Back to the future
Will Labor find its spine on the stage-three tax cuts?
It appears we’re back in 2019, with the government demanding the Opposition support its far-away stage-three tax cuts, as the Opposition dances around the issue. The Coalition – with a little help from its friends at The Australian and the AFR – is keen to wedge Labor on its $130 billion high-income tax cuts, challenging the indecisive party to recommit to the cuts, which it only reluctantly supported in 2019 to get the take-it-or-leave-it tax package passed for lower-income earners. The Australian quotes Treasurer Josh Frydenberg at length, warning that repealing the cuts – which are not scheduled until mid 2024 – “would leave middle-income earners hundreds of dollars a year worse off”. (Strangely, it doesn’t mention how much worse off high-income earners would be, with modelling from the Australia Institute finding that the top 10 per cent of taxpayers will get almost a third of the benefit, and the top 20 per cent more than half.) Finance Minister Simon Birmingham also pushed Labor on the issue ahead of tonight’s budget reply, demanding that the Opposition leader make up his mind: “Anthony Albanese should come clean, whether he has a high-taxes agenda, or give confidence to the Australian economy and back lower taxes for the future.” The AFR, meanwhile, suggests that Labor is “hardening its position against” the tax cuts. But is it?
Labor, as an impatient Birmingham pointed out, didpromise to confirm its position on the stage-three cuts – which will reduce the rate of the 32.5 per cent rate to 30 cents, increase its threshold from $45,000 to $200,000, and increase the 45 per cent threshold from $180,000 to $200,000 – after the budget was handed down (though it has only been two days). But Labor now looks increasingly uncomfortable about making the call. In an interview today, shadow treasurer Jim Chalmers said Labor was yet to make up its mind, adding that it was in no rush to do so given that the cuts are still three years away, and repeated his calls for the low- and middle-income tax offset (LMITO) to be extended further. “These additional tax cuts for lower-middle-income earners are temporary, but the big tax cuts for the highest income earners are permanent and forever,” he said. The Australian reports that the party is split on the issue, with a number of unnamed Labor MPs agitating for its repeal, noting that repairing the trillion-dollar debt had to come before tax cuts for the wealthy – especially with revenue-saving measures such as negative gearing now off the table. But Chalmers and Albanese are determined not to be drawn on the issue.
Labor attempted to keep Question Time focused firmly on other aspects of the budget, sluggish wages specifically, with two questions on wages from Albanese, one from Chalmers and one from Tony Burke. (I wonder what the theme of tonight’s budget reply will be?) Speaker Tony Smith appeared to have pre-emptively taken on some of the recommendations in the “death to dixer” committee report on how to improve Question Time, which has been tabled but not yet adopted. Smith refused to allow the government any “alternative approaches” to mention taxes, though Frydenberg did his best. “I know what will hit the wages of the Australian people is the higher taxes from the Labor Party,” he said, when asked about the cut in real wages contained in the budget.
Labor is keen not to get drawn into another class war, but it ought to be a little braver here. With a $1 trillion debt looming, economists say the affordability of the tax cuts is “very doubtful”, with either tax rises, big spending cuts or cancelled tax cuts required in the next few years, the AFR reports. It’s not clear how great the appetite will be for saving billions of dollars for the wealthy each year, when the eventual spending cuts start pouring in. Even AFR contributor Chris Richardson, a partner at Deloitte Access Economics, thinks the high-income tax cut is “toast”, politically speaking. “You can see the attack ads now”, he writes, noting that taxes going up for low-income earners (when the LMITO expires) at the same time as going down for higher-income earners “will be seen as little shy of satanic”. Perhaps, in this new political climate, Labor might like to point out – as the Centre for Future Work’s Alison Pennington does – that the stage-three cuts will “overwhelmingly benefit high-income households and men”, with men to benefit more than twice as much as women.
The government, meanwhile, might want to consider showing a little less bravado, now that even the AFR is questioning the viability of the cuts. The finance minister, as Sky News political reporter Trudy McIntosh tweets, has left himself “no wiggle room” to pare back the cuts, confidently declaring that the government delivering on its promised tax cuts is “110 per cent guaranteed”. So was that “Back in Black” surplus, once upon a time.
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It appears we’re back in 2019, with the government demanding the Opposition support its far-away stage-three tax cuts, as the Opposition dances around the issue. The Coalition – with a little help from its friends at The Australian and the AFR – is keen to wedge Labor on its $130 billion high-income tax cuts, challenging the indecisive party to recommit to the cuts, which it only reluctantly supported in 2019 to get the take-it-or-leave-it tax package passed for lower-income earners. The Australian quotes Treasurer Josh Frydenberg at length, warning that repealing the cuts – which are not...
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