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Albanese on Thursday said his view on the tax cuts had changed over summer as he contemplated how to grapple with the cost of living crisis. The truth is that Labor never really liked the design of these tax cuts and this week’s decision was Albanese’s chance to correct what the party always thought was a wrong but never had the political stomach to challenge when they were first proposed in 2018.
TheHerald could not help but notice the high farce of Albanese on Thursday criticising the design of – and economic assumptions behind – the Coalition’s stage 3 tax package even though he and Labor voted for the package in 2019 and stood behind it for two federal elections.
Asked at the National Press Club on Thursday whether the cost of changing the package was worth any damage to his personal integrity,the prime minister replied:“I tell you what my integrity is:not looking at lower middle income earners and saying,‘sorry,I’m just prime minister,I am not in a position to help you’,when I know I am in a position to help you and this is what this plan does.” Many voters may agree.
Albanese and Chalmers will now endure a ferocious campaign from Opposition Leader Peter Dutton. Dutton’s central theme will be that Albanese is a liar who can’t be trusted.
However,the Coalition comes to this fight with little credibility after Tony Abbott broke a string of promises about protecting funding for health,education and the public broadcasters ABC and SBS. Dutton and other current frontbenchers all spent months back then defending the breaches of faith. Julia Gillard,John Howard and Paul Keating also broke major election commitments. The public is utterly sick of the lies from all sides of politics.
Despite sniffing blood in the water,the opposition stumbled in its immediate response to Albanese’s broken promise when deputy opposition leader Sussan Ley on Wednesday suggested the Coalition would roll back Labor’s changes – a policy which would mean Peter Dutton would go to the next election vowing to hike taxes for 11.5 million Australians. It simply will not happen.
Why? Because Dutton believes his path to The Lodge rests with winning marginal seats in “middle Australia”. Reversing Labor’s tax plan and restoring the Coalition’s original scheme would affect the very voters he and Albanese will both be vying for.
A worker on the average full-time salary of $73,000 a year will now receive a tax cut of about $1500 a year under the new plan,compared to a tax cut of only $625 for someone earning $70,000 a year under the original stage 3 package. A worker earning $100,000 a year will gain a tax cut of $2100 a year under the Labor policy,compared to a tax cut of $1375 under the original plan. A worker on $40,000 will receive a tax cut of about $650 a year but was due to receive no benefit under stage 3 because they were the target of stages 1 and 2 of the Coalition’s tax package.
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In all,Treasury calculates that 11.5 million taxpayers will get a bigger tax cut than the original stage 3 package. Analysis of the changes suggest an annual income of about $147,000 is the point at which workers will now receive a smaller tax cut than originally scheduled under stage 3.
This is an obvious pitch to Labor voters and a clear middle finger to the 1 million or so workers who will be punished for the apparent sin of having a job with a salary of more than $147,000.
Instead of getting a tax cut of nearly $4000 a year,a worker with a taxable income of $150,000 will now get $3729. A worker on $170,000 will get back $1646 less than planned,and anyone on $200,000 or more will have their promised $9075 annual reduction chopped in half.
Given Australia’s over-reliance on personal income tax and the continuing cost of living crisis,theHerald welcomes a tax cut for 11.5 million Australians. But we would warn against rejoicing in the impact on the estimated 9 per cent of workers on $147,000 or more who will pay for the redistribution.
A single-income worker earning $150,000 or $160,000 per annum in Sydney is not rich,particularly when the cost of childcare,schooling,mortgage or rental costs and other financial commitments are factored in. If wages continue to rise,many more workers will fall over this threshold over the coming years.
Politics aside,the bigger issue at play this week is the sheer lack of policy ambition and vision. Changing income rates and scales hardly constitutes the sort of brave and broad tax reform our nation desperately needs. There are long outstanding challenges ranging from the company tax rate and the use of personal trusts by high-wealth individuals to incentives for businesses to take entrepreneurial risks. Australians have one of the highest usage rates of accountants in the entire world because of our warped tax system. Discussions about the big issues have wallowed in the taxation darkness for too long.
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