Australian workers on the minimum wage would eventually pay the same marginal tax rate as those on $200,000 under the Turnbull government’s “flattening” of the tax system, new analysis claims.
The national minimum wage could be expected to hit about $45,000 by 2024, the year the government plans to abolish the 37 per cent tax bracket, the analysis found.
It means the top rate of tax a person on the lowest legal full-time wage in the country would be the same as someone on $200,000. Both would pay 32.5 cents in tax for every dollar they earn over $41,000.
The independent analysis, prepared for Greens employment spokesman Adam Bandt, estimated the minimum wage would reach $41,300 by 2021 considering average yearly increases of 3.4 per cent.
The minimum wage, which is set by the Fair Work Commission, has increased at that rate on average over the past two decades.
Mr Bandt argued the government’s tax plan would kill egalitarianism.
“Our labour laws and our tax system are broken when someone earning less than the minimum wage pays the same tax rate as a CEO on $200,000,” he said.
“This will turbo-charge inequality.”
People on the minimum wage – $36,134.80 a year – currently pay 19 cents in the dollar, but would have been expected to hit the 32.5 per cent tax bracket ($37,001-$87,000) by next year.
The government has proposed moving that threshold to $41,000 in 2022. But by then, minimum-wage workers are projected to earn $42,700, according to the analysis.
The government has argued flattening tax scales will provide a greater incentive for people to earn more by eliminating bracket creep for most low and middle-income earners.
Mr Morrison said on Monday the scrapping of the 37 per cent tax bracket would make the tax system “simpler”.
“That’s a simple plan, it’s a fair plan, it’s a responsible plan,” he said.
“It’s a plan that gives Australians certainty and that encouragement that the more effort they put into, the government won’t be taking more out of their own pockets.”
The total cost of the government’s plan – which also includes a tax cut of up to $530 for low and middle-income earners next year – is $140 billion over 10 years.
The plan would also progressively lift the 32 per cent threshold from $87,000 to $120,000, but most of the cost would come from having all workers between $41,000 and $200,000 moved onto the same top tax rate.
While promising larger tax cuts for low- and middle-income earners, Labor has lashed the final part of the government’s tax plan as unfair and a “hoax”.
Opposition leader Bill Shorten is yet to confirm whether Labor will block those changes in Parliament.