Yahoo Finance High income earners to score $33 billion in tax cuts
Australians earning $180,000 and more would receive $33 billion in tax cuts under the Coalition government’s as-yet unlegislated income tax cut package, new modelling has predicted.
The third stage (3a) of the tax cuts, which would see those earning up to $180,000 have their marginal tax rates reduced to 30 per cent, is estimated to cost $33 billion over the five years from when the cuts are first introduced in 2024-25.
Over that same period, those earning more than $200,000 will see $26 billion in personal income tax cuts.
“Economic growth hasn’t been this low since the GFC and the government’s proposed income tax cuts must be well targeted if they are to maximise economic growth,” said Matt Grudnoff, senior economist at The Australia Institute and author of the report.
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He said low- and middle-income taxpayers will more likely spend their tax cuts than high-income earners, and as such will stimulate the economy more.
However, the tax cuts to higher income earners are expected to cost $95 billion over five years and deliver a benefit to a smaller number of people.
“The government will spend more on this part of the tax cut than it is expected to spend on the Pharmaceutical Benefits Scheme over the same period,” Grudnoff said.
“The government should better target its tax cuts and abandon its stage 3(a) tax cuts, which will cost the budget a substantial amount of money and benefit relatively few taxpayers.”
Can the government do it?
Labor has said it will support the first two stages of the tax cut program, slated to deliver benefits to low- and middle-income earners, but has held off supporting the third stage.
However, Treasurer Josh Frydenberg has said the tax cuts are an all-or-nothing package.
One Nation’s Pauline Hanson threw another spanner in the works on Monday by refusing to support the tax cuts. She said it was more important that Australia fund another coal-fired power station and boost water security.
As it stands, the Coalition needs support from either Labor or four of the six crossbenchers, given the Greens also oppose the package.
Centre Alliance maintains a similar position to Labor, citing a softening economy and concerns over the price of the tax cuts.
However, Finance Minister Mathias Cormann has claimed the Coalition’s election victory was a mandate from the Australian people to deliver the campaign of tax cuts.
“We took a plan to the election. The Australian people voted for tax relief for all hard-working Australians," he told reporters in Perth.
"It is incumbent on all parties in the Senate to respect the verdict of the Australian people."
With AAP.
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