Shadow treasurer Tim Wilson has thrown himself into fighting the reduction of the capital gains tax discount in Labor’s budget, as well as the abolition of negative gearing on existing properties. But as treasurer Jim Chalmers recently pointed out in parliament, quoting from Wilson’s 2020 book The New Social Contract, these are changes he has advocated for himself.
“Capital gains from appreciation of having and holding assets are taxed at half the applied rate, effectively entrenching the benefit of having and holding assets that can only exist if you are established,” the book reads. “There is no intergenerational justice in such preferential arrangements.”
While the capital gains and negative gearing changes passed in the lower house last week, they are still to face the Senate.
When Wilson was appointed shadow treasurer earlier this year, Chalmers criticised his counterpart’s “dangerous ideology”. (Encapsulated in his lack of support for “Medicare, penalty rates, superannuation, work from home”.)
In drawing on Wilson’s book, Chalmers was defending the very modest attempts in the budget to shift the balance between taxing labour and capital, and to create a more level playing field, in which income from different sources is taxed differently.
He could also have quoted this:
Favourable treatment should not be extended to income derived from the holding or investment of capital that is principally beneficial to established interests. Indeed such income should be treated consistently with the income derived from labour and the application of skills.
In other words, tax paid on income from labour should be aligned with tax paid on income from investments. Which would seem to support the budget’s proposed changes to capital gains tax and negative gearing.
Intergenerational injustice
In fact, Wilson’s book argues for a far more radical overhaul of our taxation system than the budget advocates. This includes an increase in the GST and a rethink of the preferential treatment of the family home and of superannuation.
Referring to age-related benefits and tax-free superannuation, he writes:
There is a lack of intergenerational justice when those who have had the opportunity to hold (and do hold) the wealth of the nation are paying lower tax rates while having the most redistributed to them by the tax payer.
He points out the direct transfer of wealth from younger people who are “having a go” to older ones, who have “had their go”.
He also worries that more Australians are relying on their parents for help in buying their first property, entrenching privilege. This, he argues, breaches Australian liberalism’s promise of equal opportunity to get ahead, through hard work and individual enterprise.
He stops short, however, of recommending the obvious conclusion to this argument: an estate or inheritance tax, to weaken the effects of inherited privilege.
What is the New Social Contract?
Wilson’s book argues that small-l liberals need to offer Australians a social contract that places the interests of the individual at the core of government, concentrating on decentralising power and increasing home ownership.
Liberals, he says, need to restore the balance between freedom and justice, after neoliberalism – with its focus on free markets above everything else – tilted it too far in favour of freedom. “We need to rediscover the place of justice within a liberal world view […] that leaves neoliberalism behind,” he writes.
Wilson analyses justice in terms of equality of opportunity and intergenerational equality. And he invokes British philosopher Isaiah Berlin’s distinction between negative liberty (the absence of constraint) and positive liberty – which provides the conditions for people to be free to live their best life.
Wilson is to be commended for his effort to think hard about what liberalism means in today’s society. But his book has one glaring fault.
Labor shares many liberal values
Wilson is right that liberalism is Australia’s foundational political philosophy. He makes good use of politics professor (and former Howard government minister) David Kemp’s five-volume history of Australian liberalism. But he writes as if the Liberal Party were its only vehicle. It is not.
There is little explicit discussion of the Labor Party. Wilson’s book argues that socialism and centralised planning are the opposites of liberalism, but its unspoken assumption is that Labor supports both these things. However, the Labor Party shares many liberal values with its opponent – and it always has.
Apart from a few prewar radical socialists and communists, both sides of Australian politics have always supported civil liberties, private property and a mixed economy.
Where they have differed, and still do, is over the balance between private and public provision, between the role of the market and the role of government (or the state) in the distribution of resources.
Labor for more, Liberals for less: but neither for all, or none.
Overwhelming resentment damages societies
There is plenty of scope here for fruitful debates about policy. For example, Wilson puts forward plausible arguments against compulsory superannuation for people who can’t afford a house.
But the Liberal Party needs to respond to the Labor Party as it is. It should stop its lazy demonising of Albanese’s Labor as socialist and the worst government Australia has ever had. Governing is hard; it is better when oppositions are constructive.
Wilson approvingly quotes 18th-century philosopher and economist Adam Smith:
While individuals can disagree, if they have a continuing interest in the way their interests are advanced by the existing order, then the disagreement will never escalate to risk the legitimacy of the existing order […] Society struggles when resentment becomes so great that differing parties no longer share a common interest.
On paper, Wilson is thoughtful. In parliament and on the hustings, his performative outrage overwhelms his thinking – and his capacity to contribute to the development of good policy.
This article was originally published on The Conversation. Read the original article.
