The Limits of Low-Tax Social Democracy? Welfare, Tax and Fiscal Dilemmas for Labor in Government

The Australian Labor Party, following its election to government in 2007, has implemented an ambitious social policy agenda with spending on hospitals, pensions and community workers, as well as programs for parental leave and disability. It has also reformed taxes, in part to finance these reforms, implementing the mining and carbon taxes in 2012. Labor, however, has difficulty avoiding deficits because tax revenues are too low to finance expanded welfare. This article explores the political constraints and opportunities involved in financing welfare by examining voter responses to the ANU Poll of September 2011. Spending on welfare is supported by low-income earners, while taxing big industries finds greater support among university-educated voters. The article advances an explanation for this mismatch and for why tax resistance has hindered Labor's efforts to finance welfare expansion.