Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Friday, 14 June 2019
Labor says it’s eager to legislate income tax relief for low-income earners quickly. So are we. But there is no way the government will agree to split our income tax relief package. It was a firm election commitment and it is central to our plan for a stronger economy. Any attempt by the Senate to split the package would be rejected by the government in the House of Representatives.
So the way for Labor to help deliver income tax relief for low-income earners quickly is by voting for our entire package in the first week of next month.
Labor says it wants to see stronger wages growth. So do we.
Our plan for lower income taxes puts more money into workers’ pockets and helps get more people into jobs by stimulating the economy.
Lower income taxes mean higher take-home pay and more money to spend in the economy.
We need a stronger economy to keep driving down unemployment and to underpin sustainable wage growth.
And why would Labor want to persist with a losing argument? Less than a month ago Australians voted in favour of our plan for income tax relief. They voted for aspiration and against the politics of envy, where Labor effectively sought to brand as the “top end of town” any worker earning more than $180,000 a year.
Labor has questioned why parliament should be asked to legislate now for tax relief starting in 2022 and 2024, given there would be at least one more election before then. That argument cuts both ways. With another election ahead, Labor has the opportunity to campaign again to convince voters to increase income taxes for those on the top marginal tax rate — if that remains ALP policy.
Our plan for lower income taxes is designed as a complete package to be implemented progressively across a seven-year period.
That is because we have several important priorities to accommodate at the same time.
We are committed to return the budget to surplus from 2019-20, and to keep it in the black across the whole medium term to 2029-30 and beyond.
We are committed to boosting funding for hospitals, schools, infrastructure and other essential services.
We have pledged to those on low and middle incomes that they will be given priority in tax relief.
And we are committed to simplifying our tax system and to address bracket creep, which is a brake on the economy and leaves households with less. Not dealing with bracket creep means more and more Australians get pushed into the higher income tax brackets merely through inflation.
The $180,000 income threshold for the top marginal tax rate has been in place since 2008. If it was indexed by the consumer price index since then, by 2024-25 the threshold would be above $254,000.
So our plan to deliver income tax relief for all is carefully calibrated and phased in across an extended period to ensure it is affordable within the budget and in the light of other important priorities.
We need to ensure that our tax policy settings provide the right incentive and reward for effort. That leads to stronger growth, which delivers the opportunity for low and middle-income earners to get ahead.
We have already legislated the abolition of the 37 per cent tax bracket, the lifting of the income threshold for the top marginal tax rate from $180,000 to $200,000 and adjustments to various other income thresholds.
Stages two and three of our income tax plan to be considered by parliament early next month will lift the top income threshold for the 19 per cent tax bracket to $45,000 and reduce the tax rate for those on incomes between $45,000 and $200,000 from 32.5 per cent to 30 per cent.
This means 94 per cent of workers will not pay more than 30 per cent tax on any of their income. This boosts the incentive and reward for effort while preserving a progressive tax system. Our top-income earners will continue to pay the same share of income tax revenue as they do now — about 60 per cent for our top 20 per cent of income earners.
The political reality is that across the board income tax relief — as important and necessary as it is for our economy — can only be secured as part of an overall package. To split this tax relief package — dealing with the lower income end only — would effectively mean giving up on tax relief for all other hardworking Australians.
If overall income tax relief cannot pass parliament as part of a package which prioritises lower income earners and was endorsed by Australians just a few weeks ago, when could it pass?
This opinion piece was published in The Australian on 14 June 2019.