Research — a polling company used by Labor in the last campaign — polled over a thousand people in early June with the following question: "The federal government plans to raise around $2 billion a year by reducing tax breaks for people with over $3 million in super. How strongly do you approve or disapprove of these proposed changes?"
The results speak volumes about why Chalmers doesn't seem like he is in the mood to water down his proposal. Twenty-six per cent strongly approve, 37 per cent said they somewhat approve, 14 per cent somewhat disapprove, and only 11 per cent strongly disapprove. Twelve per cent were unsure.
Chalmers is now saying Labor is willing to overhaul the tax system to reduce its growing reliance on income tax while ensuring the government can raise enough money to deal with the structural deficit.
Independent MP Allegra Spender has been pushing for sweeping tax reform, calling for lower income and business taxes, fewer concessions for property investors, and a reduction in compliance costs.
The member for Wentworth has used her parliamentary platform to argue that the tax system is a barrier to home ownership and is burdening young Australians, something that is getting harder because of bracket creep and an aging Australian population.
She said it was a "really positive sign that the treasurer has recognised the importance of tax reform".
But she said even achieving revenue neutrality right now was difficult within our tax system because things like fuel excise was dropping, tobacco excise was dropping, GST as a proportion of our tax system was dropping, and we have fewer working-aged people as a proportion of people in the system.
Asked how to get voters to embrace a tax change that would slow intergenerational unfairness, Spender said: "When I talk to people in my community, people really worry their kids and grandkids are not going to be able to meet the same milestones as previous generations, and that is really motivating."
But even with a whopping majority and a community pushing for change, landing the reforms will still be hard.
One tweet from broadcaster Neil Mitchell tells that story. He warned: "Boomers beware. Jim Chalmers is taking [sic] about 'intergenerational justice' in tax. That means a tax on boomers, who actually did a bit to build this country."
Subtle? Not so much. The idea that boomers uniquely built this country is indeed a strange idea. All generations contribute during their working age. Tell that to the Gen Xers and Millennials currently slogging it to keep their heads above water.
Chief executive of the Grattan Institute, Dr Aruna Sathanapally, who has been pushing for big reform, said the treasurer had now said the quiet bit out loud. And she's relieved.
"Chalmers has said the important bit out loud — it's the government's job not just to deliver its election commitments but to lead us through the times we live in, including making the trade-offs that we need to preserve our living standards in the years ahead," she said.
"It's great to see tax reform on the table. It has to be on the table: our tax system is simply not fit for our aging society, the global context, or tackling climate change."
Sathanapally said she would like to see the government grapple with "the fact that paying for our existing expectations on healthcare, aged care, defence and pensions is going to cost more."
"It is unfair to place that burden on today's children, rather than those who have benefited from a tremendous growth in asset prices," she said.
"What I want to see is not just the government but each of Australia's sector leaders strive for a system that works for and not against younger Australians.
"Intergenerational equity is not a zero-sum game: a system that supports education, innovation, paid work, and care for each other will support a better economy and quality of life overall".
The way the Coalition plays this will be fascinating. The politics of opposing contentious changes are delicious and easy, but the demographic time bombs will hit future budgets too if they fail to get behind substantive change.
The opposition is already mounting the case that this is Labor on a tax grab. But what they fail to grapple with is that the community's expectations around spending have grown. Unless they can win the argument with voters that substantial spending cuts are necessary, they will have to consider the changes outlined by Labor.
Opposition finance spokesman James Paterson said this week that the Coalition was up for a conversation with the government.
He said his party was open to working constructively with government to make the tax system more efficient, to collect revenues in less distortional ways, "but we are not going to give them a blank cheque to increase taxes on Australians at the worst possible time for our economy."
But if the coalition is going to argue that defence spending should rise to 3 per cent of GDP, they will have to explain how they will pay for it.
Endless demands for more spending on key areas of national significance are meaningless without an answer for where the money will come from.
Patricia Karvelas is host of ABC News Afternoon Briefing at 4pm weekdays on ABC News Channel, co-host of the weekly Party Room podcast with Fran Kelly and host of politics and news podcast Politics Now.
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