Politics

Labor Will Support The Government’s Big Old Tax Cuts For The Rich

Opposition (noun): resistance or dissent, expressed in action or argument.

Anthony Albanese

Well, the government’s massive tax cuts for the rich are going ahead after Labor decided today to support the cuts after all. Truly, the Labor Party is behaving like a powerful opposition right now.

The government, you’ll remember, has been pushing for a big set of tax cuts for a while now. There are several stages to the cuts, which will benefit Australians on a range of incomes (more on that below), but a particularly controversial third stage will overwhelmingly benefit people earning more than $180,000 a year.

Labor has been pretty vocally opposed to the parts of the package that benefit wealthy Australians, and spent this week pushing for amendments that would make the overall tax package a better deal for ordinary workers. After it was unsuccessful in getting any of these changes passed in the House of Representatives on Tuesday, however, Labor just went ahead and voted for the entire package.

In doing so, it pretty much threw away any chance it had to oppose the package, because the government now has the numbers it needs to get it passed in the Senate no matter what Labor does.

Jacqui Lambie, for instance, agreed to support the bill if the government did something about Tasmania’s public housing debt — what exactly they’re going to do is unclear, seeing as there doesn’t seem to be any kind of agreement in writing. Similarly, Centre Alliance senators have no official deal with the government, but have agreed to support the tax cuts based on some kind of vague understanding that the government will help reduce gas prices. You get the idea.

The Labor Party could, of course, have voted against the bill in the Senate as a kind of protest. Instead, Anthony Albanese announced this afternoon that Labor will be voting for the bill in its entirety, saying that the party has no choice but to support it given that its “highest priority throughout this tax cut debate has been to get more money into the hands of more workers, sooner, to boost an economy which is floundering under the Liberals”.

“We will not oppose the passage of the legislation because we want to make sure Australians receive their tax cut now and that the benefits of the first stage start circulating through the economy and aren’t further delayed,” he said.

Albanese said that despite voting in favour of the cuts, the Labor Party is still opposed to the “irresponsible” move of spending billions of dollars on tax cuts for the rich, and will review its stance on tax policy closer to the next election. Still, it puts future Labor in a bit of an awkward position, having to potentially repeal legislation that it, uh, supported in its entirety. Oops?

How Much Money Will These Tax Cuts Give To Rich People, Exactly?

There are three stages to these tax cuts, and each one affects Australians with different income levels. The total cost of the three stages of cuts is $158 billion over ten years.

Here’s the simplest possible breakdown of those stages. The first one, which applies to the 2018-19 financial year, as well as the next three financial years, isn’t really a tax cut, but is more like a one-off payment. It mostly benefits low to mid-income earners (up to $125,333 a year), who’ll receive a payment of up to $1,080. Don’t celebrate just yet, though — if you have a HECS debt, you may find that Monday’s repayment threshold changes actually wipe out most or all of that tax benefit.

Stage two, which kicks in from the 2022-23 financial year, is an actual change to our tax system. It involves changing where some of our tax brackets start and end, meaning that depending on your income, you may end up paying tax at a lower rate than you currently do. For example, stage two will raise the top threshold of the 32.5 percent tax bracket from $90,000 to $120,000. That means that people who currently earn more than $90,000 but less than $120,000 will move from the 37 percent tax bracket to the 32.5 percent tax bracket, and pay less tax overall.

Because stage two changes a whole bunch of tax brackets, it impacts Australians on a whole range of incomes. People on low incomes will be paying less tax, but so will people on six-figure incomes. Stage two has also been criticised for being delayed until 2022-23 — the economy is struggling right now, and Labor and other parties argued that it would be better to move this tax cut forward so people have money to spend sooner to boost the economy.

Stage three, which kicks in from July 2024, is the most controversial part of the tax plan because it pretty much just benefits rich people. Stage three deletes the second-highest tax bracket entirely, and raises the threshold for the top tax bracket, which basically means that everyone earning between $41,000 and $200,000 will be paying the same rate of tax.

Part of that plan was already locked in, but the government went a step further in the bill that will pass today, opting to also reduce the rate of tax for that enormous tax bracket from 32.5 percent to 30 percent. In short, someone who earns $180,000 today will be getting an $11,000 tax cut from 2024 — we explained exactly how that works over here if you’re interested.

Labor spent the election firmly opposed to stage three of the tax cuts, because it will cost around $95 billion and deliver the biggest benefits to rich people who really do not need those benefits. And yet today, they were unable to stop the plan from passing, and were unwilling to vote against it.

As for where that money’s being taken from, the government keeps insisting that the answer is, uh, nowhere? In Question Time today, when Albo asked Scomo “what programs and services will be cut to fund stage three of the government’s tax cuts?”, Morrison’s answer was simply “none”. That was the entire answer.

Are People, Uh, Angry About This?

If you guessed that people might be a little pissed off at Labor for letting the government get its way on a wildly expensive, wildly controversial policy, you’re absolutely right. The Greens in particular are absolutely ripping into Labor for letting this happen, pointing out that the money could have been spent on so many other, vitally needed projects.

“That’s $90 billion going towards politicians, executives, bankers, CEOs —  lining the pockets of people who do not need the handout and ripping money out of schools and hospitals,” Greens leader Richard di Natale told ABC News this afternoon. “We have an infrastructure crisis! We need to modernise the energy system and we need to make sure the transport system is fit for purpose.”

“So many things that would be productive! People on Newstart are struggling to put a roof over their head and food on the table! That is the consequence of backing this package.”

“How are they going into an election, Labor, and argue for a welfare system when they are supporting ripping $158 million from government revenue? I mean, what we need is leadership and we need the Labor Party to stand strong against the Morrison government, and clearly we have seen a total capitulation.”

He makes a pretty good point — just yesterday, Labor also announced that it’s ready to work with the government on introducing religious freedom laws. We could use a bit of opposition right about now?