Resounding support to trim superannuation concessions has put controversial income tax cuts back at the centre of political debate as key independents say the public won’t tolerate tax breaks for the very wealthy.
The Morrison government’s Stage 3 income tax cuts are scheduled to take effect on July 1 next year but balance-of-power senators said they should not go ahead given current budget pressures.
“I think they have to be reversed,” ACT Senator David Pocock said on Monday.
Senator Jacqui Lambie also called for the Scott Morrison-era tax reform to be “tapered” on Monday, and said their benefits skewed too far towards high-income earners at a time when the government could not be “giving away freebies”.
“It’s the ones that go up over that [$150,000 or $160,000 a year in salary] I guess – do they actually need a tax cut?” she queried.
Poll position
Voters were unmoved by Opposition criticism of the government’s policy to reduce superannuation tax concessions for people with balances over $3 million; a Newspoll survey found two-thirds of them supported the change.
The finding boosted the government in a question time that ran much longer than usual, but in which Prime Minister Anthony Albanese did not weary of questions about the policy which caused so much recent controversy, and invited more.
“I do note that a majority of Australians, including a majority of Liberal voters, say they agree with this change,” he said.
One minister seemed to pour cold water on any suggestion that the poll might embolden the government to move onto other tax breaks advantageous to the wealthy, including 10 identified last week by Treasurer Jim Chalmers as costing the budget $150 billion.
“You can’t read too much into that,” the manager of government business in the House of Representatives, Tony Burke, said of the poll.
Senator Pocock said a majority of senators on the crossbench, whose support the government needs to pass bills, had declared their opposition to the tax cuts which Mr Albanese repeatedly ruled out repealing before last year’s election.
“We’ve got to start to talk about these things and not just talking about them, but putting in changes that ensure that the budget can work harder for the people who need the support, not people who have somehow managed to tuck away $3 million in super,” he said.
Shot their bolt
In moments reminiscent of the public debate that preceded last week’s change on superannuation, repeal of the cuts was publicly debated in the lead-up to the October budget, but the government did not change its position.
University of Queensland economist John Quiggin said the government risked taking a slim record of reform to voters largely staked on the Voice to Parliament referendum if it did not repeal the tax cuts before the next election.
He said criticism in response to its superannuation reform – which was styled as a raid on retirement savings by Coalition MPs – could be read two ways by senior figures in the government.
“It could be even worse next time,” he said.
“The other (possibility) is the Opposition have shot their bolt: If they say marginal changes to superannuation taxation is communism … what are they going to say next time?”
Only 0.5 per cent of Australians will be affected by the change to Howard government taxation policy that has progressively advantaged high-income earners.
But the Stage 3 cuts – which would delete the 37 per cent high-income bracket – are even more regressive, analysis by the Parliamentary Budget Office shows.
They would give a tax break of:
- $9800 for someone on a salary of $180,000
- $400 for someone on a salary of $45,000 to $60,000
- No benefit to people on lower incomes
- Twice as much of the benefits would flow to men.
The cuts come into effect mid-2024, and would take an estimated $240 billion out of the budget over the next decade, leading the International Monetary Fund to last month call for them to be reassessed so the government would have enough revenue to pay for services.
Dr Chalmers has warned that mounting costs for aged care and national defence will be difficult to meet without fiscal reform amid a widening structural deficit.
Other critics of the cuts include Nobel prize-winning economist Joseph Stiglitz and a former governor of the Reserve Bank who were among 100 signatories of an open letter in December calling for their repeal.
