Politics

Budget 2018: People Earning $200k Will Get The Tax Cut They So Sorely Need

Well, it's definitely a Liberal Party Budget ahead of an election.

Budget

Well, it’s definitely a Liberal Party Budget ahead of an election. In the next few years, people earning $200,000 a year will be taxed at the same rate as a person who earns less than a quarter of that.

In what he described as a simplification of the tax code, Treasurer Scott Morrison announced in tonight’s budget that the government plans to completely eliminate the second highest tax bracket — which currently affects people earning between $87,000 and $200,000 — by 2024.

That means that in seven years’ time, a person earning $200,000 a year would have a tax rate of 32.5 percent — the same rate as a person earning $41,000. Around 73 percent of Australians would sit within this tax bracket.

By 2024, a person earning $100,000 a year will have an extra $43 a week in their pay packet and a person earning $140,000 a year will get an extra $55 a week.

In the meantime, the threshold for that tax bracket will be lifted to $90,000, meaning more than 200,000 people who currently earn between $87,000 and $90,000 will get some immediate tax relief.

And while some might call it a “simplification”, it’s not exactly in keeping with the idea of progressive taxation — the notion that people who have more should be asked to pay more — that we’ve all grown up with.

The announcement was couched in news that (which was leaked before the budget), that low and middle income earners would receive a modest tax cut — amounting to between $210 and $530 a year — which isn’t heaps, but it’s also not nothing.

Morrison acknowledged that while those numbers may sound modest, they could be used by a low- or middle-income family to pay for a new spare tyre on their car, a washing machine, or a quarterly electricity bill.

“[The budget] is an attempt to reward working Australians who have seen it tough,” Morrison told the ABC immediately following his budget speech. “This tax relief means filling up your car six times. Your school uniforms and books for your kids to go to school.”

Opposition leader Bill Shorten said the budget “fails the fairness test”.

Shadow Treasurer Chris Bowen cast doubt on the idea that the tax cuts will ever see the light of day.

“You will have to re-elect Malcolm Turnbull twice to get that tax relief. It is ridiculous to say the tax cut will be in place in 2024,” he told the ABC. “They would make a significant change to the tax system, they want to legislate that now when we don’t know what the financial circumstances will be in 2024.”

In total, the tax cuts will cost the government $140 billion over the next decade.