Hewson's View | Tax cuts only worth it if the money is used for the greater good

This week our political leaders have spent their days on what is disrespectfully called the “Dog and Pony Show”; that is, traveling far and wide attempting to sell the messages of their budget and reply delivered last week.

The week began with mixed messages from the latest, post-budget, polls that recorded a significant difference in their poll standing. The Newspoll had the Government behind 49/51 on a two-party preferred basis, while the Fairfax-Ipsos poll had the Government well behind 46/54.

SURVEY SAYS: Post-budget polls show that many voters expect to be better off, but they only support the government making tax cuts when they use the money well.

SURVEY SAYS: Post-budget polls show that many voters expect to be better off, but they only support the government making tax cuts when they use the money well.

In the Newspoll Turnbull had increased his lead as preferred PM from 3 to 14 points; he enjoyed a 20 point lead in the Fairfax-Ipsos poll, but that was down 1 point since the last poll.

Interestingly, in the Newspoll, only 29 percent of people said the budget would make them better off (27 percent worse off); while in the Fairfax-Ipsos poll 38 percent thought they would be better off  (25 percent worse off) – this was the highest rating in perceived personal benefit since 2006.

In terms of key budgetary policies, the Ipsos poll found some 57 percent would prefer the government to use the extra money to pay off debt; only 37 percent would prefer it to be used for tax cuts. Most tellingly, it’s the Coalition voters who feel strongest about this – 68 percent prefer a smaller national debt than a tax cut. It was also the view of a majority (52 percent) of Labor voters, and 49 percent for Green voters.

This confirms a mountain of other evidence that voters are prepared to vote for the greater good of the country ahead of narrow self-interest – people seem willing to make personal sacrifices for the good of the country. So, to vote for tax cuts they have to be seen as essential to the national good.

This polling therefore raises serious questions about the strategies and messages of both the government and the opposition.

The government’s budget focused on the $140 billion personal tax package, initially offering a mere $10 a week to low to middle income earners, with other cuts to flow in about six to seven years time, with a return to budget surplus next year. Labor offers nearly double the near term tax cut, also with a return to surplus next year, but with bigger surpluses moving forward.

Labor’s pitch is reminiscent of Rudd’s 2007 campaign, when he committed to be “more fiscally conservative” than Howard.

However, Labor is raising a lot of other taxes (via action on negative gearing, capital gains, trusts, and franking credits), and does not support the government’s company tax cuts for larger companies, which allows them to offer the larger personal tax cuts to low to middle income earners, as well as additional spending on education, training, and health. 

The Government’s response has been, predictably, to ignore the claim of greater fiscal conservatism, arguing that Labor is a high taxing, big spending alternative, with most of their additional taxes being on the wealthy, and the high-end corporates, which they label as the “politics of envy”, an attempt to wage a “class war”.

However, the focus of both sides on tax cuts, to offer cost of living “relief” to taxpayers, while small, and to be doubted until delivered, leaves the causes of cost of living increases – electricity and gas, school fees, childcare, housing and so on – ignored.

I suspect that the failure to deal with these basic issues, to offer solutions, to govern, will dominate the election campaign, be it the five bi-elections, or holding them over to an early election in August/September.

 – John Hewson