Treasurer Josh Frydenberg is floating bringing forward $158 billion worth of income tax cuts — originally scheduled for 2022 and 2024 — arguing it will boost the COVID-19-ravaged economy. He has hinted that the tax cuts would form a key part of the delayed federal budget, now set for October 6.
The Coalition pushed through three stages of income tax cuts last year: the first round delivered about $1080 in tax relief for average income earners. Stage two was due to come into effect from 2022 and would cut taxes for those earning more than $90,000 a year, as well as raising the threshold on the lowest tax rate.
The final stage was to begin two years later, and allow those earning less than $200,000 a year to pay no more than 30 cents on the dollar.
These are tax cuts for the rich.
As Michael Keating, former secretary of the Department of Prime Minister and Cabinet, said, they are “incredibly biased in favour of high-income earners” and because of this “the proceeds are very likely to be heavily saved, much more heavily saved than usual”.
In other words, the government’s pitch that such measures would be the “boost” the economy needs is wrong.
Former Reserve Bank deputy governor, Stephen Grenville, said cutting the top rate would be a “weak stimulus” and that it also “undermines the equitable and progressive tax structure we’ll need when the COVID crisis is over”.
Another former Reserve Bank governor Bernie Fraser argued that spending on infrastructure, other than roads and transport projects, should be a priority.
He also criticised the Prime Minister’s new National Gas Infrastructure Plan, including an offer to prop up the gas industry with subsidies of $52.9 million.
“I was interested the other day when [the PM] was saying that, ‘Look, if the private sector is not going to jump in and provide a gas-fired power station, the government’s going to do it’, Fraser said.
“Well, the private sector’s not providing any social housing either. And yet, providing social housing would be a tremendous economic stimulus, and would also be a lasting benefit of the social kind.”
Keating and Fraser are among 40 political, economic and social policy experts backing a campaign to oppose tax cuts for the well-off, launched by the progressive think tank The Australia Institute (TAI). Nobel Laureate Professor Peter Doherty and Australian Council of Social Service chief executive Cassandra Goldie have joined it.
The TAI campaign says: “Those demanding tax cuts today will be demanding service cuts tomorrow.
Its petition, launched on September 21, states that “Tax is an investment in society”.
“After decades of tax cuts, all we’ve seen is more inequality and fewer services,” the petition notes. It estimates that if the income tax cuts are brought forward, the wealthiest Australian will be taking home an extra $11,000 each year.
AI said that cutting the Jobseeker payment by $150 a week at the end of September will mean that at least 370,000 people will fall below the poverty line, including 80,000 children.
Meanwhile, the government’s “new technology road map”, which it argues is key for the economic recovery, is heavily weighted towards new investment in gas fields and gas-fired power projects for our future energy needs.
The combination of tax cuts for the well-off, together with the fantasy of a gas-fired transition to a renewable energy future, will not only accelerate Australia’s contribution to the looming climate catastrophe, it will also widen the gap between the very rich and the rest of us.
The upcoming federal budget looks like a disaster in the making.
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