Coalition passes income tax cuts

With crossbench backing from Jacqui Lambie and Centre Alliance, the Coalition has managed to pass their $158 billion tax cut package. Millions of low- and middle- income earners will soon receive up to $1,080 back.

“This is a win for those hardworking Australians quietly going about their lives,” Prime Minister Scott Morrison said.

The Labor opposition initially opposed the package, but they have since yielded, despite their ongoing concerns about cuts starting in 2024 – 2025 onwards which they say Australia won’t be able to afford.

Labor’s initial resistance was due to problems with the second and third stages of the tax cut plan. The second stage has been changed, with the 2019 budget “increasing the top threshold for the 19% tax bracket to $45,000 and increasing the low-income tax offset to $700,” reports the Guardian. Labor agreed to support these changes.

Labor still opposes the third stage of the plan, which would give a third of the cuts to the highest-income earners.  A model by the Australia Institute found that only 3% of the benefits will go the poorest Australians, while the richest 20% will receive more than half.

However, after realising Labor’s proposed changes would not be supported, shadow treasurer Jim Chalmers, said the party had to “prioritise.”

“We won’t oppose the full package if it comes to the Senate unamended because our highest priority is to make sure that Australians do receive that tax cut next week,” Chalmers said.

According to Labor Leader Anthony Albanese, Labor may still repeal the third stage – which is not due to come into effect until July 2024. Their decision would be made before the next election and would be based on the economic circumstances then.

Opposition still remains

The Greens slammed Labor’s support with Greens Leader Richard Di Natale saying Albanese has “abandoned the mantle of opposition leader.”

“What’s the value of the Labor party if they are simply a paler version of the Morrison government?” he asked.

The ABC’s Ian Verrender argues that while incentivising middle-income earners to spend extra cash will increase consumption and provide the economy with a “jolt,” the tax cuts will not prevent a recession.

The second and third stages of cuts won’t kick in for many years, and they rely on “a series of bullish forecasts about spending and economic growth to work,” Verrender says.

Moreover, he argues these tax cuts won’t be enough to lift the economy, as they do not tackle infrastructure development. Australia’s major cities have become choked with traffic, and development projects would create jobs and improve productivity.

Many are also concerned that the third stage of the plan will lead to reduced funding for essential services to pay for the cuts, 10 daily reports. “The Federal Government is playing reverse Robin Hood,” says Joanna Quilty, CEO of NSW Council of Social Service. “Taking money that could go to essential services for our most disadvantaged in favour of giving tax cuts to those at the top end.”