Finance Finance News The government’s integrity on trial again. This time on tax cuts
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The government’s integrity on trial again. This time on tax cuts

Retail workers hit.
Tax cuts are the only immediate plan the government has to alleviate our ‘retail recession’. Photo: Getty
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To recap: The Australian economy is having its worst year since 1992.

The outlook for the new financial year is somewhere between more of the same and “uncertain” – Donald Trump permitting.

That’s why the Reserve Bank is slashing interest rates and asking the federal government to help.

As it stands, Scott Morrison and Josh Frydenberg have just one immediate stimulus proposal on the table to try to alleviate the “retail recession” – the $1080 tax refunds for low- and middle-income earners. (It will take more time, perhaps years, for the promise to restore its real infrastructure spending to something like Joe Hockey’s policy to come to fruition.)

In these circumstances, responsible government wouldn’t muck around with that single policy, lest unemployment starts ticking up faster.

But mucking around for petty political purposes is just what the Morrison  government is doing.

It’s merely cheap politics to delay those $1080 tax refunds as a means of wedging the Labor opposition on much more contentious cuts for the top 10 per cent of taxpayers in five years’ time.

The government has already been successful in somehow getting media to focus on Labor’s indecision over the distant tax, rather than question  the government’s integrity in being willing to put those immediate, agreed, necessary and utterly non-controversial $1080 tax refunds at risk.

Australia needs government first and foremost to govern for the good of the nation, to do what needs be done quickly and play political games later.

To state the obvious, Labor is in opposition – it’s the government’s job to get immediate, important policy passed.

The argument that Labor should pass all the tax cuts now because it can always repeal them later is specious.

We know only too well how hard it is to remove a tax break after the event, even if it’s little more than a rort.

Novated leases, anyone?

The political appeal for the Liberal Party is that if Labor votes for Stage 3 now and wants to scrap it later, the Coalition will be able to chant “but you voted for it”.

Multiple billions of dollars in cash refunds of franking credits for people who don’t pay tax, anyone?

The political game is even more pathetic when it looks like the government could get its legislation through the Senate with just a little work on the crossbenchers.

Sure, Pauline Hanson has made noises about not passing Stage 3, but her track record is to make such noises and then roll over for the government after some token gesture.

Heck, Senator Hanson is on about $200,000 a year – she’s a prime candidate for the best of the tax cuts, so of course she will end up voting for it. That’s two One Nation votes.

Cory Bernardi is a sure thing, leaving a little coaxing and dealing to get one of the other two independents over the line. Shouldn’t be hard.

The fact that individual Labor MPs have chosen to publicly agree to a radical flattening of our progressive income tax system might say more about those individuals’ ambitions than longer-term grasp of what’s good for the nation.

The government has been torturing the data to come up with selected numbers to support its case. You can do that with numbers if you spin them hard enough and with a receptive media audience.

To keep those much-headlined claims in perspective, here again are the core numbers that count:

In 2019, someone with a taxable income of $60,000 – about the median wage – will pay 18.5 per cent of that in income tax. In 2024, under the government’s debatable “Stage 3”, someone on $60,000 would pay 17.8 per cent – a reduction of just 0.7 of a percentage point.

Someone with a taxable income of $200,000 in 2019 will see 33.5 per cent go in tax. Under Stage 3, that would drop to 27.8 per cent – a cut of 5.7 percentage points.

The gap in the percentage of total tax paid on $60,000 and $200,000 would be compressed by a third, down from the current 15 percentage points to 10.

Many people in the top couple of per cent of income earners think that would be very nice. But it would mark a serious erosion of Australia’s relative income equality when our wealth inequality is markedly worsening.

(In simple dollar terms, a $60,000 income is supposed to be getting that $1080 tax cut now, but only another $376 out in 2024-25. A $200,000 taxable income gets only $135 now, but $11,640 in 2024-25.)

Like the blatant inequity of continuing the novated car lease lurk, playing political chicken with the $1080 tax refunds is a test of integrity.

Both major parties fail the novated lease integrity test.

The government is failing the immediate tax refund test miserably.

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