No self-respecting Labor government would design the tax scales to deliver 78 per cent of the benefit to the top 20 per cent of earners. But this is the bargain that Albanese accepted in opposition. | OPINION by George Megalogenis
But scrapping the tax cuts outright, or delaying their introduction by a year or two, would not return the budget to surplus. Liberal treasurer Josh Frydenberg’s pre-election budget estimated a deficit of $47.1 billion in 2024-25, and $43.1 billion the following financial year. Those numbers now appear to be too optimistic.
A stimulus of some sort may well be needed in 2024 to prop up demand, especially when households will be into their third year of higher interest rates, and real wage cuts. So scrapping or delaying the tax cuts is, in fact, risky fiscal policy. Nevertheless, the prime minister and treasurer must be asking themselves whether they can afford to stick with the tax cuts in their entirety. The reason they favour men at the very top of the income ladder is they flatten the tax scales from four rates to three. They do this by abolishing the marginal tax rate of 37c that currently applies on every dollar earned between $120,001 and $180,000 a year. A new middle rate of 30c will apply instead from $45,001 to $200,000.
That is more than $40 billion a year in today’s dollars – in effect, it is the structural deficit Morrison and Frydenberg bequeathed Albanese and Chalmers. But it is spending that Labor views as non-negotiable, on the National Disability and Insurance Scheme, aged care, defence, health and infrastructure.Dr Kennedy said the government could identify “structural savings” in the budget to offset this spending, or “it can raise additional tax revenue”.