The Albanese government faces fierce opposition to its changes to stage-three tax cuts, which have been endorsed unanimously by Labor’s caucus, with the Coalition vowing to repeal them if elected.
The Liberal deputy leader, Sussan Ley, promised on Wednesday to “fight this legislation” in parliament and said it was “absolutely” the opposition’s position when asked if it would roll them back if returned to power at the next election.
The comments came ahead of the Labor caucus meeting to discuss the economic plan agreed at cabinet on Tuesday evening and the prime minister, Anthony Albanese’s speech to the National Press Club on Thursday defending the change in direction on income tax cuts.
Treasurer Jim Chalmers, speaking on ABC’s 7.30 program on Wednesday, claimed the government’s tax changes would be “superior to the tax reform that it replaces”, but downplayed prospects of any further cost of living relief – for instance, for pensioners or those who don’t pay tax – beyond the stage three changes.
“The proposal that the prime minister will put forward tomorrow means more help for more people, it means a tax cut for every taxpaying worker, and it will be better for middle Australia,” Chalmers said.
“We’ve changed our view because we’ve found a better way to provide more cost-of-living relief to more people in a way that doesn’t add to inflation.”
The Labor caucus meeting concluded in a bit over an hour and a quarter, with MPs voting unanimously to endorse the plan despite some questioning how the government should sell the changes and deal with accusations of breaching an election promise.
The meeting confirmed key details of the package including that low income earners will pay a new tax rate of 16%, down from 19%, and the government will retain the 37% tax rate, which will now apply from $135,000 to $190,000.
Together the changes are expected to provide a benefit of up to $800 to low income earners, and halve the benefit of stage three to those earning $200,000 or more from $9,000 to about $4,500.
Chalmers on 7.30 noted the Coalition’s opposition to the changes, pointing toward a fierce political fight where the government will accuse the opposition of prioritising high income earners.
“The deputy opposition leader [Ley] said that if they are elected, they will unwind these changes. That means the Liberals and Nationals are going to the election with a policy to increase taxes on middle Australia in order to fund even bigger tax cuts for people on the highest incomes,” he said.
Labor MPs including Julian Hill and Graham Perrett used doorstop interviews on the way in and out of the meeting to argue that the job is now for opposition leader, Peter Dutton, to defend why the Coalition supports taking tax cuts away from low and middle income voters.
One MP said the stage three revamp is the “moral” choice but “maybe not the correct political one”, although it’s not clear yet how the electorate will respond to breach of “repeated promises”.
Chalmers defended the change in stance on the stage three tax cuts by noting that in the five years since they were legislated by the Coalition government, developments such as the Covid pandemic and global conflicts had changed the economic circumstances. The treasurer said treasury analysis would also be released alongside Albanese’s speech, which he claimed would show that the tax changes would “be better for the economy as well.”
Earlier, shadow ministers targeted the Albanese government for breaking its election commitment and the long-term effect of bracket creep caused by retaining the 37% income tax bracket which was to be abolished by stage three.
But one former Liberal, the independent MP Russell Broadbent, said the new proposal “hasn’t gone far enough”.
“It’s a very good step in the right direction,” he said. “People like me don’t need a … tax cut, but I accept the Labor proposal.”
The Greens, who are likely partners to help pass the reform in the Senate, also continued to argue high income earners should not get cuts at all, but have reserved their position until they see the full proposal.
All taxpayers earning less than $150,000 will benefit from the Albanese government’s plan, including workers earning less than $45,000 who were slated to miss out on stage-three cuts. Caucus was told 84% of Australians will be better off.
The Liberal Senate leader, and former finance minister, Simon Birmingham, said the proposal to retain the 37% tax rate “will see bracket creep remain in place as a tool of government budget policy in Australia”.
“Our government previously and this legislation tried to eliminate bracket creep for the vast majority of working Australians,” he told Radio National.
Birmingham argued that without addressing bracket creep, all Labor’s reforms “will be doing is possibly giving some people a little bit more today, but many of those people will be pushed up into those higher tax brackets tomorrow and in the years ahead”.
“It could be dressed up as a short-term giveaway, but it will come with long-term consequences of a government relying on even more income tax.”
On Wednesday Albanese sought to justify the change in policy by noting the “considerable events” that had occurred since the tax cuts were passed in mid-2019.
“My job isn’t to say I’ll just wring my hands about cost of living pressures that people are feeling,” he told reporters in Canberra. “My job is to respond … to make a difference, to make the right decision, not the easy decision.”
Albanese said his “opponents have not waited to see any detail to see what the proposal is … they’re just against it”.
He argued the Coalition was against “everything” Labor had done to improve cost of living including cheaper childcare and energy price relief.
Liberal MP Bridget Archer continued to reserve her position on the tax changes.
“As I’ve previously said I’m open to discussing changes where circumstances may have changed,” she said.
“As always I will consider any legislation that comes before me on its merits and make decisions in the interests of my community.”
