The final two stages of the government’s income tax cut plan will cost the budget more than $130bn from 2023, with higher income earners enjoying the bulk of the $144bn plan.
Costings compiled by the Parliamentary Budget Office for the Greens show Scott Morrison’s landmark tax plan to increase the 32.5% marginal threshold from $90,000 to $120,000 from July 2022 will cost the budget $36.5bn.
Scrapping the 37% marginal rate, and putting all income earners between $41,000 and $200,000 on the same flat tax rate, will burden the budget bottom line by $32.55bn.
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By comparison, the low and middle income tax offset of up to $530 for those earning up to $125,333 will cost a total of $15.9bn from July next year while upping the 32.5% marginal rate threshold by $3,000 to $90,000 will cost $6.450bn.
The government has been prevaricating on releasing more detailed costings on its tax plan, despite repeated questions about when the bulk of the $144bn would be withdrawn from the budget.
When introducing the legislation setting up the policy last month Morrison confirmed the first two tranches of the package would cost $102.35bn over a decade, while the third and final measure – the flat tax and increased lower threshold for the 45% marginal tax rate (from $180,001 to $200,001) – would cost about $40bn.
Further detail was given during last month’s estimates hearings.
The PBO costings confirm what was known and give further detail, showing $13.4bn is expected to be withdrawn from the budget from 2022-23 and $24.6bn in 2028-29, when Australia’s revenue streams are unknown.
Labor has been seeking year-on-year costings from the government, since the package was announced on 8 May.
The opposition has said it agrees with the government’s plans to give lower and middle income earners a tax offset of up to $530, remains unsure of the second wave of reforms – which increase thresholds for the 32.5% and 19% marginal tax rates – and has been highly sceptical of the final tranche – which includes the flat tax and measures for higher income earners.
Morrison has refused to back down, and has told the Senate the bill is an “all or nothing” package.
The Greens oppose both the government’s and Labor’s income tax plans and will be looking to use the more detailed figures to wedge Labor to make a decision on whether or not it supports the Coalition plan.
“Nearly $40bn of this second stage will go to the wealthiest one-third of income earners,” the Greens leader, Richard Di Natale, said. “Not only is Labor considering supporting the second stage of Turnbull’s tax cuts, they’re also floating the idea of passing the whole package through the Senate.
“This would see Labor also support the third stage of the plan, which is worth $41.6bn over five years, with the amount going to the wealthiest Australians, compounding by an extra billion dollars each year.
“In the final year of the Turnbull’s tax cuts, almost 70% of the entire benefits flow to people earning over $90,000.”
The party’s treasury spokesperson, Peter Whish-Wilson, described the duelling income tax cut plans between Labor and the government as a “tax cuts arms race” and said it was time to spend money on other things.
“We’ve been hearing for years about how as a nation, Australia cannot afford to support those doing it tough and we cannot afford to act on climate change,” he said. “But now, when that austerity myth bursts and we have the opportunity to act on these things, the old parties seek to create a new round of austerity by reducing revenue.”
The government’s legislation will be the subject of a parliamentary hearing on Wednesday.
