Tim Wilson, the shadow treasurer, is actively fighting Labor's proposed reduction of the capital gains tax discount and the abolition of negative gearing on existing properties. However, as Treasurer Jim Chalmers pointed out in parliament, Wilson's own 2020 book, The New Social Contract, advocates for similar changes.
In the book, Wilson writes: "Capital gains from appreciation of having and holding assets are taxed at half the applied rate, effectively entrenching the benefit of having and holding assets that can only exist if you are established. There is no intergenerational justice in such preferential arrangements." While the capital gains and negative gearing changes passed the lower house last week, they still face the Senate.
Labor Must Be Clear About Its Purpose
When Wilson was appointed shadow treasurer earlier this year, Chalmers criticized his "dangerous ideology," citing his lack of support for Medicare, penalty rates, superannuation, and work-from-home arrangements. By quoting Wilson's book, the treasurer defended the budget's modest attempts to shift the balance between taxing labour and capital and to create a more level playing field.
Chalmers could have also quoted: "Favourable treatment should not be extended to income derived from the holding or investment of capital that is principally beneficial to established interests. Indeed such income should be treated consistently with the income derived from labour and the application of skills." This would seem to support the budget's proposed changes to capital gains tax and negative gearing.
Intergenerational Injustice
Wilson's book argues for a far more radical overhaul of the taxation system than the budget advocates, including an increase in the goods and services tax and a rethink of the preferential treatment of the family home and superannuation. Referring to age-related benefits and tax-free superannuation, he writes: "There is a lack of intergenerational justice when those who have had the opportunity to hold (and do hold) the wealth of the nation are paying lower tax rates while having the most redistributed to them by the taxpayer." He points out the direct transfer of wealth from younger people who are "having a go" to older ones who have "had their go."
Wilson also worries that more Australians are relying on their parents for help in buying their first property, entrenching privilege. This, he argues, breaches Australian liberalism's promise of equal opportunity. However, he stops short of recommending an estate or inheritance tax to weaken the effects of inherited privilege.
What Is the 'New Social Contract'?
Wilson's book argues that small-l liberals need to offer Australians a social contract that places individual interests at the core of government, focusing on decentralizing power and increasing home ownership. He says liberals need to restore the balance between freedom and justice after neoliberalism tilted it too far in favour of freedom: "We need to rediscover the place of justice within a liberal world view … that leaves neoliberalism behind." He analyses justice in terms of equality of opportunity and intergenerational equality, invoking the British philosopher Isaiah Berlin's distinction between negative liberty (absence of constraint) and positive liberty (conditions for people to be free to live their best life).
The politician is to be commended for his effort to think hard about what liberalism means in today's society, but his book has one glaring fault.
Labor Shares Many Liberal Values
Wilson is right that liberalism is Australia's foundational political philosophy. He makes good use of David Kemp's five-volume history of Australian liberalism, but he writes as if the Liberal party were its only vehicle. There is little explicit discussion of the Labor party, and Wilson's book argues that socialism and centralised planning are the opposites of liberalism, but its unspoken assumption is that Labor supports both. However, the Labor party shares many liberal values with its opponent, and it always has. Apart from a few prewar radical socialists and communists, both sides of Australian politics have always supported civil liberties, private property, and a mixed economy. Where they have differed is over the balance between private and public provision and the role of the market versus government in resource distribution.
Overwhelming Resentment Damages Societies
There is plenty of scope for fruitful policy debates. For example, Wilson puts forward plausible arguments against compulsory superannuation for people who can't afford a house. But the Liberal party needs to respond to the Labor party as it is, stopping its lazy demonising of Anthony Albanese's Labor government as socialist. Wilson approvingly quotes Adam Smith: "While individuals can disagree, if they have a continuing interest in the way their interests are advanced by the existing order, then the disagreement will never escalate to risk the legitimacy of the existing order … Society struggles when resentment becomes so great that differing parties no longer share a common interest." On paper, Wilson is thoughtful. In parliament and on the hustings, his performative outrage overwhelms his thinking and his capacity to contribute to good policy development.
Judith Brett is emeritus professor of politics at La Trobe University. This article was originally published by the Conversation.
