Shadow treasurer Chris Bowen says the Labor Party will not take a "Buffett rule" to crack down on wealthy tax avoiders to the next election, setting up a showdown with elements of his party who believe such a policy would help counter the rise of populist parties like One Nation.
In a decision that puts Mr Bowen and Opposition Leader Bill Shorten at odds with the Left of Labor, Mr Bowen ruled out supporting the push, revealed by Fairfax Media on Wednesday.
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Tax the rich?
It's named after US billionaire Warren Buffett - a proposal that the ultra-wealthy pay a minimum rate of tax.
Under the plan, adopted by the national Left faction over the weekend, the highest-income earners in Australia would be forced to pay a mandated minimum rate of tax - most likely 35 per cent for those earning $300,000 or more a year - discouraging the pursuit of tax loopholes and aggressive tax planning.
"This approach isn't the best way to address inequalities in the system. A Buffett rule won't be something we take to the next election," Mr Bowen said.
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"The Buffett rule is an idea that has application to the United States tax system, not the Australian tax system, and wouldn't be an appropriate answer for the Australian tax system."
The Buffett rule is named after American tycoon Warren Buffett, who said it was wrong that his secretary paid a higher percentage of income tax than him simply because he could afford better accounting advice.
A Buffett tax, which could raise $2.5 billion in extra revenue a year, is being pushed by the Left as a way for progressive politics to get back into the space currently being dominated by One Nation.
The plan is likely to have the support of a majority of ALP members and sets up a collision between the rank-and-file base and the parliamentary leadership.
A senior figure on the Left pointed out on Wednesday that both Mr Bowen and Mr Shorten and their Right faction had voted to adopt a Buffett rule into Labor's tax platform under "future tax reforms" at the 2015 national conference.
A Labor frontbencher said the issue would likely be discussed in the caucus room next week, with many on the Left shocked at how aggressively the idea was put down by Mr Bowen with the imprimatur of Mr Shorten.
"This is something that would cauterise some of the appeal of One Nation and make two important points: one, that a Labor Government has solutions to the problems people are talking about and. two, One Nation's solutions are absolute crap," the source said.
One Nation advocates a two per cent flat tax on everything.
The Left has asked Labor's upcoming national policy forum, made up of parliamentarians, union officials and rank-and-file members, to consider progressing a Buffett rule as a priority before a likely debate at national conference next year and that will still happen despite Mr Bowen's intervention.
The shadow treasurer said it was better to work on existing concessions that favour high-income earners.
"Labor has shown we're serious about cracking down on tax concessions that benefit high-income earners. We have policies on superannuation, negative gearing and capital gains that ensure our tax concessions are made fairer and sustainable," he said.
The Greens adopted a Buffett rule as policy in 2016 and leader Richard Di Natale said on Wednesday that Labor should follow suit.
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