Friday, May 11, 2018 

NICK CATER               

Bill Shorten hasn't seen a Coalition tax policy he doesn't despise. Strangely, though, he has espoused most of them.

Bill Shorten’s claim that the announcements in his Budget reply speech amount to “long-term reform” was something of a stretch. This was tax-and-spend socialism of old, even if the Opposition leader was coy about the true nature of his proposed extra taxes.

 

Instead he spoke in euphemisms: he claimed to be “reforming” negative gearing and capital gains, “cracking down” on tax minimisation, and “ending unsustainable tax refunds”.

Few will be fooled by the rhetoric; what Labor is actually doing is raiding retirement savings to feed the party’s unsustainable spending habit. If this is reform, it looks nothing like the tax reform Shorten proposed in 2005 as national secretary the Australian Workers Union. 

 

As The Age reported at the time, Shorten wanted the top income tax rate to be slashed. He proposed abolishing the tax-free threshold and creating three tax rates of 10 per cent for those earning less than $50,000, 20 per cent up to $100,000 and 30 per cent over that.

“There is no question that we have to offer fair dinkum tax reform. All this tinkering about, offering people $6-a-week tax cuts, is just putting lipstick on the tax system,” he told The Age(Interestingly Malcolm Turnbull, then a backbencher, was proposing cutting the top tax rate to 35 per cent.)

When NATSEM modelled Shorten’s proposal they found it would result in a $44 billion drop in revenue and that the 3.8 per cent of "losers" under the changes would be those on lower incomes.

 

NATSEM is the modelling organisation that Shorten commissioned to model the impact of the 2015 Coalition Budget on low and middle income earners, which he then used to attack the Budget. Shorten claimed the figures were “aspirational” and said: “Look, I don’t pretend to have all the answers, but I am not going to leave the tax debate to Malcolm Turnbull.”

So where might we be now if Shorten’s 2005 reforms had been implemented? A person earning $1 million would receive a tax cut of $170,000 every year (a 40 per cent cut). A person earning just $10,000 would pay an extra $635 in tax every year (a 170 per cent increase). A person earning just $20,000 would pay an extra $135 in tax every year. And a million people then under the tax free threshold would have to pay tax when they had previously paid none.

In his previous life as a union boss, Shorten had a track record of calling for tax cuts for the top end of town. Here are just a few choice quotes: 

 

“Tax shelters are not worth the trouble when tax rates are low and the threat of prosecution is high. But evidence does show that tax shelters and advisers start to look attractive when rates rise above 40 per cent.” (“The politics of hope”, chapter by Bill Shorten in Coming To The Party: Where To Next For Labor?)

“... all the incomes brackets in terms of tax should be lowered and that obviously includes the top rate.” (Bill Shorten, ABC Insiders, 3 May 2006)

“The problem is escalating, as bracket creep drags more unionised wage earners into the top tax trap with every pay rise.” (Bill Shorten, “Tax system puts the squeeze on incentive”, The Australian op-ed, 3 May 2005)

“The top marginal income tax rate thresholds should be raised to create a fair, productive and competitive tax system.” (Bill Shorten, “Tax system puts the squeeze on incentive”, The Australian op-ed, 3 May 2005)

“It should be remembered that reducing the top marginal rate is part of the solution.” (Bill Shorten, “Tax system puts the squeeze on incentive”, The Australian op-ed, 3 May 2005)

Shorten maintained that the top marginal rate should be the same as the company tax rate“A large gap between the top personal income tax rate and the company tax rate creates an incentive to redefine personal income. In addition, the maximum marginal income tax rate cuts in at a relatively low income level, which harms work incentives and skill acquisition... workers are paying more tax than ever.”  

 

“Australia will eventually get a decent tax system where income rates are aligned near the corporate rate...” (Bill Shorten, Herald Sun op-ed, 13 May 2005)

Shorten also argued that Australia’s high top marginal tax rate makes Australia uncompetitive by international standards:

“Australia’s top marginal income tax rate is not only higher than our leading international competitors (47 per cent versus US 35 per cent, Britain 40 per cent and Japan 37 per cent)... The difference between Australia’s top marginal income tax rate and the corporate rate is also large by international standards – in Japan and the US corporate taxes exceed personal income taxes.” (“Tax system puts the squeeze on incentive” Bill Shorten op ed column, 3 May 2005)

Now Shorten is promising to legislate to increase our top marginal tax rate to 49 per cent (including the Medicare Levy) by reversing the scheduled repeal of the Temporary Budget Repair Levy, which is due to occur on 30 June 2017, as confirmed by his Shadow Treasurer, Chris Bowen: “We will bring back the high-income deficit levy. We’ll reinstitute that as the permanent tax bracket.” (Interview with 7 News, 3 May 2016.) By Shorten’s own standards, this would make Australia’s tax rates even less competitive and create an even more problematic divide between the top income tax rate and the company tax rate.

And it contradicts his earlier opposition to the Levy, where he said: “The debt levy is a new income tax on people who earn more than $180,000.” 

We want nothing to do with a new tax on the income of ordinary Australians, and we will fight the Government every step of the way.” (Daily Telegraph)


“The deceit tax [repair levy] is a price that working Australians will pay.” (Daily Telegraph)

And remember, despite his rhetoric on Thursday night, Bill Shorten thinks that $180,000 is not a rich salary. He was recently asked about this on 3AW in Melbourne: Neil Mitchell: “Is $180,000 a year rich?” Bill Shorten: “No, it’s not.”

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2019 by Menzies Research Centre