With the cost-of-living crisis biting hard, former Coalition Prime Minister Scott Morrison’s Stage 3 tax cuts for the rich became too great a political liability for federal Labor.
But all it is offering is a milder version of the same wrong policy and tossing a few peanuts to the working class.
The Coalition’s Stage 3 tax cuts — which PM Anthony Albanese was promoting days before announcing amendedments on January 25 — would have delivered 77% of its benefits to the richest 20% of tax payers, according to the Parliamentary Budget Office.
Under the original Stage 3, those on the median personal income of $54,890 were to get a tax cut of $250 a year. Labor’s reshaped Stage 3 promises $1100.
Under the original Stage 3, those on $45,000 or less were not to have a tax cut, while the reshaped Stage 3 gives $54 to $804 for those people earning between $20,000 and $45,000.
On the other end of the income spectrum, the original Stage 3 gave those with taxable incomes of more than $200,000 a year a tax cut of $9075; now they will get $4529.
But while Labor’s reshaped Stage 3 is fairer than the original, why should people on $200,000 be given a $4500 tax cut while millions are struggling to pay the rent, put food on the table or see a doctor?
Moreover, Labor’s reshaped Stage 3 will not give a cent to households that are surviving on pensions, other welfare payments or on taxable incomes below $20,000.
No benefit for most
According to Associate Professor Ben Phillips, from the ANU Centre for Social Research and Methods, 86.3% of the poorest 20% of households will not benefit from either version of the Stage 3 tax cuts.
Further, Phillips worked out that once “bracket creep” is brought into the equation, the average tax on the poorest 40% of households rose under both versions of Stage 3 but lowered for those in the richest 20%.
Both versions are therefore regressive, although the original Stage 3 was more so. Progressive tax systems increase the tax rate for higher incomes.
Antipoverty Centre spokesperson Kristin O’Connell, who survives on the Disability Support Pension, told Green Left that Labor’s reshaped Stage 3 offers no meaningful relief from the cost-of-living crisis for people earning between or below $60,000 a year.
“Welfare recipients are left out completely. But even those not eligible for a welfare payment are not going to get more than $15 a week.
“PM Albanese has done this for politics. His government is going to spend almost as much on these tax cuts as the Coalition would have. Tax cuts cost the community services and supports that we desperately need — especially when the cost-of-living crisis is so extreme.”
If Labor were serious about addressing the cost-of-living crisis, O’Connell said, it would instead help those who have “absolutely no money to absorb any more rising costs” by raising welfare payments and only delivering tax cuts to those on lower incomes.
“The tax-free threshold [currently at $18,200] should increase to at least the Henderson Poverty Line [$31,278 a year for a single person].
“It is perverse that people have to pay tax even before they get above the poverty line.
“The Antipoverty Centre is calling on the cross-bench to refuse to pass these tax cuts until substantive changes are made, so that people who can least afford to bear the brunt of the cost-of-living crisis are given real support.”
Greens against ‘reheated’ tax cuts
The Greens said Labor’s “reheated Stage 3 tax cuts” failed to deliver fairness for low and middle income earners and it will fight for “further changes to the package”.
Greens leader Adam Bandt said on January 26 that “Labor’s giving the very wealthy three times as much as the average wage earner".
“The Greens have kept up the pressure on Labor’s unfair original tax plan from day one, and as this legislation works its way through Parliament, the Greens will fight for more for low and middle income earners who are struggling under Labor’s housing and rental crisis.
“Why is Labor expecting people to be happy with an additional $15 a week, when rents have gone up by about $100 a week under Labor's housing and rental crisis and mortgages almost $200 a week?
“Labor claims there’s only $15 a week extra for middle Australia, no money to raise the rate of Centrelink and no money to get dental and mental health into Medicare, while forging ahead with a $4500 tax cut for every billionaire and politician.”
Progressive tax reform needed
Socialist Alliance (SA) National Co-convenor Sue Bull also dismissed Labor’s alternative as “Stage 3 Lite”.
“We’ve seen this before when a mass movement, led by trade unions, defeated the John Howard-led Coalition over its anti-worker WorkChoices law. Labor was elected on the back of this movement — and delivered WorkChoices Lite,” Bull told GL.
“Stage 3 Lite is also a milder version of the Coalition’s tax cuts for the rich. They don’t need more tax cuts when they are dodging taxes on an industrial scale: global mining companies are also getting away with zero tax.
“It will also take nearly $320 billion out of government revenue over the next 10 years, which means more cuts to much needed social services.”
SA supports a “steeply progressive tax system”, Bull said, in which people with incomes less than the median wage pay less tax and the top marginal tax rate is raised to 70% for those with incomes of more than $200,000.
SA supports a wealth tax for the super rich and the scrapping of the goods and services tax, Bull said. “Company tax should be raised to 49% and an additional super-profits tax should be introduced.
“Big corporations need to be forced to pay the tax they owe, by removing tax loopholes and expanding tax office compliance resources.
“We also need to end the billions in public subsidies to mining corporations, banks and energy companies and remove all negative gearing tax breaks on investment properties.”
If Labor had the “will and the guts” to do even some of these things, Bull said, there would be ample funds to raise welfare rates to a decent level and fund serious measures to address the cost-of-living crisis.