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Labor’s embrace of Liberal tax policies leaves poor worse off

  • 31 August 2021
In July, Anthony Albanese announced a significant change of stance on Labor tax policy which was disappointing, if not surprising. An elected Labor government, Albanese promised, would keep the coming high income tax cuts he previously opposed. This decision to not oppose the government proposal to restructure the income tax system through reduced marginal rates is supporting a government policy that will lead to a significant redistribution of wealth towards high income earners.

In addition, the Labor agreement to align with the government by dropping its proposals to reduce negative gearing and to stop the discounting of capital gains for taxation purposes will continue to accelerate the redistribution of wealth and push up housing prices to levels inaccessible by low and average wage earners.

These recent changes in policy by the Federal Opposition demonstrate a noteworthy shift: the Labor Party recognises that policies which prioritise the marginalised are not electorally popular. Now, in significant policies that entrench systemic disadvantage for the poorer members of our community, there is arguably no difference between the Coalition and the Labor Party.

Such blatant decisions against Labor’s commitment to social equity affect those most vulnerable in our communities, and it is worthwhile looking at the impact of these policies in simple terms.

The argument for cutting marginal rates for high income earners assumes that the reduced taxation income will be countered by an increase in economic activity, thereby improving employment and income levels for all as demand for labour increases, putting an upwards pressure on wages. It is a form of trickle-down economics: if the rich benefit, all will. This argument has been proven to be marginally effective in America and has been criticised by Pope Francis as being inequitable.

Tax cuts of this magnitude mean that, amongst other things, we cannot build as many affordable homes as needed; we cannot improve Medicare rebates so that more people can afford to take themselves or their children to the doctor. There is less likelihood of improved mental health services or dental access or reduced homelessness. There will be continued reductions in the real level of funding to essential services.

'These changes put greater emphasis on non-governmental groups like churches and NGOs to be a voice for the poor and marginalised in our community by advocating against what are now commonly held policies.' 

The argument to reduce high income marginal rates, effectively making the income tax system flatter and therefore less progressive, flies