The Albanese government is discovering that mimicking the LNP delivers no benefit. It’s a lesson they will keep getting taught all the way to the next election if they keep the stage-three tax cuts and refuse to raise jobseeker.
It was very easy for the ALP in opposition to sound generous and progressive when talking about jobseeker. And yet when it came to the election last year, the ALP went with the same jobseeker policy as the LNP. You get the reasoning – the LNP can’t criticise and so it will mostly be a non-issue, which was indeed the case.
Then on Tuesday the Albanese government’s own committee of experts released a report calling for an increase in jobseeker, and the ALP … said no.
Now it is an issue.
You think the government will get credit for “fiscal responsibility” from those who would have criticised them had they decided to raise the rate? Hell no. Here’s the Australian on Wednesday: “Jim Chalmers will reject a core $24bn recommendation from his economic inclusion advisory committee that the ‘seriously inadequate’ jobseeker be increased by 40% to just under $1,000 a fortnight”. Agreeing to bad policy in opposition means you own the bad policy in government.
The same is true for the low-middle income tax offset (LMITO).
Originally the $1,080 offset was part of the stage-one tax cuts designed to be replaced by the stage-two cuts. The Morrison government planned to give people earning between $48,000 and $90,000 a $1,080 tax cut under stage two, while simultaneously taking away the $1,080 offset.
But in 2020 they brought forward the stage-two tax cuts and kept the LMITO for another year.
That meant, as I noted at the time, those same people would now be handed a $1,080 tax rise in 2021-22 when the LMITO stopped. Oops.
So in the 2021 budget, Josh Frydenberg extended it another year, called it a new tax cut, and pushed the tax rise out to 2022-23. Then he made it worse in the March 2022 budget when he added $420 to the offset to make it $1,500.
And the ALP went along with it.
It meant, as I wrote last year, both parties throughout the election campaign avoided mentioning they had agreed to hand people a $1,500 tax rise in 2022-23.
Again, you can see the reasoning – the LNP can’t criticise the ALP for doing something the LNP was also doing, right? And again, it was not an issue in the campaign.
But then early this month Nine media reported the government would not extend the LMITO. And so the opposition leader, Peter Dutton, immediately went on TV saying “right on eve of Easter, the treasurer makes an announcement that 10 million Australians are going to be slugged by $1,500 a year.”
Shameless? Sure. True? Yep.
Not keeping the LMITO is going to see median-income earners pay up to $1,500 more in tax in 2022-23 than it did in 2021-22.
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Governments like to put a table in the budget papers showing how much better off families are due to the budget. Jim Chalmers won’t be able to do that. And going to the next election Dutton will be able to say median-income earners paid less tax under Scott Morrison.
But what about the stage-three tax cuts? Won’t they deliver whopping big tax cuts that neuter that argument?
Alas, those whopping big cuts are not for those who got the LMITO.
This is the true cruelty and foolishness of the ALP agreeing to not only remove the LMITO but keep the stage-three cuts. Consider that for a person on the current median income of $65,000, the LMITO was worth $1,500, but the stage-three tax cut give them a cut of just $500.
So, congratulations ALP: you just agreed to go to the next election allowing the Liberal party to say median-income earners were $1,000 better off under them. But hey, not to worry, someone on $200,000 is $9,075 better off. I am sure they’ll give you the credit for that:
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To put it in percentage terms, someone on the median income of $65,000 will pay 1.5% more in tax after the stage-three tax cuts have come into effect than they did last year, while someone on $200,000 will pay 4.5% less tax.
And around 75% of taxpayers will pay more tax in 2025 compared with what they did in 2022:
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How’s that for an election platform? Do you think anyone is going to pat the ALP on the back for delivering the stage-three tax cuts as promised?
Anyone who wants them already credits the LNP for implementing them. And the LNP will take that credit and at the same time shamelessly blame the ALP for a majority of workers paying more tax under Labor.
The stage-three tax cuts were always the worst economic policy, but the ALP has also turned them into the dumbest political strategy.
The government should dump the stage-three tax cuts and use the $300bn in savings to deliver fairer cuts, better services and infrastructure, and increased support for those on jobseeker. And with that they could claim their own legacy and credit.
• Greg Jericho is a Guardian columnist and policy director at the Centre for Future Work
