As word leaked on Tuesday about Scott Morrison’s retirement, his colleague Angus Taylor cited stage-three income tax cuts as a “critical” part of the former PM’s legacy.
It was a convenient way to pivot from an unwanted bout of the Coalition talking about themselves to his preferred issue of the day: Labor’s broken promise, its impending plan to radically reform the tax cuts it had recommitted to at the 2022 election.
It also happened to be true. The plan to flatten the marginal rate of tax on income between $45,000 and $200,000, legislated in the wake of Morrison’s upset victory in 2019, was, along with the Aukus nuclear submarine acquisition, his most significant achievement.
Other than these, Morrison will be best remembered for being absent in Hawaii when Australians just needed some basic competence and empathy from their leader, and a strong initial response to Covid marred by later errors.
If allowed to continue, stage three would make Australia’s income tax system much less progressive, using comforting bromides about simplicity and incentives to work to deliver a massive tax cut to high-income earners.
While Albanese is content to be the caretaker of the Morrison legacy on Aukus because he says he would likely have taken the same decision, Labor fought to cut stage three out of the tax package passed in mid-2019.
It was always hard to imagine Albanese, whose political identity is defined by humble beginnings growing up in public housing, handing over $9,000 a year to the rich with a smile.
The decision formally taken by the Albanese government on Tuesday and Wednesday is the most decisive break with the Morrison legacy and will define the remainder of this term of government.
Before this week, Labor was content ticking off what was perhaps unfairly characterised as a small target agenda, colouring outside the lines only occasionally with bigger changes in industrial relations and a small tax grab for those with enormous superannuation balances.
Albanese fronted the National Press Club on Thursday, conceding that abandoning stage three was a change in policy and therefore by clear implication a broken promise.
He brushed off multiple repetitive attempts from most questioners inviting him to deliver some ruinous grab that would help Peter Dutton elevate this to his Julia Gillard carbon tax moment.
Albanese explained that his government was defined by being “prepared to take action” and its “determination to make a positive difference”.
Seeing the difficulty Australians were having paying their bills but not doing what was needed to fix it would have been akin to saying “sorry, I’m just prime minister, I am not in a position to help you”, according to Albanese.
It was a line that reminded me of Morrison’s infamous “I don’t hold a hose, mate”, which featured so heavily in Labor election ads. The cost-of-living crisis is the fire, and cracking open the stage-three piggy bank to fix it is the hose.
Labor had very few options: without taking money off the rich, the relief would have been too small to be noticed or too inflationary to be helpful.
All of this leaves two important questions: was this the plan all along – that is, did Labor deliberately mislead voters to win the 2022 election? And will it matter, if the majority of voters are better off under the new plan?
On the first point, the evidence is mixed. Shortly after the election, the treasurer, Jim Chalmers, was authorised to test the waters publicly about the possibility of reforming stage three, but Albanese eventually shut this down.
This is consistent either with planning to abandon stage three all along and just looking for the right time, or with genuinely leaving open the option of delivering the election promise if it was feasible to do so.
The “circumstances have changed” argument has some obvious difficulties already pointed out by the Coalition: was the lingering impact of the pandemic really so unknown at the time? Why make permanent changes in response to temporary challenges?
Asked if Labor could abolish the 37% tax rate in future, Albanese didn’t exactly leap at the thought. One suspects if Labor fights bracket creep again it will be by shifting thresholds, not abolishing them to create a quasi-flat tax system.
I’d say stage three was not the Labor way, but we’ll never know, if inflation weren’t crippling middle Australia, whether they would’ve had the courage to junk them.
It’s too early to say whether voters will care more about a broken promise or the dollars and cents of it, and how many are better off.
We can say with certainty that Dutton is extremely effective when given such an opportunity, and the at times hysterical media coverage so far judges the broken promise to be the most salient point.
But by the time of the next election, the tax cuts will have started to flow. Previous broken promises like Paul Keating revoking L-A-W tax cuts, Tony Abbott’s cuts to health and education, and Gillard’s interim carbon price (not a tax) didn’t create so many winners.
Voters’ aversion to losing money saw them punish Bill Shorten’s 2019 tax proposals. But those were just proposals, and this will be cash in their pocket.
Surely loss aversion points the other way – that Dutton and the Coalition are the risk to hip pockets, thus the quick backtrack from Sussan Ley suggesting they would repeal the new cuts.
I won’t presume to know how voters will respond – but that is my hunch.
We have a clearer idea of Albanese now. On one view he is mendacious, prepared to junk a solemn pledge. On the other he is heroic: not content to just occupy space, but doing what’s right.
Albanese will not die wondering what voters make of a truly progressive government – he is having a crack.
