Australia is set to legislate a 30-cents-in-the-dollar tax rate for all workers earning under $200,000, with the Labor Party preparing to announce it will not block the tax cuts.
The New Daily has confirmed the strategy, to be discussed at shadow cabinet on Monday, leaves open the door to a future Labor government repealing the 2024 tax cuts for high-income earners, which it regards as regressive and unaffordable.
But crucially, the ALP would not insist on amendments so it cannot be accused of delaying $1080 tax cuts for 10 million workers from July 1.
Confused about tax cuts? TND explains it for you here
If the Morrison government refuses to split the bill, Labor will vote for it.
If agreed, the plan will involve Labor voting for the Stage 1 tax cuts for 2018-2019 and the Stage 2 tax cuts in 2022 in Parliament.
The New Daily revealed on June 4 that the first shadow ministry meeting had discussed this approach.
Shadow cabinet is also expected to debate if the Stage 2 tax cuts due in 2022 should be brought forward to address the weakening economy.
The ALP would then amend the government’s legislation that deals with the Stage 3 tax cuts – worth $95 billion – for middle- and high-income earners.
Reminder: 2024 tax cuts will not “end bracket creep” as @mjrowland68 just claimed on @InsidersABC. To do that you would index the tax income thresholds. They’re not. Suggestion will end bracket creep nonsense. Also, $95 billion estimate re cost was in the budget papers. April 2.
— 𝕤𝕒𝕞𝕒𝕟𝕥𝕙𝕒 𝕞𝕒𝕚𝕕𝕖𝕟 (@samanthamaiden) June 22, 2019
These are the tax cuts that will deliver a flat tax rate of 30 cents in the dollar for all workers earning between $45,000 and $200,000 from 2024.
If adopted, an estimated 94 per cent of taxpayers would face a tax rate no higher than 30 cents.
But crucially, the ALP will not insist on these amendments, which means if the Morrison government refuses to “split the bill” and the amendments fail, the Labor Party will vote for the entire package to ensure the first stages of the tax cuts are not delayed.
The Morrison government has insisted it has a mandate for the entire $158 billion tax package and warned it will not “split the bill” to ensure it is an all-or-nothing proposition.
Labor leader Anthony Albanese prepared the ground for the new approach in interviews where he called for an end to the class warfare rhetoric and declared he does not regard tradies and blue-collar workers earning $200,000 a year are the “top end of town”.
On Sunday, treasury spokesman Jim Chalmers backed this view and he also issued an apology for his own rhetoric.
“First of all, we accept that some of the language that we used in the last term, and I used in the last term, didn’t strike the right chord in the Australian community,” Mr Chalmers told the ABC’s Insiders.
“We do acknowledge that. The second point that Anthony is making there is that if you’re on a good wicket in this country, we say good on you. That is a good thing. We want more people doing well.”
Mr Chalmers confirmed on Sunday the urgent need for the $1080 tax refunds to stimulate the economy.
“Our highest priority is to get money into the hands of workers and flowing through an economy which desperately needs it. The economy hasn’t been growing this slowly since the Global Financial Crisis 10 years ago,” he told the ABC’s Insiders.
“So what we’ll do, what our highest priority is, is to get that first stage into the economy flowing through the shops and businesses so that we can get the place moving again.”
"The economy is quite weak at the moment" @JEChalmers
— Insiders ABC (@InsidersABC) June 22, 2019
The peace plan follows a warning from Labor frontbencher Joel Fitzgibbon that the ALP should adopt a pragmatic approach and stop pretending to be a “government in exile”.
ACTU secretary Sally McManus said unions remain concerned about the Stage 3 tax cuts.
“We believe this reduces the progressive nature of the taxation system,” she told The New Daily.
“Someone on $50,000 will be paying the same tax as someone on $200,000.”