On the day the senate committee holds its only hearing to discuss the governments personal income tax legislation, ACOSS is raising serious concerns about both the tax cuts themselves and the way the parliament is dealing with them.
On the decision making process, it is extraordinary that the fate of $140 billion of public revenue is being decided in a single day of hearings, without full details of the annual cost of the tax cuts.
Of even greater concern is the potential impact of this legislation on the ability of future governments to fund decent health, education and community services and lift people out of poverty, including an increase to Newstart.
The Coalition is embarking on a disastrous remake of recent history in their hurry to lock in unaffordable income tax cuts for the next six years, while we have underfunded essential services and shaky budget figures.
Dr Cassandra Goldie, CEO of ACOSS says: “John le Carré says to ignore history is to ignore the wolf at the door.
“In 2007, the Howard Government budgeted for $34 billion in personal income tax cuts (over 4 years) to be delivered in two stages: the first for middle income taxpayers and the second for those on higher incomes. The Labor Opposition supported the cuts in the 2007 election, and when elected, the Rudd Government implemented almost all of those tax cuts ($26 billion over the remaining 3 years) before facing an unexpected economic downturn in the Global Financial Crisis (GFC) of 2008-9, which slashed tax revenues, especially from companies.
“Without the bi-partisan commitment to costly income tax cuts in 2007, the Budget would have likely returned to surplus soon after the GFC downturn, when the Rudd Government’s economic stimulus package was wound back.
“Instead, in 2014 the Abbott Government’s response to the six budget deficits that followed the GFC was to slash spending on social security payments for the poorest in the community (including an attempt to deny young people unemployment benefits for six months), and funding for essential services, including doctor’s visits, hospitals, schools and universities. In fact $15 billion of those cuts are still on the books, and Newstart Allowance has not increased for 24 years.
“Fast forward a decade to 2018, and the Coalition government has announced a very similar $140 billion package of personal income tax cuts, beginning with middle income earners and leading to more costly cuts for those on the highest incomes.
“This income tax package comes at a time when our Budget is in a much worse position than in 2007 and the gaps in essential services such as aged care, health, and Newstart are wider than they were in 2007.
“The 2018 income tax cut package is built on shaky budget projections which few experts have endorsed, such as wages growing by 3.5% in both 2020 and 2021 when wages only grew by 1.9% last year, and real growth in spending held at an average of 1.6% per year, which would be the lowest level in fifty years!
“The 2018 income tax package will mean ongoing cuts to health, education and social security for those who need them most – people in the lowest 40% of households who are unlikely to benefit from tax cuts.
“We call on the Coalition and Labor to take a deep breath, learn from the recent history of federal budgets and tax cuts, and make the decision to avoid a long run of tax cuts we can’t afford.
“Otherwise, when aged care and disability services aren’t available when people need them, when people avoid visiting a doctor because it costs too much, when more people locked out of paid work and families on low pay fall into poverty, and people on modest incomes have to leave our cities because they can’t afford housing, people will recall that this was when the major parties made the wrong call.
“Even if the budget projections are right and public revenues flow strongly again from taxes on wages and profits, locking in tax cuts seven years in advance to restore ‘’bracket creep’’ is the wrong approach. To compensate taxpayers for bracket creep, governments need to know how different groups are affected by it. The government has taken a stab in the dark and offered most of its tax cuts to high income-earners. Low and middle income-earners are likely to find they’ve been offered a raw deal.
“This is the time for cautious, responsible budgeting, not a reckless tax cut auction.”