ALP To The Fore, Duel The Dual System

The following opinion piece by AWU National Secretary Bill Shorten was published in The Australian Financial Review on December 22, 2005

I am 38 and before my 50th birthday, I hope to have seen the election of Australia's first independent head of state and to have celebrated at least three more Collingwood premierships. I know these might be pipedreams.

What I do think more probable is that, before my 50th birthday, our rotten tax system will have been abolished.

As Wayne Swan and Lindsay Tanner have recognised, our two-class tax system is too unfair to survive.

It is riddled with exemptions, concessions and deductions that are explicitly designed to favour particular types of income or expenditure.

We don't have a progressive tax system in Australia. Our tax system is bell-shaped.

It is a rotten system and who is it most rotten for? The people who earn less than $85,000 a year and who pay 85 per cent of all income tax.

Our tax system rewards avoidance and evasion. Minimisation, negative gearing and concessional capital gains are devices available to the few, not the many.

Just this month we have seen the Australian Taxation Office give up its fight to pursue husband and wife income-splitting arrangements designed to lessen the couple's tax bill.

These tools are not accessible to members of the Australian Workers Union and other ordinary working Australians.

Tax reform is a union issue. If you are a union member, paid under a union agreement based on a union award, you won't have corporatised yourself into a contractor. The dual system creates incentives to opt out of the agreement/award/pay as you go system.

These incentives also decrease the likelihood of unions. I have witnessed Joe Bloggs, fitter, opt out of one tax system to become Joe Bloggs, corporate, in another tax system.

I make no apologies for talking tax reform. Go explain to steel workers, building workers, metal workers why they are paying more and more tax, while others pay less and less.

I make no apologies for wanting the Labor Party to champion tax reform with base broadening and lower marginal rates.

The best way of achieving a simpler, progressive income tax structure is by lowering everyone's rates and ensuring that those on the lowest incomes, with the highest effective marginal tax rate, benefit as much as a proportion of their income paid as higher-income earners.

Tax shelters are not worth the trouble when tax rates are low and the threat of prosecution is high. But evidence does show that tax shelters and advisers start to look attractive when rates rise above 40 per cent.

If Labor folk worry about the 48 per cent top rate and not the fundamentals, then this is not a debate of the true left.

Tax and economic management are the two journeymen issues of Australian politics.

We do not stand in Labor for merely these two issues but we cannot succeed without them.

We should remember the past.

The federal ALP won five elections with seven tax cuts. In 1996, when the ALP did not complete the L A W tax cuts, the ALP lost the sixth election.

Remember well, that the ALP, between 1983 and 1996, introduced tax imputation, brought in the capital gains tax and delivered seven personal income tax cuts. And with tax reform came a real package of reform for working families.

The tip of the iceberg in tax reform is the top personal rate. The real bulk is the unfair tax system.

Bob Hawke and Paul Keating never got stuck on the tip of the iceberg. True progressives focus on change - real change.

Would we have had compulsory national superannuation if we had kept our eyes on the past?

And if you think my proposition is silly, close your eyes and reflect where we would be if we had advocated the radical overhaul of our unfair system at the last election - certainly we would not have lost the Senate with all of its disastrous consequences in industrial relations.

Every time we don't grab the intellectual leadership, every time we remain at the rear of the ideas queue, we lose.

We should never wait to react or do the coalition's bidding in the debate about ideas.

We should learn from our successes during the Hawke and Keating era and never sit back.