"Try living in reality and not in false narratives."https://www.theguardian.com/australia-news/2020/oct/06/who-benefits-most-from-the-tax-cuts-in-the-2020-australian-budgetSo everyone is getting a tax cut! But just how fair are they?
First of all, let us give thanks that the government has not brought forward the stage three tax cuts, which will see everyone between $45,000 and $200,000 pay a top marginal tax rate of 30%. Those cuts are grossly weighted to favour those earning more than two and three times the median income.
Instead what the government has done is bring forward the stage two cuts, which were initially designed to come in 2022-23.
These cuts involve raising the 19% marginal tax rate threshold from $37,001 to $45,001 and the 37% marginal tax rate threshold from $90,001 to $120,001.
That seemed quite fair, and it would have led to median-income earners on $60,000 a year getting a $1,080 tax cut (1.8%) while those on $120,000 would receive a $2,430 cut (2.03%).
Sure those on $120,000 get a bit more of a cut, but it’s not by a massive amount.
Except stage two also involved removing the low and middle-income tax offset (LMITO), which was worth (not coincidentally) $1,080 for those earning between $45,000 and $90,000.
Had the government gone forward with the old stage two these cuts would have been grossly unfair with almost all of the cuts going to those in the top 20% income earners.
What the government has instead done is keep the LMITO for an extra year, meaning that middle-income earners get a $1,080 tax cut.
But they only get it for a year.
The government has extended the LMITO for two reasons – first politically, ignoring 80% of taxpayers during a recession would be suicide; and second during a recession not giving a tax cut to low and middle-income earners would be moronic.
But it is only for a year, because the government is judging the stimulus is needed now, and thus can take it away next year. And it certainly is not because of any change in attitude from the government about whom it wishes to favour.
In his budget speech, the treasurer, Josh Frydenberg, said: “Lower- and middle-income earners will this year receive tax relief of up to $2,745 for singles.” First that relief is not all “this year” – it is compared to 2018-19 – and those getting a $2,745 cut are earning $120,000.
That someone earning double the median income and is in the top 12% of all taxpayers is now included in “lower and middle-income earners” might suggest just who the government is really thinking about when it says it is helping “middle Australia”.
