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Wednesday, 23 May 2018
Page: 4300

Mr ZAPPIA (Makin) (11:35): In speaking on the Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018, I say at the outset that I support the comments made by members on this side of the parliament. I think that at this stage of the debate Labor's position on this bill is clear. It's even more clear, after listening to the statistics that many of my colleagues have been able to present with regard to the unfairness of this legislation, how the government is so much out of touch with reality and with the community. This legislation goes to the heart of the government's proposed tax cuts, and those tax cuts are part of a long-term plan that takes us right out to the year 2024—indeed, perhaps to a time when those who are proposing the tax cuts in this legislation will not even be around to be held accountable for it.

It's proposed that the government's plan has effectively three stages to it. Phase 1 begins on 1 July 2018. The government proposes to then introduce the low- and middle-income tax offset, a non-refundable tax offset, of up to $530 per year for taxpayers earning up to $125,333 and increase the top threshold of the 32.5 per cent personal income tax bracket from $87,000 to $90,000. Phase 2 begins on 1 July 2022—that is four years away; indeed, it's perhaps two elections away. Then, the government wants to increase the low-income tax offset from $445 to $645. The 19 per cent personal income tax bracket will be increased from $37,000 to $41,000 and the government wants to increase the top threshold of the 32.5 per cent personal income tax bracket from $90,000 to $120,000. Then we come to phase 3. That is proposed to commence on 1 July 2024—that is in six years time, which is possibly three elections away. Then, the government proposes to abolish the 37 per cent tax bracket and increase the top threshold of the 32.5 per cent personal income tax bracket from $120,000 to $200,000.

As those dates quite clearly point out, this is a plan that takes us effectively into the never-never, because between now and then it is very likely that not only will governments change but also circumstances here in Australia and overseas will change. While we haven't been given the full picture from the government, the early indications of the government's plan are that, once the government's three-stage package is in place, it will deliver more large benefits to those on higher incomes. The Australian National University's Ben Phillips has estimated that, by 2027, around 60 per cent of the tax cuts will go to the top 20 per cent of households. As part of the new proposal, low- and middle-income earners get a tax offset in 2018-19, with higher income earners getting very little of that money. This part of the plan means that more money goes to lower income earners. However, by 2024-25, the tax cuts mean that higher income earners gain $7,225 per year, while those earning $50,000 to $90,000 gain just $540 per year, and those earning $30,000 gain the very little amount of $200 per year. The Grattan Institute has assessed that, once the three-stage plan is complete, $15 billion of the annual $25 billion cost of the plan will result from collecting less tax. I repeat that: collecting less tax from the top 20 per cent of income earners. The Australia Institute has also analysed the government's tax proposal, and the Australian Institute analysis shows that, overall, the government's plan sees 62 per cent of the benefits flowing to the top 20 per cent of income earners over a seven-year period.

Labor's position with respect to this legislation has been made clear. Labor will support the government's proposed changes that are to take effect from 1 July 2018. Labor has been entirely up front about that. If the government was to split the bills, we could vote for the 1 July 2018 changes only. They would pass immediately. However, the total cost of the government's 3-stage plan, whilst $13 billion over the forward estimates, is expected to reach $140 billion over the medium term, and, as I said earlier, the government has been unwilling, deliberately hiding or simply unable to provide specific details of the plan, including the year-by-year costs beyond the forward estimates.

I turn to the question of fairness and the inequity about this proposal. The government's proposed tax plan is regressive in that it will widen the inequality that already exists throughout Australia and that has been widening over recent decades. According to the Australia Institute, the top one per cent of income earners' share of income has more than doubled from 4.5 per cent to nine per cent. The top 0.1 per cent has seen an almost fourfold increase in their share of total income. The top 20 per cent own 62.5 per cent of the net worth of all households. And the top 20 per cent own 97.7 per cent of net financial assets. That is financial assets less financial liabilities. It's clear that the wealth of this nation is falling more and more into the hands of fewer and fewer people.

Budgets reflect government priorities and government ideology. This is a tax package that begins with some tax relief—around $10 a week for average households—but ends with substantial tax cuts of over $7,000 per year to high-income earners who really don't need that money right now. For most Australians, wages over the past two decades have almost flatlined. For many, hours have been cut and there is no longer any job security. Wage earners have seen very little increase whilst simultaneously company profits and living costs have risen substantially. Most of the high-income earners, who will indeed benefit from the government's proposed tax cuts, are not likely to be wage earners. They are most likely to be self-employed people or highly paid professionals who negotiate their own contracts and who very likely have not been restrained by low wage growth over recent years.

The current median salary in Australia is approximately $55,000 a year and the median full-time wage is approximately $73,000 per year. On current estimates, some three-quarters of income tax payers earn less than $90,000 a year. So, again, the dominant beneficiaries of the government's tax proposals are those people who are already well off—or at least should be—because they are on high incomes They don't need a tax cut. The government knows that, and that is possibly why the Prime Minister and the Treasurer refuse to release their costings. The government also knows that the community would see through the unfairness and judge the government accordingly if those costings were to be released. This is on top of the $80 billion in corporate tax cuts that the government is also still pursuing and of which, again, the government still refuses to acknowledge the full costing.

Of course, there are other very serious flaws with the government's policy, and I want to run through some of those. Firstly, the package is dependent on the Turnbull government winning the next two elections, or possibly the next three elections if governments don't run their full three-year terms. Secondly, the package makes wages growth assumptions that are out of step with reality. If that wage growth does not eventuate—and it is very likely that it will not—then government income tax revenue will also fall and the government's tax cuts will be unsustainable. Thirdly, the package makes assumptions about the economy that are very speculative. We don't know what the global economy or the Australian economy will look like in three years time, let alone in six years time. But neither the Prime Minister nor the Treasurer is very likely to be around in 2024 to be held to account or indeed to have to fix up the mess that they may well create as a result of this policy. It is about promising things into the future that they are not in a position to deliver on right here and now. It is one thing to deliver for the forward estimates; it is another to deliver beyond that.

Of course, these tax cuts for high income earners are proposed when net debt is set to hit $341 billion at the end of this financial year, 2017-18, and rise to $350 billion by the end of 2018-19. So again one can ask the very legitimate question: why, at a time when net debt is around $350 billion, would the government provide tax cuts into the future to those who are not in need, when there is a much greater need to try to get the budget back into order?

Even worse than all of that, these are tax cuts that the Turnbull government is proposing at a time when it wants to cut the $14-per-fortnight energy supplement to pensioners around Australia. That measure is still on the books. The government wants to cut $17 billion from schools. I hear members opposite saying that there are no cuts to schools. There are cuts to schools in comparison to what would have been allocated had the government stuck to its commitment when it was elected in 2013. The government wants to cut a further $270 million from the already decimated TAFE system around Australia, at a time when we know we need more skills training in this country, and it wants to cut hospitals funding. As the member for Ballarat quite properly pointed out yesterday with respect to one of the hospitals in Queensland, hospital funding has been cut. These cuts come at a time when the government wants to continue the Medicare freeze on specialists and at a time when out-of-pocket costs to see doctors and specialists have risen.

This is also at a time when the government is saying to people, 'If you want a pension, you will have to work until the age of 70.' No other country in the world does that, but this government believes it's reasonable to say to the older people in this country, 'You will have to work to the age of 70 before you are entitled to a pension.' It comes at a time when up to 700,000 Australian workers will lose up to $77 a week in penalty rates cuts that this government supports. These are people who are already struggling to make ends meet and who are quite often only part-time workers and have to work two or three jobs just to try to make a living. It comes at a time when families are paying over $1,000 more for private health insurance. Again, the government wants to cut the taxes for the high-income earners at a time when costs of living for people around the country are probably the single most concerning issue for so many families.

It's clear that this government, the Turnbull government, is completely out of touch with Australian sentiment. If the Turnbull government thinks that it is fair to offer over $7,000 a year of tax cuts to very high-income earners while people at the low end of income are absolutely struggling, it needs to get out into the community and talk to some real people. That is why Labor's alternative proposal is much fairer and, quite frankly, much more responsible. It is a proposal that will see a person on $65,000 be given a $924 tax cut per year. Ten million Australians will benefit from Labor's tax cuts because Labor understands that right now the families throughout Australia that are struggling the most are the middle-income and low-income families. It is those families that government policy should be seeking to support at this very time. Supporting those families and providing those tax cuts will, in turn, give the Australian economy the best boost possible.