Journalists fall into the same trap as generals and politicians: they view the present war with blinkers imposed by the experience of past wars.
This has coloured the reaction to the Albanese Government daring to change tax arrangements on superannuation. There would be a major voter backlash, virtually every commentator argued. The horses would be frightened. Where would the slippery slope end, argued the Opposition – Labor will tax ordinary Australians to the hilt.
They pointed to how even a sniff or speculative reference to a tax rise of any kind meant political suicide. Fraser won 1980 on the suggestion that Labor might tax the home. Morrison won 2019 on Labor’s non-existent death duties.
On and on it went. New taxes or the threat of them, like the GST, franking credits, negative gearing and superannuation would bring voter retribution, they said.
But not this time, I suggest. It may have been true in the past but now, with these superannuation changes, the context has changed.
Let’s look at the history.
Most of the most egregious present tax concessions were initiated by the Howard Government: cash-back franking credits; capital-gains concessions; superannuation concessions; and private-health-insurance deductions. At the time there was a resources boom, so few minded.
Moreover, most people other than business owners and managers and their tax accountants took little interest in these things.
Howard then artfully constructed an image of inner-city, Labor-voting, latte-drinking, welfare-bludger supporters as being enemies of aspirational hard-working middle Australians families. The Howard battlers were born. The myth of small business as the backbone of Australia and the way to wealth was born.
Meanwhile, he poured money into private schools and private health. He added to that high immigration, particularly of wage- and union-suppressing semi-skilled workers.
Rudd-Gillard-Rudd more or less marked time, but Abbott-Morrison continued the legacy, especially with their first welfare-bashing Budget.
The overall reality, as distinct from the myth, became that wealth begets wealth. Lightly taxed share dividends, property, and superannuation became the path to wealth in Australia. Hard work remained a treadmill, not an aspirational path to wealth.
But after a quarter of a century of this, voters are waking up. They do not seem to be responding to the superannuation changes as they did to previous tax changes. They have responded less to the crazy exaggerations about marching socialism in the Murdoch press and more to incisive satire on television about struggling squillionaire superannuants.
Opposition Leader Peter Dutton and his shadow treasurer Angus Taylor have demonised these modest superannuation changes as an attack on middle Australia and a tax grab. Labor is “going after” your money, they said.
But middle Australians simply do not have superannuation balances above $3 million. The median balance of those between 60 and 65 is just $158,000. The median is the middle point with half the accounts less than this and the other half more.
At the other end of the scale, there are 11,000 Australians with more than $5 million in super, the Australian Superannuation Federation says. Only about 80,000 people have more than $2 million and 27 self-managed funds have more than $100 million.
In short, this change affects a mere half of one per cent of Australians.
The Coalition has characterised it as a tax grab. Not so. Rather it is a partial removal of a too-generous concession. That concession was aimed at encouraging savings for a dignified retirement, not for people to build up multi-million-dollar accounts to pass on to their children.
The tax on the earnings of these accounts will rise from 15 to 30 per cent – still a 17 per cent concession.
But the Coalition will be taking to the next election a promise to repeal these changes – not very astute.
Let’s take one of the 11,000 people with more than $5 million in their account. The (say, 6 per cent or $120,000) earnings on the balance over Labor’s $3 million threshold now attracts just $18,000 in tax. Labor would raise that to $36,000.
What are the hard-working middle Australian families to make of this?
The Coalition is deluded if they think they would applaud handing back the $18,000 to the multi-millionaire superannuant.
For a start, a hard-working Australian’s hard-earned wage of $120,000 would attract much more tax than the $18,000 tax on the unearned $120,000 of the multi-millionaire superannuant.
The reaction of middle Australia is more likely to be: “It is about time the bastards paid some tax.”
Indeed, far from fearing Labor “going after your money”, many in middle Australia might applaud “going after” extremely wealthy people’s money, often made on the back of tax concessions.
Indeed, many very wealthy Australians – such as Dick Smith – also agree with higher taxes on the wealthy – paying their fair share.
Critically, unlike in the past, the tax debate is happening in the context of years of declining government services – Medicare under impossible strain; public schools struggling while private schools wallow in money; and infrastructure buckling under the high immigration that only benefits big business.
In this new context, people are less likely to fall for a higher-taxes scare. More likely, they are likely to applaud a realignment in the tax system if it provides money for better services.
Dutton’s knee-jerk reaction to reverse Labor’s changes is a clear message to the electorate that the Coalition is on the side of tax breaks for the rich at the expense of government services for the many.
That message is the wrong one for the times. Moreover, the few people affected by Labor’s changes are unlikely to be Labor voters or if they are, they vote Labor for moral reasons and will not change because of changes in tax policy.
In short, now is the time to bring on fair tax, not shy away from it.
This article first appeared in The Canberra Times and other Australian media on 7 March 2023.