It will be called a tax cut

One of the stupidest decisions of the Abbott/Hockey government in the 2014 budget was the decision to impose a Temporary Budget Repair Levy, taking the top marginal income tax rate from 45 to 47 per cent; 49 per cent with the Medicare Levy.  This took us back to where we were in 1988.

Abbott and Hockey were deluded enough to think this measure would make everyone describe the budget as FAIR, which of course it did not.  But it didn’t stop Labor waving this measure through.  (What’s the bet that Labor policy will be to keep it?)

Here’s my guess: there will be some distorting new taxes added to superannuation (because that’s fair)in the budget but then to appease some supporters, the Coalition will note that the Temporary Budget Repair Levy will be removed from 1 July 2017.  The classic pea and thimble act.

And can I remind you of the latest figures on the distribution of income tax revenue (thanks: Noel Whittaker):

2.5 million   20% pay no tax

3.1 million   24% in the $18,200 to $37000 bracket   = 2.7% of total tax

4.8 million  37%  in the $37,000 – $80,000 bracket    = 30% of total

2 million    16%  in the $80,000 – $180,000 bracket   =  39% of total

340,000     2.7% in the top bracket                            =  28% of total 

Here is the piece from The Age

The Turnbull government is being called on to retain the temporary budget repair levy on high-income earners, which is due to expire next July, after conceding this week that tax cuts for individuals may be unaffordable in this budget due to lack of funds.

The temporary 2 per cent loading on the top tax bracket is scheduled to be removed in July 2017, giving high-income earners on more than $180,000 an effective tax cut.

Treasurer Scott Morrison pointed this week to the removal of the repair levy next year as an example of a future tax cut on the horizon – a comment designed to placate high-income earners who have been conditioned to expect tax cuts in this budget.

Prime Minister Malcolm Turnbull is under pressure to make the 2 per cent loading on high-income earners permanent. Photo: Andrew Meares

But now the Greens are calling on the Turnbull government to make that 2 per cent loading permanent, and also to introduce a new 50 per cent tax bracket specifically for ultra-high income Australians earning more than a million dollars a year.

Modelling by the Parliamentary Budget Office, obtained by Fairfax Media, and commissioned by the Greens, shows such an initiative would affect a small minority of taxpayers, and raise $4 billion over the next four years.

According to the modelling, which has been signed by Parliamentary Budget Officer Phil Bowen, if the temporary budget repair levy was made permanent it would affect only the top 1.3 per cent of taxpayers, 382,000 people.

If a new marginal tax rate of 50 per cent was introduced for people who earn more than $1 million a year, it would affect just 0.08 per cent of taxpayers, or 9850 people.

According to the document, those two tax changes would raise $4.1 billion for the government over the next four years, and potentially $24 billion by 2025-26.

Greens leader Richard Di Natale said the Turnbull government needed to seriously consider the proposal, given the pressures of disappearing revenue.

“Today, the Greens are putting these costings on the table and calling on the government to recognise that making the deficit levy permanent makes good economic sense,” he said.

“The alternative is to continue dismantling our social safety net and slashing funds for schools and hospitals, which is a recipe for a more unfair society.”

The temporary budget repair levy was introduced by the Abbott government in its 2014-15 budget and was designed to remain in place for only three years, to be removed in July 2017.

It increased the rate at which high-income earners are taxed for each $1 over $180,000, from 45 cents to 47 cents.

If the government allows the repair levy to expire next year on schedule it will find it harder to promise further income tax cuts because it would effectively be offering high earners two cuts.

It would also be hard to justify because the federal budget will still be in substantial deficit. When the deficit repair levy was introduced, the budget was facing a deficit of 2.8 billion in 2017-18. The forecast has since blown out to $23 billion.

On Tuesday, Treasurer Scott Morrison appeared to rule out the possibility of income tax cuts in this year’s budget, saying with little funds at his disposal, if he had to choose between personal and company income tax cuts, he would choose company tax cuts because they would boost economic growth.

The backdown on personal tax cuts came as his chief departmental advisor on tax, Treasury revenue group chief Rob Heferen, stepped down from the job to take a post in the industry department, where he will work on energy resources in northern Australia.

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35 Responses to It will be called a tax cut

  1. Barry

    Pirates !

    Bring on the Trumpster !

  2. feelthebern

    Taxation is freedom.

  3. It’s not the tax cut which are unaffordable, its the fucking government which is UNAFFORDABLE!

  4. hzhousewife

    If a new marginal tax rate of 50 per cent was introduced for people who earn more than $1 million a year, it would affect just 0.08 per cent of taxpayers, or 9850 people.

    What makes me laugh is how they ASSUME that those 9850 people will continue earning over a million a year after Year One. They, of all people, will rapidly arrange things so that they do not pay 50% in tax.

  5. Felix Kruell

    Introducing the temporary tax increase was the reason Abbott lost my support (well the last straw). Failing to remove it when promised will be when Turnbull loses my support (if not earlier).

  6. H B Bear

    There is nothing as permanent as a temporary tax increase.

  7. hzhousewife

    There is nothing as permanent as a temporary tax increase.

    or temporary welfare measures

  8. Norman Church

    I cannot remember using the hot tub time machine but it sure feels like I have been transported back to the 1970s. Key difference – I can’t see Mrs Thatcher anywhere.

  9. Bruce of Newcastle

    340,000 2.7% in the top bracket = 28% of total

    I wonder what would happen if those 340,000 moved to New Zealand? Or East Timor, lets say, if the Timorese decided to do something sane like set a 10% flat tax on companies and individuals. Would their economy go whooshka or what?

  10. Ant

    So the top 2.7% pay 10 times more tax than the bottom 44%.

    And the left thinks the welfare slobs and moochers amongst that 44% are getting it tough.

  11. Occupy Centrelink

    “The alternative is to continue dismantling our social safety net and slashing funds for schools and hospitals, which is a recipe for a more unfair society.”



    I don’t care if they make $1,000,000 a week, taking 50% of someone’s income doesn’t sound too fair to me.

  12. goatjam

    One of the stupidest decisions of the Abbott/Hockey government in the 2014 budget was the decision to impose a Temporary Budget Repair Levy

    The entire budget was a stupid decision. I’m not sure it is possible to isolate which parts were stupider than others.

  13. Rabz

    Bluddee hell – taxes, taxes and more taxes – as far as the eye can see.

    Investigation of my emigration options is proceeding with greater urgency.

  14. H B Bear

    I cannot remember using the hot tub time machine but it sure feels like I have been transported back to the 1970s.

    Gillard’s IR policies are right at home then. If only there was a political party committed to smaller government, lower taxes and individual freedoms people could vote for.

  15. Ant

    Investigation of my emigration options is proceeding with greater urgency.

    Where to?

  16. Botswana O'Hooligan

    To add insult to injury our very own top clown wants to get into bed with the bloody greens and expects us to vote for the coalition come the election.

  17. Rabz

    Where to?

    As I’ve stated previously, Un Zud.

  18. Norman Church

    “Gillard’s IR policies are right at home then.”

    You said it, HB!

  19. What makes me laugh is how they ASSUME that those 9850 people will continue earning over a million a year after Year One. They, of all people, will rapidly arrange things so that they do not pay 50% in tax.

    Anyone earning a mill plus will have highly marketable skills in global demand and take off overseas. Of course, this has probably already happened, many times. As each set of the top crust leave the next layer down is promoted in their place which probably explains why our companies are now run (with a few exceptions) by utterly clueless morons. It’s not just the tax rise that is bad, it is the enstupification (I just made the word up) of Australian business that inevitably occurs.

  20. Peter Hill

    The “Temporary” Budget Repair Levy (“TBRL”)! Hahahahaha!
    So that we, the ignorant hoi polloi, can better understand political processes of government budget plannings, we must firstly learn how to spell “temporary”. Look up a good dictionary, or better still learn from your pollies who would teach us that the spelling of “TEMPORARY” is “P-E-R-M-A-N-E-N-T”.

  21. .

    *Temporary refund adjustment*

  22. .

    Peter Hill is thinking like the great man, Milt. Friedman.

    “There is nothing so permanent as a temporary government programme”

  23. JohnA

    Rabz #1978315, posted on March 17, 2016 at 1:01 pm

    Bluddee hell – taxes, taxes and more taxes – as far as the eye can see.

    Investigation of my emigration options is proceeding with greater urgency.

    I think you might be too late:

    Taxes, taxes everywhere

  24. Struth

    When talking about who is actually paying taxes, it has got me stuffed as to why people don’t break it down to how many in the PRIVATE SECTOR pay how much.
    Most of the time, public servants are part of the equation giving a completely false figure on who is actually paying in to the government.
    I don’t know how many times I’ve had to explain to public servants that their complete,salary package comes courtesy of the private sector, and you getting a little accountancy adjustment is not you paying tax.

    It would be interesting to take the public servants out of this, when talking about tax payers and then see where we stand.

  25. Struth

    I am checking out NZ in April.
    If it weren’t for family concerns I’d already be gone.
    Still might.

  26. rickw

    340,000 2.7% in the top bracket = 28% of total

    I wonder what would happen if those 340,000 moved to New Zealand? Or East Timor, lets say, if the Timorese decided to do something sane like set a 10% flat tax on companies and individuals. Would their economy go whooshka or what?

    I’m one of the 28%. I want representation commensurate with my FUCKING TAXATION!

    With each passing year, somewhere else is looking a lot better, I’m kicking myself that when the A$ was 1 to 1 that I didn’t move to Texas, less tax, more guns, more trucks and no Malcom and friends.

  27. classical_hero

    I believe Abbott only did this to silence the useless leftist idiots in the party. We need to purge the Liberal Party of those people, otherwise it is doomed and hopefully then a true conservative party rises in it’s place.

  28. Perth Trader

    “Public expenditure by all levels of Australian government, as a share of gross domestic product (GDP), is now about 39 per cent. That’s 39% of $1.6 trill.” $624 bill per year,$12 bill per week. And these are IPA figures. And Govt. spending is increasing faster that inflation. Ladies and Gentlemen..it was a honour to serve and know you all.

  29. Squirrel

    Clearly there is too much churn, and – after decades of craven vote-buying by both sides of politics – far too little self-reliance.

    As others have noted, the federal government has grown too large – in his comments today about the Safe School program, it was refreshing to hear George Christensen observe that, aside from any questions about the merits of that program, the Commonwealth shouldn’t be dabbling in this sort of detail in an area of State responsibility.

  30. Sydney Boy

    Introducing a top marginal rate of rate of 50% – a 3% increase – on incomes over $1M will raise $1B per year. If the bottom marginal rate of 19% was raised by just 3% to 22% it would raise over $30B per year. Seems like a no-brainer to me …

  31. Damienski

    enstupification

    I’m so stealing that, Mr Oxidised.

    Regrettably it describes far too much of our political and economic discourse.

  32. Ross B

    And so, 2.34m people carry two-thirds of the ITR burden of 12.74m taxpayers in a nation of 23 million, and it is all “fair” if you’re living in the twisted universe that exists south of Bywong. Crazier still, if you haven’t noticed, is that not a single proposal flown so haphazardly by those who’ve hijacked the LNP seeks to do anything other than increase the ultimate burden on those few already carrying the vast bulk of the take.
    The LNP have so ruthlessly abandoned their base Turnbull is making Bill Clinton and Dick Morris look like complete amateurs in the triangulation-stakes. The requisite clean-out is so massive we should all look forward to MemoryVault’s master plan on how we can teach them the greatest lesson at the ballot-box…

  33. Combine Dave

    Struth
    #1978588, posted on March 17, 2016 at 4:52 pm
    I am checking out NZ in April.
    If it weren’t for family concerns I’d already be gone.
    Still might.

    Me too.

    Kinda a scouting mission, personally I’d perfer Taiwan though.

  34. Mooka

    Are there figures available that give the total net tax burden for each income bracket,taking into account welfare payments such as child care,child payments, GST,fuel tax ,etc, rather then just the
    income tax burden?
    To continually focus only on income tax rates is looking at a small part of the equation.

  35. Harry Lime

    The $4B over 4 years the Greens are claiming is the combintaion of the 45% bracket going up to 47% and a further 3% (to 50%) for those with an income over $1M. It would be fascinating to see just how much extra revenue the 50% bracket raises by it self. My guess: very little, which showes perfectly the futility of these mad soak therick tax brackets. There just aren’t enough rich people around to soak to make a meaningful difference.

    Even the two proposals only raise $1B a year. Put crudely, and assuming this extra $1B comes from raising the $180K bracket by 2%, if the $180K+ bracket was raised to 98% (+ML) it would only raise an extra $26.5B pa not taking into account obvious Laffer curve effects. So basically, if we banned people from earning more than $180K pa, the Commonwealth government would still be running a deficit…

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