Let’s be honest – the prime minister and every single member of the government knows the stage-three tax cuts are bad. They are tax cuts without a defender; a rotting pile of garbage from the Turnbull-Morrison years that no one is, as yet, willing to throw in the bin.
We know the prime minister and the treasurer, Jim Chalmers, think the cuts are bad policy because they told us as much when they were in opposition.
In 2019, Chalmers noted the cuts “will cost almost $20bn every year” by the end of the decade. He argued that is “roughly what we’re spending on aged care or public hospitals this year and more than what we’ll spend on the NDIS. It’s roughly twice as much as we’ll spend on Newstart or carers and childcare this year.”
Now, however, we only hear, as the prime minister said this week, “These were legislated and are legislated tax cuts. And we said that we wouldn’t seek to change them at the election.”
That is not a defence of policy, it is an excuse for inaction.
Fortunately, the policy can be easily changed – if you have the conviction.
In 1983, Bob Hawke fronted the media soon after winning the election and told journalists that while he had promised tax cuts during the election, “Now that we had the full knowledge of the true budgetary situation … it [is] very significantly less likely that there would be an opportunity of any general tax cuts.”
Anthony Albanese could learn a thing or two from him.
Because, as in 1983, things have changed.
When the election was called, the cash rate was 0.1% – not 1.85% and heading higher.
The RBA predicted inflation would peak at 3.75%, not 7.8%, and it forecast GDP growth slowing to 2% by June 2024, not 1.8%, and certainly not 1.7% by December 2024 as it does now.
In March, Treasury was predicting medium-term productivity growth of 1.5%; now it estimates just 1.2%. This matters because the secretary of the Treasury, Dr Steven Kennedy, estimates such a downgrade would increase government debt by 2% of GDP by 2033. In today’s money, that is around $45bn.
And as for the cost of the actual tax cuts? We can discard Chalmers’ old line about “almost $20bn” because the Parliamentary Budget Office’s costings requested by the Greens leader Adam Bandt put the annual cost by the end of the decade at almost $30bn.
I don’t know about you, but that seems like more than enough excuses to scrap them.
The PBO also provided ample evidence to remind us how terrible the tax cuts were from the get-go.
The stage-three cuts reduce the marginal tax rate faced by the $45,000 to $200,000 tax bracket to 30%. By 2032-33 in total this will have cost $243.5bn and reached $36.9bn a year.
And who gets that money? The PBO estimates in 2024-25 the top 1% of income earners will receive the same total benefit as will the bottom 65%.
More specifically, those earnings over $180,000 will get $117.6bn of the total money in the first 9 years – or 48.3% of the value of the tax cuts. That’s a pretty large amount to go to just 3.7% of all income earners.
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Because women earn less than men, the PBO estimates that in the first 9 years men will receive about 65% of the total benefit.
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The PBO’s figures show just how few of us will benefit. And we can use the taxation data to see just how long it would take most workers to earn above $180,000 and be part of the group that benefits the most.
For example, a primary school teacher who earned $74,012 in 2019-20 will earn $180,000 in 2050 (if they are able to secure an annual wage growth of 3% in that time).
A garage mechanic on $60,096 (close to the overall median taxable income of $60,794) will have to wait a bit longer – they will only get to $180,000 in 2057:
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Someone on $45,000, can look forward to getting most of the benefit of the tax cuts in 2070 (best not to spend it just yet).
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All this money going to the richest means less going to others. Albanese knows this given he asked Scott Morrison in 2019, “What programs and services will be cut to fund stage three of the government’s tax scheme?”
Now, apparently, that’s not an issue. He told the ABC’s Richard Glover of the choice between not raising Jobseeker and keeping stage-three tax cuts: “There’s no link between the two things.”
But of course, both he and Chalmers were right in 2019. There is a massive link.
In 2024-25, $12.7bn of the $17.7bn cost of the tax cuts will go to those earning above $120,000. That is almost the same amount expected to be spent on Jobseeker payments that year.
While $120,000 is nearly four times the poverty line, the current level of Jobseeker is almost $300 a week below it:
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The relative level of unemployment benefits is as low now as it has been in the past 50 years:
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More than enough has changed in the economy since the election to justify dumping the tax cuts. But they should never have been agreed to in the first place. They are an anathema to the aims of any progressive political party and will leave the nation with fewer resources to help those who truly need it.
Greg Jericho is a Guardian columnist and policy director at the Centre for Future Work
