The Greens have called on Labor to abandon its support for a tax cut for people earning $80,000 and over, arguing it amounts to “trickle-down economics”.
Greens Treasury spokesman, Peter Whish-Wilson, has written to Labor’s shadow treasurer, Chris Bowen, calling for reconsideration of the tax cuts in shadow cabinet and caucus. The call has been rebuffed, with Bowen insisting Labor will continue to support the cut.
The Turnbull government plans to increase the middle income tax bracket from $80,000 to $87,000 at a cost of $4bn over four years.
The tax cut is designed to prevent more than 500,000 people moving into the second-highest marginal tax bracket in the next year and does so through a tax cut to 2.5m taxpayers who earn more than $80,000 a year.
Whish-Wilson argued the tax cuts were a “poorly targeted response to the challenges of bracket creep” in a letter dated 3 October.
“This bill would deliver an additional $315 to only the top 20% of income earners,” he said.
“This includes some of the wealthiest people in the country, and goes well beyond the group of income earners most affected by bracket creep.”
Whish-Wilson welcomed Bowen’s recent speech The Case for the Middle Class in which the shadow treasurer railed against “trickle-down economics and the scourge of growing income inequality”.
But he said Labor’s support for the tax cuts “cuts against the intention” of the speech and stood in contradiction to its principles.
Whish-Wilson said the $4bn tax cut would wipe out two-thirds of the savings achieved by the omnibus savings bill with Labor support. That bill cut family tax benefits for 383,000 middle income households, cut back-payment of carers’ allowances, increased Centrelink debts and “shifted more lifetime debts onto students”, he said.
“Viewed together, these two pieces of legislation will simply exacerbate the problems identified in your speech.”
Whish-Wilson proposed that if Labor supports the tax cuts it should “at least insist on another policy we both share, making the top marginal tax rate permanent at 47%”.
“This would neutralise the budget impact of the tax cut and ensure the measure is better targeted to the purported audience of workers approaching $80,000,” he said.
A spokesman for Bowen told Guardian Australia that Labor would continue to support the tax cuts.
He rejected the idea the cuts were poorly targeted or in contradiction with Labor’s criticism of trickle-down economics, noting “those earning around $80,000 to $87,000 a year are middle class”.
“Senator [Whish-Wilson] hasn’t given us the courtesy of receiving the letter before releasing it to the media,” he said.
According to research by The Australia Institute that counted people who don’t file tax returns, including those on the pension, just 14% of Australians currently earn $80,000 or more.
It found in 2013-14 only about 17% of women had a taxable income of more than $80,000 compared with 33% of men because men are more likely to work full-time.
