Speech on Personal Income Tax Changes
12.30pm | June 19, 2018
Australia has a progressive tax system. That's something that we've had since very early in our history, and it lies at the heart of our conception as an egalitarian nation. I start with that historical fact because there has been quite a lot of commentary from members of the coalition here and in the other place and in the media about how unfair it is to have people on higher incomes pay a higher rate of income tax than those on lower incomes. They have a way of talking about this in the tech world. They say, 'This is a feature, not a bug.' It is by design that we ask people who earn more to contribute disproportionately more. That is because we are a society that has always said: 'We will not leave people behind. We will use our resources to lift up everybody.'
When asked by my colleague Senator Hume at the Senate Economics Legislation Committee inquiry into the Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018 what the effect of this package would be on Australia's tax system, the head of the Grattan Institute, the centrist think tank, replied, 'It will be less progressive than it is at the moment.' We know from analysis of the package that this is primarily the result of tranche 3 of the government's package. The consequences of that shift to a less progressive tax system should be the feature of tonight's debate. The effect of moving to a less progressive tax system is that money begins to flow to where it already is—our tax and transfer system does less work to address inequality. Practically, the benefits of this package overwhelmingly flow to groups and sectors that are already doing well. That is the basis for Labor's decision to support only stage 1 of this package, because the balance of the package will make our tax system less progressive and less fair.
I want to take some time to look at two dimensions of this: gender and geography. I'll start with geography. I think senators know that I grew up in a small regional town. When I was growing up that town had very high rates of long-term unemployment. It was a town where very few people had been to university and very few people hoped to go to university. Some things have got better in regional Australia—certainly things have got better in my town—but all of the data tells us that it is in our regions that people still do it hard.
The Brotherhood of St Laurence released a report a few months back that showed that the hotspots for youth unemployment are in rural and regional Australia—67 per cent in outback Queensland; 30 per cent in the Southern Highlands and the Shoalhaven, in my home state of New South Wales; and well above 16 per cent in Tasmania's south-east, in the Murray and on the Coffs Coast, up on the North Coast near where I grew up.
What does this tax package do for the people in those places? Well, not much. The National Centre for Social and Economic Modelling, NATSEM, did some work to have a look at how the benefits of the government's income tax package are distributed geographically. The results are pretty stark, because the lion's share flow to the very wealthy electorates in our capital cities. The analysis they provided lets you rank the federal electorates in order of the benefit that they receive from the package, from the most to the least, and the top 10 electorates—every single one of them—are from Sydney and Melbourne. None of them are regional. Average households in any of the top 10 electorates would get at least 50 per cent more than the average Australian household when you look at all households. Of course, as has been widely noted, it's the Prime Minister's electorate, the electorate of Wentworth, that gets the largest benefit. One-quarter of the National Party electorates are in the bottom 10. It's an unbelievable concentration of disadvantage, represented allegedly by the National Party in this place. There's only one National Party electorate in the top half. Where are the National Party in all of this? Where are they? They're not in this chamber standing up. They are sitting next to the Liberal Party with their mouths closed. They're sitting next to the Liberal Party, being held hostage by the ideologues who have never pretended for a moment that they give a fig for the people in the regions who are doing it tough, the people experiencing 30 per cent youth unemployment.
I want to talk about women too, because this has been a week when people have wanted to speak a great deal about their commitment to women, to their safety, to their equality and to their economic opportunities. The Labor Party has raised, during the course of the debate, the very different impacts that this package has on men and women. The analysis shows that the final stage of this tax plan delivers three times as much benefit to men as to women. That's $30 billion going to men and just $11 billion going to women. Across the total package, it's still pretty stark: $90 billion in tax cuts delivered to men compared to $50 billion delivered to women. There's an opportunity cost when you do these things because, when you take $143 billion out of the budget, it lessens the government's ability to undertake measures that address the economic position of women.
When confronted with these facts, how did government react? The Treasurer went from angry to silly. He decided his approach would be merely to mock these things. He started talking nonsense about pink and blue forms. The Treasury secretary was more sober, but he dismissed it by saying that the tax cuts are gender neutral. He simply denied the facts. During the Senate committee hearings, I asked the National Foundation for Australian Women about these comments. I asked: is this tax package gender neutral? Do you know what they said? Marie Coleman said:
That's just a nonsense. The intention was gender-blind, I would say, rather than gender-neutral. The statistics that are there clearly indicate that these tax cuts are a long, long way from being gender neutral.
Let's think about it for a minute. The government is taking a decision to distribute $143 billion over 10 years. It is, by some accounts, the largest single tax cut in a budget ever. Let's be clear: if you're going to distribute $143 billion, if you're going to try to put that into the discretionary earnings of households, there's more than one way you can do it. This government has deliberately chosen to design its tax intervention in a way that delivers the vast bulk of the money to the men of Australia.
Women are already earning less than men. They have less wealth than men. They retire with half the superannuation of men. Women bear a significant economic penalty for the caring responsibilities that they take on in looking after women, looking after older residents and looking after children, including children with disabilities. Government policy should respond to this. It is not good enough to say this is merely a response generated by the market. That is what government is for. It is to see inequality and to address it, and the failure to address it in this package is disgraceful.
The worst thing is that the government didn't even look. On every occasion in the last three years when I have asked Treasury officials, 'Have you undertaken analysis on how this impacts women?' the answer has been no. They do not care to look. The truth is this: you cannot come into this place and say that you're interested in defending and supporting the economic interests of Australian women if you do not even bother to find out how your measures, how your decisions in government, will impact on Australian women and whether they will support them or, indeed, harm them. This government doesn't even know. It doesn't know because it doesn't care to look.
Ironically, had the government chosen to look, it may have found some information that would have assisted it in better meeting its stated aims in introducing this package. The Treasurer claims that this bill aims to deliver fairness and remove disincentives to work, but the evidence is that it fails on this front. Mr John Daley, from the Grattan Institute, indicated that the benefits in this bill flow to high-income earners. Those people are, of course, already working full time. There's not going to be a huge increase in labour market participation because men working full time on high salaries get a tax cut. They're already working at capacity. The real economic opportunity, if you want to lift labour market participation, is actually to reduce the very, very high barriers to women working. Women who are the second earner in a family can, in some instances, face almost a 100 per cent effective marginal tax rate when they take on an extra day of work. The reason is that when they go to work that third day they tip over that threshold and they start to lose their childcare benefit, start to lose their family tax benefit and pay more income tax. The combination of those things means that they take almost no extra money home at all. It is literally not worth it financially to attend work. And that is a policy design problem. If you tackled it, you would lift the number of hours being worked in the Australian economy. That is something that does have the potential to lift economic growth.
All of the evidence suggests that if we can increase women's participation we can grow the economy. But the government didn't think about that. The government didn't think about it because it dismisses out of hand any argument that suggests you ought to take care about how your policies impact on women. It dismisses them. It laughs at them. It treats women with contempt. I tell you what: I think the women of Australia are noticing.
There are people in this chamber and in the community who believe in small government. They believe in a flat tax, and they believe that for ideological reasons. They think it's okay to ignore the consequences for less-privileged members of our society. Those people—like Senator Leyonhjelm, who was here in the chamber earlier—argue for their beliefs clearly and openly. But the government, ostensibly, doesn't claim that it's among them. The government, in its public rhetoric, claims to care for the economic wellbeing of women. It claims to care about regional Australia. It claims that its package will incentivise aspiration and convince people to work longer and harder for more. It claims that the package is about fixing bracket creep for ordinary Australians, not about reducing the tax burden for the well-off. But the problem for the government—and it is a problem—is that none of these claims are really true.
This government is stuck defending a package that its far-right base and its donors desperately want, and it's stuck defending the package using arguments it doesn't really believe. If the government wanted to, it could put tranche 1 of its plan up for a vote tonight and this Senate would deliver tax relief for millions of average Australians—Australians that those on the other side claim to care about. But if the government's not going to do that, it should be honest. It should be honest with the Australian public about its actual reasons for wanting a less egalitarian, less progressive tax system.