Critics line up to blast tax cuts for the rich

Labor’s support for the federal government’s stage three tax cuts have been savaged by the Greens and Canberra-based think tank The Australia Institute (TAI).

Labor leader Anthony Albanese said on Monday the party would support the cuts that will see everyone earning between $45,000 and $200,000 paying 30 per cent in tax from 2024. The cost has been estimated at $19 billion a year.

The changes scrap the 37 per cent tax bracket for those earning above $120,000, making those earners the biggest winners.

The cuts had been described by shadow treasurer Jim Chalmers as the “least affordable, least fair and least likely to be effective because higher-income earners aren’t as likely to spend in the economy as workers of more modest means.” However he told the ABC on Tuesday: “I’ll tell you what this election will be about – it won’t be about differences on these already legislated tax cuts. It’ll be about whether we can have a stronger, more sustainable, more inclusive society and economy after COVID than before.”

Read: When COVID is behind us, Aussies are going to have to pay more tax

Greens leader Adam Bandt has described Labor as politically “gutless” for backing the cuts. It released modelling that shows the cuts will exacerbate the gender pay gap and give high income earners up to 400 times the benefit of the lowest paid.

TAI chief economist Richard Dennis and senior economist Matt Grudnoff agree.

To gain a better understanding of who will benefit most, they devoted an episode of the Spin Bin to the topic by analysing an Insiders interview with Treasurer Josh Frydenberg. The pair hit the pause button throughout the interview to fact check the Treasurer’s claims as to who will benefit most from the tax cuts. They also compare the cuts to the temporary Low and Middle Income Tax Offset (LMITO).

They say the claim that the tax cuts would benefit most Australians because the average full time wage is $82,000 is misleading at best.

Read: Calls for inheritance tax and GST hike to fix broken tax system

“Australia’s median wage is $55,000, which means half of Australians actually earn even less. In fact, earning $82,000 would put you at around the top 25 per cent of income earners – not exactly ‘average'”.

Analysis prepared by the parliamentary budget office for the Greens offers a similar finding. It says the bulk of the benefit will flow to the highest paid, with about 45 per cent of the cost of the package going to fund tax cuts for those earning more than $180,000 a year.

The Guardian offered the following summary of that report:

The top 1 per cent of earners – those with incomes of more than $309,000 this year and more than $462,000 in 2031-32 – will be $11.8 billion better off over the course of the decade.

This is more than the 40 per cent of taxpayers earning less than $60,000, who will get just $3.1 billion – or 1.7 per cent – of the total $184 billion paid out by 2031.

The average tax cut for the top 20 per cent of earners will be worth $4230, compared with just $10 extra for the lowest paid – 400 times the benefit.

The parliamentary budget office report also noted that between 2024 and 2031, men would receive about $2 for every $1 women receive – an extra $121.7 billion compared with $62.4 billion for women over that period.

Read: Experts call for end to generous super tax concessions

On average, this will see a woman receive an annual tax cut of $1180 by the end of the decade, compared with $2150 for men, The Guardian reports.

Mr Bandt said Labor’s decision was a political opportunity for the Greens.

“If you want to kick the Liberals out but have a government with progressive values, the only option now is to vote Green,” he said.

“We will go to the next election defending a progressive tax system, pushing for a new tax on billionaires and fighting for an Australia that is more equal – we won’t waiver on those values.”

He said Labor had chosen to “join the Liberals in being a flat tax party” and that elections should be about offering different visions for the country.

“I think it is ultimately politically gutless. People respond well when you say, ‘We will tax the billionaires and put the money into services that make your life better’, and that is the approach that we will be taking.”

He said that in the event of a hung parliament, the Greens would push for the repeal of the stage three tax cuts.

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Written by Janelle Ward