More than 100 economists and tax experts have published an open letter calling on Prime Minister Anthony Albanese to reconsider the Stage 3 tax cuts for high income earners, labelling the tax cuts as economically unaffordable and unfair.
The open letter appears as a full-page advert in the SMH & The Age today. High profile signatories include Nobel Prize Winning Economist Professor Joseph Stiglitz, former Governor of the RBA Bernie Fraser, Former ACCC Chair Professor Alan Fels AO, tax expert Professor Miranda Stewart, Professor John Quiggin, and former Department of Prime Minister & Cabinet Secretary Dr. Mike Keating AC.
“More than 100+ economists and tax experts are calling on the Prime Minister to reconsider the Stage 3 tax cuts in the interests of responsible economic management,” said Dr. Richard Denniss, Executive Director at the Australia Institute.
“Economists & tax experts are telling us that these cuts are bad for an inflationary economy, unaffordable, and unfair.
“The RBA has just forecast inflation to be above the 2-3% target range by the end of June 2024, a day before these cuts are scheduled. Handing out a quarter of a trillion in tax cuts to high income earners will fuel inflation, damage our fair-go tax system, and lead to cuts of essential services. Scott Morrison’s scheme from 2018 is the wrong economic plan for the Australian economy in 2022,” concluded Dr. Richard Denniss.
Fmr RBA Governor Bernie Fraser said “Stage 3 of the previous Government’s personal income tax changes was always unfair and unaffordable. It is even more so today and prospectively, on both counts. The choice ahead for Labor could not be more clear-cut; it can stick with its “phoney” commitment to Stage 3 (“phoney“ because it was adopted not because it was viewed as a valuable social reform but more for base political reasons), or it can choose not to go down this path and channel the substantial savings involved to the many very valuable – but very expensive – social reforms promised in the lead up to the last election. Which way Labor decides to go here will be a good test of the strength of its commitment to fostering a fairer and more caring Australia.”
Fmr ACCC Chair Allan Fels AO said “The tax cuts will add to our inflationary woes, are fiscally inappropriate in light of major demands on the public purse, and unfair unless linked with wider tax reforms.”
Tax Expert Professor Miranda Stewart said “The Stage 3 tax cuts permanently flatten the income tax rate structure. The removal of the 37% bracket delivers a permanent tax cut to top income earners, mostly men. This makes the structural fiscal deficit worse, with a substantial fiscal cost without efficiency and equity benefits.”
Professor John Quiggin said “While increases in interest rates are forcing millions of Australians to tighten their belts, the promised Stage 3 tax cuts are a step in the opposite direction for high income earners. With the knowledge that there will be an extra $9000 a year in to their pay packets in eighteen months’ time, those earning $200,000 a year or more have no need to scale back their spending. This inflationary fiscal policy is counteracting anti-inflationary monetary policy”.
Small Extract of open letter advert in SMH & The Age with 100+ Economists & Tax Experts, full version attached
Short Stage 3 Research Summary:
- Will cost the budget around a quarter of a trillion dollars
- Will hand $9,075 to the highest income earners while giving $0 to those on the minimum wage
- Represent a substantial opportunity cost for investment in services
- Will give occupations like CEOs of large corporations, surgeons, and federal politicians a $9,075 a year tax cut. While aged care workers, hairdressers, and café workers will get nothing.
- Men will get twice as much of the tax cut as women. Half will go to the top 10%, 72% going to the top 20% while the bottom half get only 5% and the bottom 20% get nothing.
- In their first year, Stage 3 will cost more ($17.7b) than the entire Pharmaceutical Benefits Scheme (PBS = $16.4b)
- Will permanently make our tax system less progressive by removing an entire income tax bracket
- Almost twice as many Australians (41%) support the Labor Government repealing the Stage 3 tax cuts than oppose (22%), with 37% unsure.
- Majority of Australians (61%) think that adapting economic policy to suit the changing circumstances, even if that means breaking an election promise, is more important than keeping an election promise regardless of how economic circumstance