Tax and wealth after the election

Submitted by Janet on 3 June, 2019 - 10:13 Author: Janet

Dick Bryan spoke to Janet Burstall for Workers'Liberty about Labor's tax policies and the federal election results. Dick researches the significance of financialisation, for capital, labour and households. He is Emeritus Professor of Political Economy at Sydney University and co-author of the book Risking together.

Q: Is it possible that policy changes initiated by Labor in the 1980s and 1990s (and then built on by Howard) that were designed to increase household savings and their financial exposure, have altered the perspectives of traditional Labor voters on taxes targeting wealth? If so, how?

A: Labor Government policies of the 1980s and 90s generated a critical turning point in a number of ways. Some would say that these governments performed the transformations of Thatcher and Reagan, but with trade union support! I think thats a bit cynical, but nonetheless by the early 2000s Australia, the US and Britain had all turned in the same direction. Howard was, in critical senses, a continuum of this agenda, but was able to take up the right-wing turn for which the Labor governments had built the preconditions.
But in Australia, major reforms came with the inclusion of trade union support, and superannuation was central. Its effect was indeed to change savings culture, and in complex ways. On the one hand, households became critically and increasingly invested in the performance of the stock market via compulsory investment there. Another was that households took on debt, in the knowledge that part of their wages were already going to compulsory savings through superannuation. But the effect of engaging debt, especially from banks pushing loans, was that households became vulnerable to variability in income, in interest rates, in house prices, etc. In these circumstances I think people can readily become anti-tax - they would rather have the money in their own pockets to meet their financial obligations than pay more tax in the hope of benefits from improvements in health and education, etc. The tax is seen as both compulsory and unaffordable. The promised social expenditures are seen as hypothetical and unpredictable.

Q: Some prominent Labor figures have criticised Chris Bowen's tax reform package as too radical. How would you assess that policy package?

A: It is interesting what the word 'radical' means in this context. The tax reform package was perhaps radical in the sense that it gestured at challenges to the wealth of the wealthy. And I think that this intention needs to be acknowledged. But it was gestural in terms of real reform in wealth distribution. So it is interesting how, in the public relations exercise (election campaigning), the Labor package could be condemned as an assault on 'ordinary people'. It's a positive sign that the right didn't feel it could defend the rights of the rich; it's an alarming sign that they didn't need to!!
So the analysis could get strategic at this point: how could Bowen have put grandfather clauses on policies; caps on tax increases, etc. so as to minimise the critique. For those of us who want the nature of capitalism itself to be an issue for open discussion, it is good that he didn't dapple in these softners more, but oddly un-strategic. I think Bowen landed in that space where a (slightly) reformist set of policies needed to come out of a bigger reframing of debate in Australia: to make talking about class and wealth, and how wealth is acquired more a part of mainstream discussion. Thinking you can just introduce these issues in an election campaign and not get push-back is odd politics.

Q: What are the prospects for reforms to make the taxation system more progressive? What might make them both more appealing to voters, and worthwhile?

A: I think if politics starts with tax levels and what is fair, it is hard to build a successful politics. It is, as we have just seen, too easy for those who will lose from reforms to wheel out cases of people who are not wealthy who will be disadvantaged by the changes. Tax must be the policy consequence of an alternative reframing of how society and the economy work differently for the wealthy and those on high incomes from how it works for those who are poor and on lower incomes. Tax cannot be the starting point of debate. Unless we challenge the underlying processes, it is too easy for the right to open issues like the deserving, hard-working, self made rich person in contrast wth the un-deserving, welfare-scheming poor, etc. as if these cases are representative of their 'class'.
I think that this recent election in Australia, like that of Trump and the Brexit referendum, suggest that we need to re-think class in relation to politics. Working class people angry with their displacement will vote for disruptions that may not be progressive. People on low incomes, and especially volatile incomes, and people with high contractual commitments (especially debt) will vote for tax cuts because they want money now, not state services in the future, and they don't trust the state to deliver.
So really tax is the tip of the iceberg. How to deal with people's experiences of volatility and insecurity, without making promises that we can initiate policies to go back to the forms of job security (for white men!) of the 1970s, is critical, I think. I sense we are in an era of significant change, where there is diminishing trust in the state to deliver benefits, security and stability. Accordingly, the very legitimacy of even current levels of tax is under challenge. Turning that around is not (particularly) about making the state bigger, at least not before we have seriously reconsidered how the state can play a supportive role in the emerging new era.

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