A funny thing happened on the way to the tax forum
The tax forum has been and gone. There were no grand visions adopted, not even neoliberal ones. Business argued for tax cuts and more rent seeking tax concessions. Unions pointed out we are a low tax country and that business did not come to the Forum with clean hands. The neoliberal visionary, Ken Henry, talked about the conference being predictably scripted. Except the unions are right.
The failure of Labor to progress real and progressive tax reform (as opposed to fiddling at the edges with business tax cuts and the like) highlights the bankruptcy of social democracy in Australia today.
Let’s go back to basics. Workers produce the wealth of society. The social surplus is something that various sections of society fight over. Unions (sometimes) battle with the bosses over the rate of exploitation, i.e. how much of the wealth workers produce goes to capital and how much goes to labour. In Australia the percentage of national product going to capital is at its highest and that to labour its lowest since records have been kept.
But capital and its creation, the state, fight among themselves for a share of the surplus we create – financiers against productive capital, service capital against the State etc etc.
The State however depends ultimately on the successful exploitation that productive capital carries out of its workforce to produce the surplus. So its role is ambiguous - it wants to take some of the surplus without actually upsetting those whose domination over workers are able to steal that surplus.
Labor in the past has been able to implement reforms for the benefit of captial for two reasons. As a party partly of the trade union bureaucracy it has less strong links to particualr sectiosn of capital. So it could once deliver reforms for the capitalist class as a whole while at the same time alienating sections of it. Tariff reforms and floating the Australian dollar come to mind.
Because of its indirect links to the working class it can more easily sell those pro-capitalist reforms to the class, often in terms of jobs and increased living standards.
Labor’s backdown on the Resource Super Profits Tax calls into question its ability to introduce tax reforms for all of capital at the expense of sections of it. The main beneficiary of the RSPT would have been big business and incorporated small and medium businesses. Labor would have redistributed super profits from mining companies to less profitable sectors of industry. This was an attempt to address the low and stagnant profit rates in those sectors of society.
In the face of a concerted scare campaign from mining companies, the ALP dumped the Prime Minister and introduced a new, narrower resource rent tax negotiated with the big 3 mining companies.
This back down shows a timidity to rule for capital that goes beyond mere capitulation to powerful section of the ruling class this one time. It shows to my mind an abandonment of the social democratic role of Labor, or perhaps more accurately it highlights the abandonment of social democracy by Gillard Labor.
That is why the Tax Forum – an idea foisted on Labor by one of the Independents as part of the deal to support the Gillard Labor Government - was not gripped with enthusiasm for big picture reform, let alone progressive reform.
Labor’s vision remains in the gutter of business tax cuts and business tax concessions.
They have trumpeted increasing the tax free threshold from $6000 to a possible $21000. But that will be paid for by reducing or abolishing the low income tax offset. That offset moves the effective tax free threshold currently from $6000 to $16000, and under an earlier proposed change, to over $21000. So it looks like this magnificent change to the tax free threshold is in fact a pea and thimble trick. (I’d have to check the figures but just having got out of hospital my mood is not really amenable tonight to that).
Something else too. Rich tax payers benefit more from an increase in the tax free threshold than low income earners, and those below the threshold limit don’t benefit at all.
The neoliberalism of tax has infected groups like the Australian Council of Social Services. A quote from Peter Davidson, a senior policy officer with ACOSS, in today’s Australian Financial Review summed up the all pervading influence of neoliberalism in the tax debate. He said that $5 billion could be saved by closing shelters and loopholes associated with self-education, offsets for medical expenses, the education tax refund and senior Australian tax offset.
Now some of these might be worth looking at because they may go and do go disportionately to the rich. But to be frank there are much bigger fish to tax.
According to Australian Tax Officer Deputy Commissioner Jim Killaly, between 2005 and 2008 40 percent of big business paid no income tax. Nothing. Zilch. Zero. That figure will be higher as a consequence of the Global Financial Crisis when big business utilise losses arising then against income today. Minimum company tax anyone?
The ATO has been losing case after case recently in the Courts over the application of the general anti-avoidance provision Part IVA. The Courts are destroying its effectiveness. Fixing that up would yield billions from the tax bludgers.
As I have mentioned previously, according to Treasury, in 2010 there was about $113 billion in revenue foregone through exemptions, extra deductions and the like. Tens of billions of these disguised grants go to business.
There is no analysis of the effectiveness of these grants, no outcry about the secrecy attached to them, nothing. Getting rid of the grants to the business tax bludgers, those sucking on the teat of the tax system, could wipe out the budget deficit overnight, provide money for decent hospitals, schools, transport, nurses and teachers and easily cover the cost of equal pay for community sector workers, 80 percent of whom are female.
A businessman, Mark Carnegie, suggested that the wealthiest should pay an extra 15 percent in tax to ease growing inequality. That great union man and Labor icon, Bill Shorten, shot the idea down. Labor’s social democracy is dead.
Readers might also like to look at How about taxing the rich instead?