Grattan on Friday: Those tax cuts test Albanese and provoke Hanson

As hissy fits go, it was a beauty. Pauline Hanson was very cross indeed. Senate leader Mathias Cormann hadn’t called her, even though he was reportedly negotiating on the government’s $158 billion package of income tax cuts.

Venting on Sky on Wednesday night, Hanson said: “I don’t think he’s got the guts to pick up the phone and actually talk to me. And to turn around and say that he’s negotiating with crossbenchers is not the truth, because he’s not negotiating with me”.

She went on to rail about the Liberals preferencing One Nation below Labor, doing “grubby deals” with Clive Palmer and trying to destroy her.

The three-stage 10-year package, which promises an extra tax offset for low and middle income earners, is the big game in town for the first days of the new parliament, which opens the week after next, and it’s causing some grief for both sides.

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Despite the government’s confident words during the election campaign, the Tax Office has declined to pay the offset of up to $540 until the legislation is passed. This means the July 1 deadline from when the offset was supposed to be available will be missed. (Although people will get from July 1 the tax cut in the pipeline from last year’s budget.)

If the tax legislation is passed quickly, a few weeks’ delay for the offset is no big deal, especially as many people won’t be putting in their tax returns for a while. But the pressure on the government to deliver the first stage of its plan ASAP - not least because the economy needs the stimulus - reduces its ability to hold out indefinitely on its insistence it won’t split the package to accommodate objections to the later cuts.

Labor is in even more of a bind. It is happy to tick off the first stage - worth $15 billion - but has yet to decide its position on stages two (costing $48 billion and starting 2022-23) and three (costing $95 billion and commencing 2024-25).

Its objections are particularly to the last stage, which delivers cuts for higher income earners. Both the later stages come after the next election, due early 2022.

Those urging Labor should try to block at least stage three argue, apart from the equity issue, that mounting economic uncertainty makes it irresponsible to lock in such big tax cuts out in the “never never”.

On the other hand, a strong case can be made on grounds of principle and practicality for Labor to wave the whole package through.

The question of when a party or politician has a “mandate” is vexed.

On one view an opposition can claim it possesses a mandate to stay faithful to positions it advanced before an election even after it has lost that election.

But when the Morrison government went to the polls with the tax package as its prime policy, it does seem to have a strong case to say the parliament should pass it.

The same point would have applied if Bill Shorten had won. He would have had a mandate for his proposed changes to franking credits and negative gearing – both opposed by the Coalition.

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It doesn’t help maintain faith in the political system, or in election promises, for parties to try to govern from opposition, despite the Senate’s voting system sometimes facilitating this. Voters should be able to expect that major election policies of the winning side are implemented (perhaps with some alterations at the edges by parliament).

It is another matter when, as happened with the Abbott government’s 2014 budget, big new controversial initiatives are brought in soon after the election campaign, during which they were not flagged.

The practical reason against Labor going to the barricades on the tax package is that as it regroups, there is little to be gained by taking on this particular battle, especially when it is trying to reposition itself as appealing better to “aspirational” voters and leaving behind language attacking the “top end of town”.

Labor might be right that the proposed long term tax cuts could look irresponsible later, but if so, that is a fight to be had at the next election, when the ALP could highlight doubts it had previously registered.

There are divisions in Labor about what to do. Victorian MP Peter Khalil this week said if the government won’t split the package, Labor should vote for it all. Anne Aly, a backbencher from Western Australia, expressed concern about the package’s implications against a darkening economic outlook. The ALP has asked the government for more information. Anthony Albanese is consulting within the party before shadow cabinet decides the position it takes to caucus.

While the government is focusing the rhetorical pressure on Labor, it has an eye to the alternative route – to get the package through via the crossbench.

Read more: Coalition likely to have strong Senate position as their Senate vote jumps 3%

For Cormann, the new Senate is easier than the last, partly because the non-Green crossbench has been slashed at the election.

To pass legislation opposed by Labor and the Greens the government needs four of the six non-Green crossbenchers. These include two from Pauline Hanson’s One Nation, two from Centre Alliance, South Australia’s Cory Bernardi, and Tasmania’s Jacqui Lambie.

Bernardi will vote with the Coalition. He has said he wants to help the Morrison government as much as possible, and on Thursday he announced he is winding up his Australian Conservatives party. It’s not clear whether he’ll seek to rejoin the Liberals, from whom he defected in 2017, or even stay in the parliament.

Cormann has been in discussion with Centre Alliance about their push for lower gas prices, and an agreement on some action appears likely. While this deal is formally separate from the tax package, he and they both have that front of mind.

This would leave one vote to be collected.

Lambie refuses to comment on her position. Hanson said earlier this month she was “not sold” on the current package and “therefore not likely to support the measures” – and proposed some of the funds be used for a coal-fired power station and a water security scheme.

After Wednesday’s outburst, Cormann was (of course) on the phone to her at crack of dawn Thursday. On her account, he said: “I’m not negotiating with crossbenchers with this at all. We have our three stages. We’re going to pass that no matter what”.

The government aims to keep the heat on Albanese. By the same token, if the crossbench has to come into play, Cormann won’t want a repeat of last term, when he couldn’t muster the numbers to deliver tax relief to big companies.