by Elisa Resce and Gavin Newbound – June 2018
The Government’s tax cuts have now passed the Senate. Seems like good news, if you only follow slogans – ‘tax cuts’ always seems like something the ordinary Australian would want.
But as always, the devil is in the details.
In this case, one of the most important details is that tax cuts mean less revenue for governments to deliver essential services.
Maybe that’s not a problem if a government is intending to privatise said essential services, but Australians are already suffering from similar decisions in the past – and wouldn’t it be good if we could learn from those mistakes? We have plenty of reminders about what happens when government assets are privatised, if our soaring energy bills and inability to deliver a cheap and efficient FTTP NBN are any indications. So how the Government intends to make up for this lost revenue without either privatising or cutting resources, is still anyone’s guess.
Further to this is the fact that ‘ordinary Australians’ aren’t the ones getting the most benefits from these tax breaks. The top 5% of income earners will have a tax benefit of $7000 per year, versus roughly just over $500 a year for the average worker.
How has Scott Morrison sold this? It all comes from the claim that the average wage is $84,600 per year, and this basic definition of ‘middle Australia’ is what the entire tax cut plan is based around. But either ScoMo was being deliberately misleading, or something is wrong with his maths – the true average wage is $62,000. So how to sell a tax cut policy based on an ‘average’ salary that, in reality, is high income compared to most of us?
Keep pitching a slogan, expect that people will be grateful for the small break they get, and hope people don’t look too closely at the sums.
There are some who feel sorry for the top end of town, who think high income only ever comes from hard work. And, let’s be fair, there are some on high income salaries who work incredibly hard in their field – for example, doctors – so there is the argument that they should not have their income slashed through tax. But the reality is that high income earners were already benefitting from the raising of thresholds in lower tax brackets – their benefit was just being capped. This new legislation puts an end to that capping. Further, the high end of town have generally been able to negotiate / demand their own pay increases in the past to compensate higher tax rates, while the ordinary worker without the same negotiating ability, cannot fight even for minimum wage increases when fearing reprisal in job loss.
There’s little to be gained from guessing what the Government’s motivations are. But it is becoming clear that Treasurer Scott Morrison is not interested in maths as much as he is in slogans. Just recently on RN Breakfast, ScoMo summarised the entire issue as:
“The choice is clear:
Higher taxes under Labor,
Lower taxes under Liberal.”
Never let the details (or maths) get in the way of a good election pitch.
The Australian Democrats advocate for fair and balanced tax systems that appropriately fund governments to deliver essential services. We also advocate a close watch on government spending, to ensure taxes are not wasted.
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