I rise to speak on the Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018 and I want to state at the outset what we are witnessing with this legislation is not a fair dinkum plan for tax relief for those who need it most.
What it is is a political stunt designed to blackmail the Senate into signing up to a tax package that is both fiscally irresponsible and unfair. A tax package overwhelmingly biased toward some of the wealthiest people in the country.
A tax package for the wealthiest parts of Sydney and Melbourne, not for the suburbs, or the regions, or states like Tasmania, Queensland and South Australia.
And we know the extent to which this is a political stunt because if the Government was serious about its claim of wanting real tax relief for the battlers, 10 million working Australians on low and middle incomes, it could have that right here, right now.
The so-called step one of the tax relief has the support of just about every Senator in this place except the Australian Greens. So we could put it to a vote right now and it would pass tonight. But that is not what the Government wants. They want to play a bit of politics. They want to play a bit of politics with what happens in 2024 to try to gain what they perceive as a political advantage and they are prepared to stand in the way of tax cuts for 10 million working Australians.
Lets make it clear the only people standing in the way of the part of the tax package that starts next month are Malcolm Turnbull and his senators in this place.
They are holding hostage the tax relief for those Australians on low and middle incomes, from the 1st of July, because they are tying them to tax cuts for the highest income earners that arent due to be delivered for six or seven years.
You have to elect Malcolm Turnbull twice. Dear me. Tax cuts that wont eventuate not for one, but two elections.
It begs the question what is it about these so-called steps or stages two and three of the Governments income tax plan that the Government doesnt want to take to an election?
Because these are unfunded tax cuts for high income earners that come at a staggering cost to the Budget. And we dont actually know the full details of the cost because the Government has refused to make all of that information public.
The Prime Minister, the Treasurer, the Finance Minister have consistently refused to provide the Parliament with the year-by-year cost of each stage of the Governments tax plan. We saw that this week in Question Time.
And tax cuts which overwhelmingly flow to those earning more than $120,000 a year.
Do you know how many people in South Australia earn that amount? I think it is around five per cent. Indeed, there is not a single electorate in South Australia that even makes the top 25 of those that will benefit the most from stages two and three of these tax cuts.
But you know which electorate is at the top of the list? Wentworth. The Prime Ministers electorate which benefits most from this tax package.
And do you know how many people in Queensland earn more than $120,000 a year? Eight per cent. And Tasmania? Four per cent.
So, Senators in this place from South Australia, Queensland and Tasmania are being told agree to this tax package that spends billions of dollars on people in the most exclusive parts of Sydney and Melbourne or millions of hardworking low and middle income earners in their states get nothing.
What an extraordinary thing for a Prime Minister to do. To say to the Senators in this place we will hold back tax cuts for millions of Australians unless you benefit, for Tasmanian Senators four per cent of the people in your state, or eight per cent of Queenslanders. It is political blackmail of the highest order.
Well, there is a much better way of doing this. A simple solution that delivers tax relief right here, right now, to those who need it most, and makes clear that this Senate will stand up for all the people it represents, and wont be bullied by a Prime Minister who is desperate for a political tactic for the by-elections and for the federal election.
Well Labors position on this is crystal clear. We have been upfront from the start. On Budget night we said we will support the Governments proposed changes taking effect next month.
We support the change to the top threshold of the 32.5% personal income tax bracket from $87,000 to $90,000.
We support this just as we supported the change to the threshold from $80,000 to $87,000 announced in the 2016 Budget, and passed through after the election of that year.
We also support the Low and Middle Income Tax Offset, providing tax relief for taxpayers earning up to $125,333.
Of course Labor has a superior tax relief offering with our Tax Refund for Working Australians, but Ill come to that later.
So this Parliament can guarantee that the tax changes due to take effect in two weeks can pass immediately.
Labor, and just about every other Senator in this place, could vote right now in support of tax cuts for 10 million Australians.
And if Labor is elected, we will almost double these tax cuts and we will make them permanent. Labors bigger, better and fairer income tax cuts will see those earning up to $125,000 a year better off when compared to Malcolm Turnbulls plan over the next four years.
But what we do not support, and what we do not think is reasonable, is someone on $200,000 paying the same tax rate as someone on $40,000.
Its a simple issue of values. Labor does not agree with Malcolm Turnbull giving even more tax cuts to the top tax bracket and this is after the Turnbull Government cut that tax rate last year.
Thats why Labor will move amendments in the Senate to the Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018 to ensure the passage of the tax cuts starting on 1 July.
So when approaching this legislation Labor will hold true to the position we have held since Budget night. We will move amendments to this bill to ensure the passage of tax cuts starting next month. And will also seek to implement better, fairer tax cuts through Labors Tax Refund for Working Australians which would come close to doubling tax relief to up to $928 per year.
Malcolm Turnbull needs to stop standing in the way of this tax relief for the majority of working Australians. Why should tax cuts for teachers and for tradies be held hostage to tax cuts for bankers in six years time?
And if Mr Turnbull doesnt allow passage of tax relief for 10 million Australians before 1 July let me make clear a Shorten Labor Government will ensure that these taxpayers receive it regardless.
As the Treasurer himself has conceded the legislation does not actually even need to be in place by 1 July for the tax relief to be received at the end of the next financial year. So a future Labor Government will act on Mr Turnbulls failure and make sure they receive this tax relief and go further and lock in a bigger, fairer, tax cut.
Budgets are about priorities, and so too is tax policy and because Labor is not giving millionaires another tax cut, or giving big business an $80 billion tax handout, including $17 billion for the banks, we are able to put more money into the pockets of working Australians, we are able to fund better schools and hospitals, and we are able to pay down the debt quicker.
I did enjoy today in Question Time when Senator Cormann started to talk about the Budget and fiscal responsibility. This is the Finance Minister who has presided over higher debt levels than we have previously seen.
So lets come to fiscal responsibility because as well as being deeply unfair, this entire package is fiscally irresponsible.
Evidence to the Senate inquiry indicated that the tax cuts would put at risk the long-term sustainability of the Budget and, given economic uncertainties, this is a risky thing. It also makes the tax system less progressive.
The total cost of these tax cuts is $13.4 billion over the four years of the forward estimates and a staggering $143.9 billion over the medium term. This has a major structural impact on the Budget over the medium term, particularly when combined with the government's big business tax cuts, which are due to mature over this period.
Taken together, if implemented, the Turnbull Government's step 3 tax cuts and the company tax cut for big business will cost the Budget at least $25 billion per year by the end of the medium term.
Let me say that again: $25 billion a year.
Independent analysis by the Parliamentary Budget Office showed that step 3 of the government's tax cuts is set to grow at 12 per cent a year, much faster than any other component of the income tax package.
It's extraordinary, isn't it? We heard so much in the context of the 2014 Budget, and until recently, from this government, this Treasurer and this Finance Minister about the need to contain spending growth. Understand what they are asking this Senate to do. They're asking this Senate to pass a component of a tax package which grows at 12 per cent a year. That is almost four times faster than the rate of increase in defence spending, twice as fast as the increase in spending on schools and six times faster than the annual growth in assistance to families with kids12 per cent growth in a tax package that massively, massively benefits high-income earners.
Leaving aside the fact that this is a fundamental restructure of the tax system, what sort of fiscal package is this that enables that kind of growth in effective expenditurethat is, by revenue forgoneto higher income earners?
The government would never tolerate a 12 per cent annual increase in any other area of government expenditure. If we had child care, schools, hospitals, the family tax benefit or even defence growing at 12 per cent a year, you would hear them baying for expenditure cuts, but they're happy to dole the money out to high-income earners. It is unfair and it is fiscally reckless, and it locks in an unsustainable tax package into the future that would render this country far more vulnerable to economic and fiscal shocks.
Does anyone here think that a responsible government or parliament should be allowed to lock in spending a decade from now on a program set to grow at 12 per cent a year, when no-one can possibly predict what might happen to the domestic or global economy over that period? As the Grattan Institute's John Daley said in a submission to the Senate inquiry:
economically, the chances of a significant economic downturn over the next six or seven years are pretty large we do not think it is prudent to be providing tax cuts of this magnitude that far in the futurecertainly not to be legislating themwhen there are so many economic uncertainties between now and then. And there is no need to legislate them.
There is no need. I have not yet once heard this Prime Minister, the Treasurer or the Finance Minister articulate why this Senate has to pass tax cuts which won't start for six years. Has anyone heard an explanation as to why it is so urgent that we have to pass legislation for tax cuts six years hence?
These tax cuts are also a fundamental restructure of Australia's tax system. Put simply, they make our tax system less progressive. They make our tax system less fair and less progressive. As Miranda Stewart of the ANU Crawford school's Tax and Transfer Policy Institute said, these changes are both 'an inefficient and a retrograde step that undermines 100 years of a progressive income tax rate structure in Australia'.
The ANU's Ben Phillips has estimated that, after the government's full plan is in place, someone in the highest quintile will see a 2.2 per cent rise in their income, compared to a 1.1 per cent rise for those in the middle quintile and a paltry 0.2 per cent rise in the lowest quintile. Of the tax cuts, by 2027, around 60 per cent will go to the top 20 per cent of households.
NATSEM modelling suggests that this new tax system from 2024-25 is less progressive than the current system, which means higher income inequality. The rich will get more of the tax cuts than the poor.
The Prime Minister says it's not a problem because everyone can aspire to be something more. Well, you know what? I think a cleaner deserves a decent tax cut now. Rather than telling a cleaner or a tradie, 'You can aspire to be more,' how about we give them a fair deal now? That's the right thing to do, and that's what a Labor government would do.
Then, of course, there is the great uncertainty caused by having this Parliament legislating for tax cuts that won't come into effect, as I said, for at least a couple of elections. I know Mr Turnbull has a bit of a view that he was born to lead, but I do think it's remarkable that he thinks he might still be Prime Minister in 2024.
Anyway, for the government to say they're certain that they can deliver tax cuts in 2024, frankly, is a joke. I'm not sure what the international economy will be like in 2024, but I tell you what: I don't reckon the Treasurer does either. Now is the time to be strengthening fiscal buffers and building Australia's resilience to a shock. As the IMF stated recently:
Decisive action is needed now to strengthen fiscal buffers, taking full advantage of the cyclical upswing in economic activity.
This government is committing billions of dollars on the back of what is likely to be a temporary global economic upswing, and we have seen what happens. We've seen that play out before. As Peter Martin writes:
We've been handed a budget for the good times that pays out as if those good times will last, even though they may not.
At a time when the government should be locking in strong surpluses, it's failing to adequately insure the nation for the future. The government's own budget papers state:
risks appear more balanced in the short term In the longer term, the global economy faces further challenges.
To put it bluntly, by signing up the next two parliaments to these tax cuts this month, the government is proposing to endanger the long-term health of the Budget and putting at risk the ability to fund essential services into the future.
As I said earlier, there is a better way and there is a fairer way. There is a way to deliver bigger, better, fairer tax cuts right now for those who need them most, and that is to effectively split the bill and to vote for Labor's tax plan to deliver better, bigger, fairer tax cuts for 10 million working Australians.
Under our plan, every Australian earning less than $125,000 a year will receive a bigger tax cut compared to the Liberal Party's plan, and more than four million people will be better off by $398 a year compared to the Liberals' plan.
For example, Labor's plan will ensure a teacher on $65,000 will receive a tax cut of $928 a year, and a couple earning $90,000 and $50,000 respectively will receive a tax cut of $1,855 a year.
Ours is a tax plan for all Australians. The government's is a tax plan for Malcolm Turnbull's electorate. Compared to the five or six per cent who receive most of the benefits of stages 2 and 3 of the government's plan, under our plan more than seven out of 10 taxpayers will benefit in every state and in every territory, including three-quarters of taxpayers in South Australia, Queensland and Tasmania.
By opposing Labor's tax plan, the government is denying greater tax relief to 74 per cent of Victorian taxpayers, 73 per cent of taxpayers in New South Wales, 75 per cent of Queensland taxpayers, 71 per cent of taxpayers in WA, 76 per cent of taxpayers in South Australia and 77 per cent of taxpayers in Tasmania.
Fundamentally and finally, I close on this point: this tax plan is not a tax plan for a stronger future for this country. This tax plan is not a fair dinkum plan. The government's tax plan is a political strategy. It is entirely about trying to blackmail this Senate into passing the totality of the government's legislation.
Not once has any minister from this government explained in any terms which make sense why tax cuts for high-income earners and a fundamental restructure of our tax system to take place in 2024 should hold hostage tax cuts starting next month. Not once have they explained that, and that is because it is inexplicable. It can be explained only if you get into the recesses of the Prime Minister's mind and understand what political strategy he thinks he is playing at.
So I urge this Senate: do not allow this government to hold the chamber hostage. Do not allow this government to hold millions of Australians who are entitled to a tax cut from next month hostage to a political strategy for a Prime Minister desperate to find some way to wedge people in this place in the by-elections and in the federal election.
Do not lock in an unsustainable, unfair tax package, which is what this is. It is both fiscally reckless and deeply unfair.
Authorised by Noah Carroll ALP Canberra.