The cost of the stage-three tax cuts has increased to $313 billion over 10 years, with more than half of the benefit going to people earning over $180,000 a year, new costings show.
That’s 23 per cent more than previously estimated, according to Parliamentary Budget Office (PBO) figures published by the Greens on Wednesday.
The estimated cost has risen from about $254 billion in October due to a fall in the jobless rate, rising wages growth and an expansion of the forecast horizon by another year to 2033-34.
Greens Leader Adam Bandt seized on the new costings to renew his calls for the stage-three plan, which will begin in 2024-25, to be dumped.
“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,” Mr Bandt said on Wednesday.
“Food bank queues are growing and people can’t pay the rent, but Labor’s giving billionaires like Clive Palmer a $9000-a-year tax cut.”
Asked on Sunday whether the Albanese government had changed its position on the stage-three tax cuts, Treasurer Jim Chalmers said there had been no shift in policy.
“We’ve said in principle that returning bracket creep is a worthy objective of governments of both political persuasions,” Dr Chalmers said.
“We’ve always said when we can afford to give tax relief, particularly to low- and middle-income earners, then that’s a worthy objective as well, and governments of both persuasions have done that over time.
“[This] tax starts [to] kick in $45,000 – that’s a fact, which is sometimes lost in the conversation.”
Housing crisis, climate change
But Mr Bandt said on Wednesday that the $313 billion set to be lost in tax revenue could be redirected to fund other priorities, including the housing crisis and climate change.
“Labor’s $30 billion a year in handouts for the rich is more than 60 times their affordable housing spend,” Mr Bandt said.
“How can Labor spend over $30 billion a year on tax cuts for the wealthy, but not $5 billion a year for public housing as the Greens want?”
Matt Grudnoff, a senior economist at the Australia Institute, said that paring back the stage-three tax cuts before they begin could deliver a win for a government trying to curb inflation.
“The government is concerned about the inflationary impacts of any kind of spending and by far the largest spending [in the next few years] will be the stage-three tax cuts,” he told The New Daily.
“If you remove those or substantially alter them, it frees up space to spend on things like unemployment benefits or boosting Medicare.
“Those are all things the government made a start on [in the budget], but a lot of people said really didn’t fix the problems.”
The controversial tax plan, which was legislated under the Morrison government and retained by the Albanese government, will remove the $120,000 to $180,000 tax bracket; increase the top bracket to $200,000; and reduce tax rates for everyone earning at least $45,000.
The latest PBO costings show the stage-three tax cuts will cost $20.4 billion in the first year and will rise from there, reaching $42 billion in 2033-34.
Big winners
The top 20 per cent of income earners will be the big winners.
They are set to rake in more than $220 billion over the 10 years of costings, which is almost 75 per cent of the total cost.
Men will benefit disproportionately, getting more than $200 billion over the next decade compared to women, who will receive just $110 billion (about 35 per cent).
Mr Grudnoff said a paring back, rather than scrapping, of the stage-three tax cuts could involve just retaining the $120,000 to $180,000 tax bracket.
“You could keep the other elements of the tax cut, but keep the bracket,” he said.
“That would take a lot of the tax cut away from those at the top end, but retain the small amount that currently goes to the bottom end.”
Previous research undertaken by Anglicare Australia, which has also called for the cuts to be scrapped, found Australians living in wealthy parts of the country will benefit most from the plan.
About 31.5 per cent of Canberrans will benefit from the stage-three tax cuts, while 23 per cent of West Australians, 19 per cent of Victorians and 18.4 per cent of those in New South Wales will also benefit.
However, only 13.9 per cent of South Australians and just 12.1 per cent of Tasmanians will receive a tax cut.
