11 Reasons Why the Economic Case for Stage 3a Tax Cuts Has Not Been Made

1 // Giving away a $95 billion dollar tax cut means billions of dollars less for schools, hospitals and other services

Tax revenue is what pays for community services and infrastructure, and this proposed tax cut for the wealthiest Australians represents one of the largest threats to Australia’s revenue base in recent times, dwarfing even Turnbull’s doomed big business company tax cuts which were thwarted by the Senate.

2 // Someone earning $45,001 will have the same marginal tax rate as someone on $200,000 a year

The Government keep trying to tell Australians this is not a flat tax, but 83% of all taxpayers paying the same marginal tax rate. Fair? We don’t think so.

3 // The highest income earners find themselves in the winner’s circle — again

These tax cuts are another big win for the wealthy. The top 20% of income earners get over half the benefit (52.7%) while the bottom 20% get only 12% of the benefit — in fact, the bottom 10% get nothing at all.

4 // Men get twice the benefit of this tax cut compared to women

It’s not just low income earners who lose out. In fact, once fully implemented in 2024–25, women will only get half of the benefit compared to what men will receive.

5 // Already, the 7 richest families in Australia own more wealth as the poorest 1.8 million Australian families combined

Our tax system is designed to help everyone get a fair go, but these tax cuts would do the exact opposite . They put more money in the pockets of the already wealthy while low income earners have to pick up the slack.

6 // It will severely undermine our progressive taxation system and cost billions.

The Government is putting in legislation now for income tax cuts that won’t start until 2022 and 2024.

When fully implemented, the tax cuts remove $95 billion dollars in revenue from the budget in the first five years, money that could be going towards schools, hospitals and other services and infrastructure.

7 // The claim that these tax cuts would benefit most Australians because the average full time wage is $82,000 is misleading at best

Australia’s median wage is $55,000, which means half of Australians actually earn even less. In fact, earning $82,000 would put you at around the top 25% of income earners — not exactly ‘average’.

In other words, nearly three out of every four working Australians earn less than the average full-time salary.

8 // The idea that these tax cuts are needed ‘to address bracket creep’ is a furphy

Claims by the Government that their Stage 3(a) tax cuts are designed to reduce the impacts of bracket creep are simply not supported by the data.

Comparing current income taxation levels to a bracket creep baseline shows the levels of tax paid currently (under the income tax cut legislation passed in 2018) are already lower than if only allowances for bracket creep had been removed.

In fact, Australia Institute analysis shows the two highest income tax brackets have already received the largest amounts of overcompensation in the name of bracket creep when they have actually required the least.

(What’s ‘bracket creep’? Bracket creep is when the marginal tax rate brackets don’t move with inflation, but your wage does.

Put simply, if your wage increases by the ‘cost of living’ every year, you have not been ‘given a raise’ in real terms. But there is no corresponding increase to the marginal tax rate brackets, leading to workers ‘creeping up’ in the tax brackets on what is technically the ‘same’ wage in real terms.

People on higher wages paying higher marginal tax rates is not ‘bracket creep’ that is Australia’s progressive taxation system working as designed.)

9 // What’s the rush? — If the tax cuts don’t kick in for another four years, why do they need to be rushed through Parliament now?

Why do we need legislation for a $95 billion dollar income tax cut in 2024–25 passed in the Parliament in 2019? What’s the rush?

10 // And if these tax cuts don’t kick in until 2024–25, they cannot stimulate the economy right now

These tax cuts will only further entrench inequality in Australia. In a time of sluggish economic growth, these tax cuts do not come in until 2024, so they cannot stimulate the economy right now when it is needed.

Furthermore, low- and middle-income taxpayers are more likely than high income taxpayers to spend their tax cuts and stimulate the economy.

There are simply many other more cost-effective ways to stimulate the economy. Targeted spending like investing in schools and education is more likely to help the economy than giving away more tax cuts to high-income taxpayers.

11 // The economic case for the Stage 3a tax cuts has not been made

The Government has not made a credible economic case for these tax cuts. Send a message to the Senate, telling them to oppose the $95 billion Stage 3a income tax cuts for high income earners.

These Stage 3a tax cuts do not even come into effect until 2024. There is simply no economic reason for the Government to pressure the Senate — Australia’s democratic House of Review — to rush to rubber stamp this legislation in July 2019.

Tell the Senate what you think.

Block Stage 3a in the Senate > Add your name to the petition.

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an independent think-tank based in Canberra > australia.org.au

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The Australia Institute

The Australia Institute

an independent think-tank based in Canberra > australia.org.au

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