The Stage 3 tax cuts are so geared towards the rich that most workers will pay more tax in 2025 than they did in 2022
Losing the low-middle income tax offset and getting the Stage 3 tax cuts will leave most workers worse off
The Stage 3 tax cuts were always a terrible economic and taxation policy. Almost half of the total benefits go to the richest 3% and so massive are the costs at $300bn over 9 years, that you could raise Jobseeker from its current rate of $693 a fortnight to $1,925 and you would still end up with a smaller government deficit in 2032-33 than you would with the Stage 3 tax cuts.
But the decision by the Morrison government to cut the low-middle income tax offset (LMITO) which was worth up to $1,500 for people earning between $50,000 and $90,000 in 2021-22 set a booby trap for the ALP which they walked right into.
The LMITO was actually quite generous for low and middle-income earners, but the Stage 3 tax cuts are not. For someone on the current median income of $65,000 the LMITO was worth $1,500. That has now gone and has been replaced by a $500 tax cut under Stage 3. That means that person will pay $1,000 more in tax once the Stage 3 cuts come into effect in 2024-25 than they did last year.
By contrast, because those earning over $125,000 did not get the LMITO but they do get the largest benefits of the Stage 3 cuts, they will all be better off.
When we look at the type of workers who will be worse off if the Albanese government implements the Scott Morrison tax policy we see that nurses, school teachers, chefs, bank workers, aged care workers and most other occupations will be paying more tax. But a small number of occupations that account for around 10% of all workers will get a nice tax cut. These include stock brokers, doctors, surgeons, engineers, lawyers, judges and Members of Parliament. MPs in fact will get the maximum $9,075 tax cut.
The Stage 3 tax cuts combined with the loss of the LMITO make for a situation where most voters will go to the next election paying more tax than they did at last year’s.
That is a very poor political strategy and one of the Albanese government’s own doing.
The Scott Morrison tax cuts were a bad policy, and the decision by the Morrison government to dump the LMITO made the Stage 3 cuts even worse. The ALP should not have agreed to them, but it is not too late. The Stage 3 cuts should be dumped and replaced with a better fair policy – which includes not just fairer tax cuts but increased Jobseeker and better funding for infrastructure and services.
Tanya Martin Office Manager
Jake Wishart Senior Media Adviser