Labor's 'Son of Fightback!'
The Catholic bishops have accurately described the Keating government's budget as "Son of Fightback!". It introduces indirect taxes that hit low- and medium-income earners the most and lavishes the largest cuts in direct taxes on the rich — following earlier cuts to company tax rates. This, at a time when corporate profits have nearly returned to their 1989 record high and wage levels are depressed. In the face of more than a million unemployed the budget slashes $690 million from job-creating investment in public infrastructure projects and threatens to force some 20,000 people off the dole by tightening the restrictions for the long-term unemployed.
Just five months ago Prime Minister Paul Keating won an election on the basis of overwhelming public rejection of John Hewson's Fightback! policy — the Liberals' plan to introduce a goods and services tax (GST). Keating's fiery denunciations of the GST are now exposed as sheer hypocrisy and a cynical attempt to sucker Labor's hapless "true believers".
Today the Liberals are equally hypocritical — though accurate — in opposing Labor's tax changes as inequitable. At the same time they argue that the GST would be better because it would have reduced the immediate burden of indirect taxes on businesses.
Hewson tried to disguise the inequitable effects of Fightback! with a range of measures said to compensate lowincome earners for the effects of the GST. Labor has tried to do something similar. In addition, it has tried to sell its increase in fuel taxes as an environmental measure. But in the absence of a dramatic reversal of the ongoing attacks on public transport, this will not significantly reduce pollution.
The Labor government used a sophisticated Treasury computer to convincingly demonstrate the inequitable income effects of the GST. But a similar computer analysis of the Labor budget's tax changes, carried out by Dr Neil Warren of the University of NSW, have proved damning. He found that 50% of households will lose an average of $560 per year while the richest 10% of households (which already own more than 50% of the nation's wealth) will be $4900 a year better off. And this is before Keating's promised but deferred income tax cuts for the rich come in!
The regressiveness of the tax changes will further deepen because the indirect taxes will continue to rise after this year — which is why it has been called a "creeping GST".
Regressive taxes were not the only reactionary aspect of Hewson's Fightback!. Hewson also threatened some $9.6 billion of spending cuts which would have destroyed Medicare and further ravaged the welfare system. However, Keating's promises not to further cut expenditure lack credibility because he has made two promises he wants to keep:
- Reducing the $16 billion deficit within the next three years to 1% of GDP.
- Delivering the second tranche of income tax cuts (aimed at the highest income earners).
The WA Greens and the Democrats are right to use their "balance of power" in the Senate to try and stop Keating's reactionary budget. But they have only limited bargaining power with the Keating government, especially as a double dissolution may cost them their seats too. Without a campaign to mobilise opposition in the streets, the WA Greens and the Democrats will only win token changes to the Son of Fightback!