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Costello doesn't deny disincentives in his tax system.

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Wayne Swan MP Federal Labor Shadow Treasurer 15 March 2005


In Question Time today Peter Costello didn’t deny the Government’s budget measures have made work disincentives worse for some families.

He didn’t deny that the family he described - with a single earner, on the minimum wage and with a child under five - actually goes backwards for every additional hour worked under his budget measures.

Following the Government’s budget tinkering, a family on the minimum wage who was paying an effective marginal tax rate of 83 cents in the dollar now hands back to Peter Costello $1.04 for each additional dollar earned.

He didn’t disagree with a senior Treasury official’s admission that the Budget measures actually worsened disincentives for some low income families.

He didn’t disagree with the Melbourne Institute's analysis of the package which found these disincentives would have resulted in 22,000 individuals leaving the labour market.

As usual, Peter Costello dodged the substance of the question to answer his own set piece.

In claiming that the same family - on a minimum wage with one child under five - is better off under the Coalition than they would have been under Labor he kicked a spectacular own goal.

The family described by the Treasurer would have in fact been $290 a year better off under Labor’s tax and family policy compared to the Government’s budget package.

Despite mounting evidence to the contrary, the Treasurer continues to assert that his budget package last year fixed the tax trap for low income families.

The reality is that Peter Costello sits on his hands while high effective marginal tax rates act as a barrier to participation and jeopardise our future prosperity.

15 March 2005 Contact Jim Chalmers 0417 141 676