A Promise Worth Breaking

Since the inception of stage three tax cuts in the 2018 budget, I have held large reservations. The Liberal and National Coalition government’s proposal introduced a regressive and flat income tax structure and to top it off announced it without any costings. When the costings eventually surfaced, four years later, they were substantial. Recent estimates from the Parliamentary Budget Office (PBO) revealed that the stage three tax cut would incur a 20.7 billion dollars expense in its first year.

However, upon closer examination, the distribution of these cuts proved even more concerning. A significant portion, over $11.2 billion (more than half), would benefit taxpayers earning above $150,000.

Despite the Coalition government’s promise for a boost in productivity and participation this policy falls short under scrutiny. The lion’s share of the tax cut would have gone to individuals earning $200,000, maintaining their marginal tax rate of 45% unchanged.

Additionally, the assertions that these cuts would have mitigated bracket creep were highly flawed. It’s evident that this phenomenon disproportionately affects low- and middle-income earners, contrary to the Coalition’s claims.

But now, they are gone. Or, to put it more accurately, they have been replaced by something new, fairer and catered to the current economic conditions. 

So what does this exactly look like?

The median annual earnings for Australian workers now stand at $67,600. This represents the true middle Australian worker. Under Labor’s new stage three tax plan, middle Australian workers stand to gain $804 more compared to the previous arrangement, receiving a $1,369 tax cut as opposed to $565.

According to PBO estimates, 90% of income earners make less than $153,000. Considering that the new tax cuts benefit those earning less than $146,500, it’s safe to say that approximately 85% of income earners will fare better under this revised plan.

There’s no hiding that this change is quite formidable.

Ultimately, these changes result in a tax system that is considerably more progressive than what would have been achieved under the previous stage-three cuts.

While there will undoubtedly be political contention surrounding the breaking of an election promise, such arguments will only carry the Coalition so far. 

Do they really think people on median and average incomes will be angry they are getting a bigger tax cut? Complaining that because Labor broke a promise 90% of people are going to be better off is rather unconvincing.

The stage three tax cuts in its previous form was just bad policy. The Labor Government was right to dump them and come up with something better for the economy, and the country.

Every one of the 13.6 million taxpayers in this country will benefit from Labor’s tax cuts, now that’s a promise worth breaking.


Dilhan Simsek

The author Dilhan Simsek

Leave a Response