Tax Cuts: Temporary for Low and Middle Earners, Permanent for High Earners

New analysis from The Australia Institute has found that the income tax changes announced in the Budget yesterday will disproportionately advantage wealthy Australians both now and into the future.

The limited, temporary benefit that will flow to Australians on low and middle incomes this year will be replaced by larger, permanent tax cuts given to high income earners from financial year 2021-22 onwards.

Key findings:

  • In 2020-21, 41% of the Government’s tax plan will go to the top 20% of income earners. The bottom 20% gets only 4%
  • In 2021-22, 88% of the Government’s tax plan will go to the top 20% of income earners. The bottom 20% get nothing
  • Those new tax settings favouring wealthy Australians will then be permanent.

“This Budget gives a temporary boost to lower and middle income earners and a permanent boost to the wealthiest people in the country,” said Matt Grudnoff, senior economist at The Australia Institute.

“Our research shows that low and middle income earners will actually be paying more tax next financial year than they are this year.

“Regular Australians and those who are struggling will get a hand out this financial year while wealthy Australian get a tax cut that is legislated forever.

“Gearing this tax plan towards wealthy Australians will permanently widen inequality in Australia and increase the chances of it being saved rather than spent, undermining its already limited stimulatory effect.”

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