Key points
- Costings by the independent Parliamentary Budget Office for the Greens show the tax cuts will cost $243 billion by 2032-33.
- Men will get $160.6 billion of that money, while $82.9 billion will go to women, according to the new analysis.
- The PBO analysis also reveals that the highest income bracket of over $180,000 will suck $117,600 billion out of the budget in cuts over the next decade, or 48 per cent of the total tax cut package.
The Labor government is facing growing calls to scrap tax cuts for the wealthiest earners to avoid a budget hole of more than $240 billion over a decade and a tax windfall that would disproportionately benefit men over women.
Economists, unions, the welfare sector and the Greens are urging the government to axe the tax cuts which are set to come into effect in 2024. Many argue the nation can no longer afford them after the COVID-19 pandemic has ravaged Treasury’s coffers.
Prime Minister Anthony Albanese and Treasurer Jim Chalmers are facing calls to axe the stage three tax cuts.Credit:Alex Ellinghausen
Labor opposed the stage three tax cuts heading into the 2019 election, but last year reversed its position under Anthony Albanese and vowed to keep them in place.
Costings by the independent Parliamentary Budget Office for the Greens show the tax cuts – which would provide major income tax relief to high-income earners and are supported by both Labor and the Coalition – will cost $243 billion by 2032-33.
Men will get $160.6 billion of that money, while $82.9 billion will go to women, according to the new analysis. This is because men are typically paid higher than women, and comes amid growing concern that the gender pay gap has stagnated.
The analysis also reveals that the highest income bracket of over $180,000 will suck $117 billion out of the budget in tax cuts over the next decade, or 48 per cent of the total tax cut package. The $45,001-$60,000 bracket will only get $2.7 billion, or 1 per cent of the tax cuts.
Under then-treasurer Scott Morrison’s three-stage overhaul of the tax system unveiled in 2018, lower- and middle-income earners were given tax cuts first, including through a tax offset that ended last financial year, with the final stage targeted at higher-income earners.
The stage three tax cuts would abolish the 37 per cent tax bracket, while the 32.5 per cent rate would be cut to 30 per cent for all incomes between $45,000 and $200,000.
A politician on a base salary of $211,250 would get a tax cut of $9075. A registered nurse on $72,235 would expect to get just 7 per cent of that, with an extra $681, according to an analysis by the Australia Institute.
Australian Council of Trade Unions secretary Sally McManus said the union movement had “always opposed the stage three tax cuts” and the money would be “better spent solving our national challenges”.
Greens leader Adam Bandt said the tax cuts “for billionaires and the wealthy will turbocharge inequality in Australia”.
“Labor is dismantling Australia’s progressive taxation system, putting an award-wage worker on the same tax rate as a CEO,” he said. “Women will get just 50¢ for each dollar men receive.”
Former Reserve Bank governor Bernie Fraser said the government should scrap the tax cuts, arguing they were always bad policy and the pandemic had made them even less affordable.
“They were very unfair at the time that they were put forward and approved, and they’re even more unfair now,” he said.
Fraser said proceeding with the tax cuts could also run counter to what the Reserve Bank was trying to do to tackle inflation.
Grattan Institute chief executive Danielle Wood said it was “clearly not the right time to deliver the tax cuts”.
“They were legislated back in 2019 when we were told there would be budget surpluses as far as the eye can see from 2024-25,” she said. “It is a very different fiscal environment and structural deficit now and the tax cuts will only amplify that.”
She said the government could delay the tax cuts, restructure them to limit the benefit for the super wealthy, or package them up with other tax reforms such as tightening superannuation and capital gains concessions.
Labor is reticent to change or delay the tax cuts for fear it would be seen as a broken promise, with former prime minister Paul Keating’s scrapped L-A-W tax cuts and Julia Gillard’s no carbon tax promise still fresh in their minds. Many MPs are also alive to the fact that a significant portion of Labor MPs now earn up to $200,000 a year and need a tax cut to deal with bracket creep.
Former ACTU secretary Bill Kelty said the tax cuts were “probably not fair” but “governments pay big prices when they change policies” without going back to the people.
“Even though you don’t like these things, sometimes you’ve just got to do it,” he said. “As soon as you change things substantially, then you add risk and uncertainty, and then people can’t trust you.”
Treasurer Jim Chalmers did not respond when contacted on the stage three cuts, but earlier this month said they were needed.
“We intend to leave them in place. We think that there are steps that can be taken now in the tax system particularly in relation to multinational tax avoidance,” he said.
Rather than touching the stage three tax cuts, some Labor MPs argued the government should over time do more to tackle superannuation tax concessions which cost the budget about $16 billion a year.
Labor MP Josh Burns said: “At some point, we will need to have a broader, mature debate about tax and the tax arrangements we’re leaving for future generations.
“But I am pleased with the work done on multinational tax avoidance and ensuring multinationals pay their fair share in Australia.”
Another Labor MP, who wished not to be named, said the Greens were peddling a “magic pudding economic argument” and that ditching the stage three tax cuts was “not a structural fix to the budget mess the Liberals left”.
“A lot of the structural problems started in John Howard’s day with overly generous loopholes and middle or upper-class welfare,” the MP said.
Edwina MacDonald, acting chief executive of the Australian Council of Social Service, said it “beggars belief” that the government wasn’t raising the $46-a-day JobSeeker payment but going ahead with the stage three tax cuts.
“The government has the opportunity now to offer people hope that we can all rely on decent essential services and an adequate safety net that lifts people out of poverty,” she said. “As part of that, they must look to winding back the stage three tax cuts.”
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