The cost of stage-three income tax cuts has climbed to $313bn over a decade, with the benefits flowing disproportionately to high-income earners and men, according to new data.
New Parliamentary Budget Office costings, conducted for the Greens, has predicted a blowout in the cost of implementation. It has been released as the Albanese government insists it has no plans to revisit the controversial tax cuts.
The cost of stage three has risen from $254bn in October due to lower unemployment, higher incomes and inclusion of an additional year in 2033-34. The PBO found that the tax cuts will cost $20.4bn in their first year, 2024-25, rising every year to $42.9bn in 2033-34.
With the treasurer, Jim Chalmers, declaring Labor’s first full-year budget a balance between cost-of-living relief and inflation, the burgeoning cost of stage three has been a focal point for those who wished it had shown greater ambition in poverty reduction, including the independent MP Zoe Daniel and senator David Pocock.
The cuts, passed by the Morrison government in mid-2019, remove the $120,000 to $180,000 tax bracket, increase the top tax bracket to $200,000 and reduce the marginal rate of tax for everyone earning between $45,000 and $200,000 to 30%.
The PBO found that men will collect $203.7bn over the decade, or 65% of the benefit, compared with women, who will receive $109.4bn, or 35%. Over four years, men will get $45.8bn while women will get $23.4bn.
Income earners in the top 20% are set to scoop up $227.6bn of the total $313.1bn benefit, as their incomes rise from $109,200 in 2023-24 to $155,600 by the end of the decade.
The second-highest quintile of earners will receive a further $60.3bn. The middle quintile of earners will receive $23.1bn, the second lowest just $2.1bn and the lowest quintile will get nothing from the tax cuts because their incomes are projected to remain less than $45,000.
Although the government has repeatedly cited the benefit of returning bracket creep to low- and middle-income earners, the costings reveal those earning between $45,001 and $60,000 will get just $3.7bn – or about 1.2% of the benefit – over a decade.
Those earning $60,001 to $90,000 will receive $25bn, or 8% of the total, while $157bn – just over half of the total cost over the decade – will flow to people earning over $180,000 a year.
The PBO used de-identified Australian Taxation Office data from 2018-19, grown over the medium term using parameters in the 2023-24 budget for the estimate.
The Greens leader, Adam Bandt, said that “Labor’s stage-three tax cuts for the wealthy are a massive black hole, sucking in money that should be spent on services for everyone”.
The Greens spokesperson for economic justice, Nick McKim, said “the idea of giving $313bn in tax cuts to the wealthy instead of freezing rents, lifting Centrelink above the poverty line and building public and affordable housing is beyond disgraceful”.
In budget week Chalmers deflected several questions about stage three by insisting they “haven’t actually been a focus of the deliberations for this budget at all”.
Chalmers told Guardian’s Australian Politics podcast that the tax cuts “kick in at $45,000” and “it is actually a defensible objective” to try to return bracket creep – the increased tax take as incomes rise – back to people.
The Grattan Institute has argued that while there is “some justification” to give back bracket creep, the stage-three cuts are “too big” and “overcompensate” for its effects. Retaining the 37% tax rate, which currently applies from $120,000, could save the budget $8bn a year, it proposed in April ahead of the budget.
The shadow finance minister, Jane Hume, told the podcast the Coalition supports “lower, simpler and fairer taxes”, praising stage three for allowing middle-income earners to “keep $0.70 of every [dollar] that they earn”.
Hume said the cuts were a “really necessary reform” and accused the government of being “very noncommittal about this”.
On Monday, the prime minister, Anthony Albanese, noted that Labor had tried to amend Coalition legislation to remove the stage-three tax cuts but was not successful.
“It wasn’t just the Coalition by the way,” he told ABC Melbourne. “It was Jacqui Lambie and others in minority parties who voted for it.”
