The proposition that the Howard Government is responsible for the current deficit annoys the hell out of me. As I understand the argument, Howard and Costello irresponsibly granted tax cuts in a boom time with no regard for the fact that future governments might want the extra revenue.
What’s really at the base of the argument is the view that a cut to income tax is an indulgence to the population as distinct from an acknowledgment that government should only collect what it needs. In the world of The Australia Institute’s Matt Grudnoff, tax cuts, once granted, are permanent and therefore wrong. No chance that a subsequent government, faced with different circumstances, might raise taxes to deal with an emergent crisis.
Similarly, there is no allowance made for the fact that the Gillard Government has embarked on major spending which could hardly have been contemplated in the Howard era. I’m thinking of Building the Education Revolution and Gonski and the NDIS.
It also puts at nothing the stimulus effect of those tax cuts. It was reasonable to spend tax dollars after the GFC as an economic stimulus measure, but completely illegitimate to leave money in the hands of those who owned it so that they could spend it in the economy. If the tax cuts had not been delivered in the Howard era, how much more would have to have been spent on stimulus to get the same result? How much more company tax was paid as a result of companies becoming more profitable due to lower pressure to raise incomes?
Last year, as part of the ridiculous Carbon Tax compensation scheme, the Labor Party was happy to put up taxes on higher income earners. If they had thought it necessary or desirable, they could have gone further. They didn’t, of course, because they are craven and they would have hurt too many of their own supporters.