Interview with Kieran Gilbert – Sky News AM Agenda – Wednesday 30 March 2016






SUBJECT/S: State income taxes


KIERAN GILBERT:  This is AM Agenda, with me now the Shadow Communications Minister Jason Clare. Jason Clare thanks very much for your time. The tax debate about giving the States some responsibility – we’ve heard from Ed Husic, he’s saying it’s double taxation reviving the language used by Neville Wran in the ‘Wranslide’ election of ’78 I’m told, when Malcolm Fraser had a similar proposal. Isn’t it about trying to make the thing more efficient given we’ve got more than a hundred special payments between the Commonwealth and the States right now?  


JASON CLARE, SHADOW MINISTER FOR COMMUNICATIONS: Kieran I think it’s a bad idea. We got rid of this in the 1940’s because it is more efficient to get the Commonwealth to raise this revenue and set it as a standard right across the country.


I think the incredible thing here is that six months ago the Prime Minister and the Treasurer were floating the idea of cutting income tax. Then a couple of weeks ago they shelved that and said they won’t be able to deliver income tax cuts in this budget and now there is the prospect of six new state income taxes. I think anyone who hears that today, right across the country will be pretty angry to hear that a Government that was going to cut income tax is now talking about increasing it.  


GILBERT: Although it would be, from what I understand it, the idea is that the Federal Government would reduce its rate of income tax and then allow the States to fill the gap in order to give the States a more sustainable revenue stream as opposed to the less predictable GST that’s the argument isn’t it? 


CLARE: Well we haven’t heard that. We haven’t heard that the Government is going to cut income tax. Two weeks ago we were told that they weren’t going to do that. Last week we were told instead that they were going to cut company tax. So for Australian workers out there that were told that they were going to get an income tax cut and now are told that the company they work for is going to get a tax cut and they’re not, but instead they are going to get slugged by their state governments for more income tax – I think people would think, what the hell is going on with this Government. One minute we are getting tax cut, the next minute we are getting a tax increase.


I am hoping that the Treasurer will come out today and rule this bad idea out. Tony Abbott ruled it out. Tony Abbott said it was a bad idea to go this far back into the past, back to the 1940’s. And this is the bloke who brought back knights and dames. So if Tony Abbott thought it was a bad idea to go back to the 1940’s and drag up this old taxation system, hopefully Malcolm Turnbull and Scott Morrison do as well.    


GILBERT: We are going to hear from Scott Morrison shortly, the Treasurer is going to be speaking in Sydney in the next few moments. Before he does I want to ask you about the Committee for Economic Development of Australia – CEDA as it is known, their paper, their presentation yesterday which basically pointed out that a balanced budget could be achieved within the forward estimates on May 3, on Scott Morrisons first budget, if the Government does undertake the various measures that are being discussed right now, without seeking to cut tax. That would be a good outcome for the Government if they were able to do that, would it not?


CLARE: It’s a very significant report written by very eminent Australians, two former heads of the Prime Minister’s Department and a former Cabinet Secretary under John Howard. Their report effectively says that the Government should implement the policies that the Labor Party has been proposing for the last twelve months. The changes to capital gains tax, the changes to negative gearing, the changes to the way in which superannuation is taxed, the changes to tobacco excise – the report backs all of that.


These aren’t cheerleaders for the Labor Party, they are senior former public servants, senior people who have worked for conservative governments that have backed in the policies we have proposed and they make the point that if you do all of those things you can still keep revenue to less than twenty-four per cent of GDP. It is a very strong endorsement of the policies that Labor has put forward, and once again I’d encourage the Government to push politics aside, if you ae not prepared to listen to the Labor Party, listen to these gentlemen and back these good ideas.  


GILBERT: They are also arguing something the Government is looking at, which Labor hasn’t done and that’s reducing work related tax deductions. Should Labor do the same thing? Take your own advice.


CLARE: I would encourage everybody to run a ruler over all of the different ideas that are put forward in this proposal. The Government in its committee work has said that it would look at this but we haven’t seen any evidence that they are going to go down this path. We’ll have to wait until the budget to see whether they are going to take action in this area.


GILBERT: A tax cut is that something that Labor is contemplating ahead of the election, we haven’t heard anything from Labor on that front?


CLARE: That’s a question best asked to Chris Bowen who leads our economic team but the point I would make is that if you tell the Australian people that you are going to give them an income tax cut and then you turn around and increase income taxes by forcing the States to do it and at the same time cut company tax for big multinational companies in Australia, then good luck selling that to the Australian people. There’ll be a lot of people that will be very angry, that will have had a gut-full of this government and will send them a very, very clear message on election day, whether that’s the 2nd of July or any other time. 


GILBERT: Isn’t the problem that we’ve got at the moment that the States are the spenders where as they don’t have the capacity to generate the revenue themselves, therefore there is not the accountability for them to be as efficient as possible therefore they’ve always got their hand out for more money. To put it simply that’s the problem in the Federation right now. 


CLARE: Kieran I’ve heard you ask this question a number of times this morning. Don’t misunderstand the way that money is provided by the Commonwealth to the States for health funding. It’s not a blank cheque, it’s not a block grant. Money is allocated based upon an assessment of what’s the efficient price to do a procedure in a hospital and if the cost to the hospital, if the cost to the state of doing that procedure in the hospital is more than that set price then that burden is worn by the States and it encourages the state and the hospital to be more efficient in the way they do things. So there is an accountability mechanism and it’s a reform that was put in place by Labor and I see in the newspaper today that the Government is saying that they’ll keep that in place and that’s a good thing because it makes the state governments accountable for what happens in our hospitals.


Overall Kieran, we are one country, we’ve got one Medicare system. People want to know that if you get sick and you’re in Tassie, Queensland, New South Wales, WA or anywhere else that all of our hospitals are going to provide a first class service and if the level of service in our hospitals depends upon how much you slug tax payers in income tax in different States then I think that’s a retrograde step.             


GILBERT: What about the comparisons with Canada though where you apparently have a situation where the different States are able to increase or reduce as the case may be their income tax and therefore have a more competitive situation between States in terms of attracting business and investment?  Is that not a good idea?


CLARE: Kieran you could make the same assessment of the United States where there is state based income tax. I don’t think either of those approaches is a good idea. I think a better approach is to get the Commonwealth to raise that revenue. We made that decision back when World War II was still raging when we had troops in Papua New Guinea fighting the Japanese. Now if we want to go back to a system where we are slugging people different income taxes based upon which side of the border you’re on, I think that we would be making a very, very big mistake. I think it’s bad policy, I think it’s bad politics too because I think the Australian people would hate the idea that not only is the Commonwealth Government in Canberra taking money out of your pocket every week but the state government’s got their hand in your pocket as well now.   


GILBERT: Ok we’ve got to go but thanks for your time this morning.