In an already difficult post-budget week, Labor isn’t being helped by some of its “friends”. But it has won an important endorsement from one powerful voice.

NSW Labor premier Chris Minns was perhaps the least helpful to his federal counterparts.

He echoed opposition leader Angus Taylor’s call for more to be done on “bracket creep” and took aim at the 47 per cent top marginal tax rate. 

“It’s a tough burden for a lot of families,” he said, requiring them to work half the week “for the government”.

“That’s not how marginal tax rates work,” an unimpressed Treasurer Jim Chalmers shot back.

The last NSW premier to suggest the feds cut income tax, the Liberal’s Mike Baird, at least proposed an increase in the GST to pay for it.

By contrast, Minns clearly reckons the changes to investment taxes should rake in more than enough to do the job.

And he’s not alone.

Allegra Spender, a fellow traveller with Labor on the need to wind back investment tax breaks, agrees a bigger tax cut should be offered to workers.

“If you are going to increase taxes, you need to give all of that back as lower marginal tax rates,” the independent MP told Radio National.

The debate is not easy

Clearly, a bigger income tax cut would make life easier for the government as it tries to sell changes to negative gearing, capital gains tax and trusts. But inflation is running too hot right now to tip more money into the economy, and the prime minister clearly wants to wait until closer to the next election anyway to fire those tax cut cannons.

Instead, the government is discovering what spending political capital looks like. It’s not pretty.

The prime minister and treasurer are trying to talk up their efforts to help young home buyers but are instead copping endless questions about the impact of their changes on non-property investments.

From social media memes to open letters of complaint, the government has been on the backfoot.

Chalmers said he wanted a debate on the “substance” rather than the “politics” of broken promises in the budget. He’s getting that debate now and it’s not an easy one.

The treasurer keeps promising changes will be made to better protect start-ups, which have been the focus of most complaints. Those changes can’t come soon enough.

After framing this as a budget to tackle intergenerational inequity, Labor so far appears to have upset at least some young Australians dreaming of turning a side hustle into a booming business.

‘The biggest gift’

On the other side of politics, the Coalition can’t believe its luck.

“This is the biggest gift we’ve had in four years”, said one Liberal frontbencher. The comment reflects the glimmer of optimism the fallout from this budget has created in the demoralised ranks of the Coalition.

Never one to be accused of understatement, Shadow Treasurer Tim Wilson framed the tax changes in his post-budget address to the National Press Club as an “economic earthquake” that would “kill aspiration”, forcing young Australians to lose hope and even flee the country.

With senior Liberal moderates watching approvingly from the audience, Wilson notably avoided wading into debates over migration and transgender rights, as Angus Taylor and others have done this week.

Wilson’s vision is for a Liberal Party revival built on aspiration and small business, rather than chasing One Nation around the “orange paddock of despair”.

But the danger for all in the opposition is over-reaching in the excitement of a tax debate.

Picking up on the viral memes about business owners being smashed, Wilson cited the example of a successful teenage entrepreneur selling skincare products online, who has now discovered she has “a shareholder who wants to take half the reward for her effort”.

But when pressed if this young businesswoman really would be any worse off under the government’s changes, Wilson had to concede he wasn’t sure. It would depend on the details and was a “hypothetical” scenario.

Some high growth investments will be worse off under the new CGT rules, but not all businesses will see dramatic change.

And exemptions and concessions for small business will remain in place.

The government has not looked well prepared for where the post-budget debate has gone and is still working out what to do about the tax treatment of start-ups.

But despite all the noise, Labor still thinks it can convince voters of the bigger point.

It’s seeking to rebalance the tax system to shift benefits from wealthier investors to give the vast bulk of workers a better deal.

Loading

A high-profile friend

And at least there’s one friend Labor can rely on in this battle.

Paul Keating may be no fan of the government’s approach on AUKUS but has given a big tick to its effort to return capital gains tax to a regime much closer to the one he introduced.

“The simple fact is that income is taxed too heavily while capital is taxed too lightly”, the former prime minister says in a statement.

Defending the rules he first put in place in 1985, Keating says the changes made by “a couple of smarties, John Howard and Peter Costello” in 1999, to introduce a 50 per cent CGT discount “made housing unaffordable for a whole generation”.

“The point is, a society that fails to house its children is a society in decline — this is what Jim Chalmers and his prime minister are seeking to arrest”, he says.

In the heat of a difficult debate, it’s an endorsement Labor needs from someone with more tax reform cred than some of its other critics.

David Speers is national political lead and host of Insiders, which airs on ABC TV at 9am on Sunday or on iview.