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Newcastle Herald
Newcastle Herald
National

Labor's Stage 3 tax cut kite-fly pits budget economics against election promises

EVEN if Prime Minister Anthony Albanese is simply using Treasurer Jim Chalmers as a weather-vane to test the weather on changes to the Morrison government's "stage three" tax cuts, the fact the government is prepared to do it all must be taken as an indication of a possible political move to wind them back, if not eliminate them completely.

The reactions so far have been predictably clear-cut. One side has been a chorus from the Left, exemplified by the Australia Institute, which came out in August - after the Parliamentary Budget Office released costings on the legislated cuts - to say they "massively favour the wealthy".

Its headline grab was that "77 per cent of the benefits ... go to the richest 25 per cent".

Without quibbling about the exact numbers, the institute may be correct, but it's not the full picture because the first and second stages of the Coalition's tax changes catered to low and middle income earners.

Stage three, timed to start in 2024, is aimed at a different part of the tax base.

The other view, expressed in the financial media and likely to be vociferously prosecuted by opposition leader Peter Dutton, is that repudiating the stage three tax cuts would amount to a massive betrayal of the electorate, given that Labor went to the election promising to uphold them.

With this in mind - and given the way that previous broken promises have wounded leaders on both sides of Australian politics in recent years - the Albanese government may need to spend a lot of its political capital to persist with the idea.

At the same time, its union base will ideologically argue against any sort of "handout" to the well-off, maintaining pressure inside the Labor camp for the PM to be seen to be doing "something", even if the wind-back is only minor.

Facts and figures can be brought to bear on both sides of the argument but the latest tax statistics - admittedly for for 2019-20 - show just 3.6 per cent of taxpayers earning above $180,000, the current top tax bracket that will move to $200,000 under the cuts.

The average income, by contrast, was just $66,535, and the median $50,425.

Politics is reasonably described as the art of compromise, but a cynical electorate - tired of broken promises across the field - would seem to be crying out for a government that can be trusted.

The tax debate will put a focus, too, on the cross benches, who can make or break this, should Labor decide to try to axe or modify the cuts.

ISSUE: 39,724

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