Analysis: 54% of Tax Cuts Benefit go to Highest Income Earners

New research from The Australia Institute shows by 2024-25 when the income tax cuts are fully implemented, the benefits will overwhelmingly go to high-income earners.

The Australia Institute has today issued a report modelling the distributionary effect of the accelerated income tax cuts, which reveals 54% of the tax cut benefits goes to the top 20% of income earners, while the bottom 20% receive a mere 3% of the benefit.

Key findings:

· 34% of the benefit goes to the top 10 per cent of taxpayers, and more than half (54%) goes to the top 20 per cent. Only three per cent of the benefit go to the bottom 20 per cent.

· The benefits also mainly go to high-income males. For every dollar of the tax cut that goes to women, two dollars goes to men.

· Meanwhile, the Low and Middle Income Tax Offset (LMITO) sees over 80 per cent of the tax cuts go to middle-income earners in 2019-20

“The progressive nature of Australia’s income tax system has been an important feature for decades,” said Matt Grudnoff, Senior Economist at The Australia Institute.

“If the Government is committed to maintaining a budget surplus, this radical reshaping of income tax will only lead to spending cuts in the future. Less spending on the services that Australians demand from their governments like health, education and aged care.

“Flattening income tax reduces the tax take from high-income earners, which ultimately means either fewer government services or high taxes on middle and low-income earners if the government wants to maintain a surplus.

“Flattening tax rates will see an executive on $195,000 pay the same marginal tax rate as someone on $45,000 which is little more than the minimum wage.

“Instead of addressing stagnant wage growth and rising inequality, this tax cut for the top end of town will only make inequality worse.

“At a time when Australia is suffering record low wages growth and historically high inequality the government has proposed a radical plan to increase inequality.”

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