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Monday, 16 June 2003
Page: 11445

Senator SHERRY (8:06 PM) —I want to thank my colleague. He deserves to speak on the Taxation Laws Amendment (Personal Income Tax Reduction) Bill 2003. I was under the impression that we were going on to something else, and I left the chamber as a consequence. I could not have put it better than my colleague Senator Ludwig. We could best describe this particular piece of legislation as the `sandwich and milkshake' tax reduction bill. It was so appropriately described not by anyone on this side but by Senator Amanda Vanstone in one of her more honest moments. I have to say she is one of the more refreshingly honest and accurate of the Liberal ministers on the other side of the chamber.

The essence of the bill that we are considering tonight was appropriately and memorably described by the Daily Telegraph as a `piddling tax cut' that for middle Australia amounted to the grand sum of $4 a week. That is the size of the tax cut for those earning between $30,000 and $50,000 a year—$4 week. It is a miserably small effort. For low earners the tax cuts are even smaller: a wage earner on $20,000 a year gets a tax cut—get this—of $1.63 a week. High earners do a little better: a person earning $65,000 a year gets a tax cut of $11 a week.

This is a bill by which, as we pointed out on budget night, the biggest taxing government in Australia's history gives the smallest tax cuts in our history. The tax cut for ordinary working Australians is so small that, for a worker on average earnings, the tax cut will disappear; it will be swallowed up within 12 months. It gives $4 and it disappears within one year. On the budget's prediction of an average four per cent wage increase, a worker earning $40,000 today will after 12 months pay $480 more in tax on their income. Yet, they will be rewarded with only a $208 tax cut. The Liberal government is returning much less in tax cuts than it is taking.

Let me give you a little more detail about what the bill does. Its main purpose is to implement the personal income tax cuts announced by the government in the budget five weeks ago. The proposed tax changes have three parts. First, the low-income tax offset will be increased from $150 to $235 per year. In addition, the income threshold at which the tax offset begins to phase out will be increased from $20,700 to $21,600. Second, the personal income tax thresholds will be increased. The lowest threshold, which imposes a tax of 17 per cent, now begins at $21,600; previously it began at $20,000. The 30 per cent threshold has increased from $50,000 to $52,000, the 42 per cent threshold has increased from $60,000 to $62,500 and the 47 per cent threshold has increased from $60,001 to $62,501. The third change in the bill is to increase the Medicare levy threshold that applies to taxpayers who are eligible for the senior Australians tax offset from $20,000 to $20,500.

The long overdue tax cuts in this budget do nothing to take away the Liberal government's record as having the highest taxing Treasurer in Australian history. More tax; less service—that is this government's seven-year record. On the government's own figures, tax revenue will still surge from $159.8 billion in 2002-03 to $166.5 billion in 2003-04. More than three-quarters of this extra revenue grab will be from extra tax on individuals and, I have to reiterate, this is before considering the GST, which the Treasurer, Mr Costello, still continues to pretend does not exist. Apparently, the GST that the Liberal government—Mr Costello and Mr Howard, the Prime Minister—introduced, with Meg Lees, ex-Democrat, and which they are so proud of, does not exist; it is not a federal tax. They exclude it from their own budget figures. Once the GST is added back in—$32.1 billion in 2003-04—the real tax take is $198.6 billion.

It is not just Labor that thinks the GST should be counted as a Commonwealth tax; it is also the view of the government's two financial watchdogs: the Auditor-General and the Australian Bureau of Statistics. They are independent of government—whichever government of the day—and they will not knuckle under to the threats and the blandishments from this government about trying to have the GST reclassified from a Commonwealth tax to a state tax. The Liberal government has also rejected the unanimous recommendation—and I stress this—of the Joint Committee of Public Accounts and Audit that the final budget outcome, the FBO, should be audited by the Australian National Audit Office. The government's excuse is that, if the FBO were audited, it might not be published until after the 30 September charter of budget honesty deadline—three months after the financial year—and it is pathetic. The consolidated financial statements released in November are audited, but they are prepared under the AAS31 accounting standards and are not the figures the Treasurer quotes on budget night. It is another way of disguising unpleasant truths.

One of these unpleasant truths is that, under this Liberal government, Commonwealth tax as a proportion of national output has achieved record levels. The budget forward estimates also reveal that this high taxing will continue. Mr Costello still stands tall as Australia's greatest taxer—more tax; less service. Mr Costello remains the only Treasurer in Australian history to collect on average more than 17 per cent of national income in income tax. Even with this tax cut, income tax revenue will surge from $127.9 billion in 2002-03 to $134.2 billion in 2003-04. There has never been an Australian government for whom income tax represents as high a proportion of its total tax take as it does for this one. This is despite the fact that Mr Howard promised the GST would take pressure off income tax.

In this budget, the Howard government remains addicted to introducing new hidden taxes. The budget proposes increased excise on petrol and diesel and proposes a new excise on liquid petroleum gas. These tax burdens fall well short of compensating taxpayers for the burden imposed on them in other areas by the budget. Each of the government's hits—to Medicare, education and family tax benefits—will, on its own, far outweigh the tax cuts. As I said earlier, more tax; less service. The cost of services is more and more being pushed onto low- and middle-income Australians. The $4 a week tax cut will be swallowed over a year by just five visits to a doctor who does not bulk-bill. These are the same families Mr Howard wants to slug an extra $5.50 each and every time they buy essential medicines. These are the same families who will, on average, get $400 less in family tax benefits than the government promised this financial year due to the government's benefit clawback. These are the same families that the Prime Minister, Mr Howard, expects to pay more for higher education contributions or to take out loans to pay for their education and their children's education. These families face up to $32 a week in increased higher education contributions debt and up to $125 a week in education loan repayments.

Although the tax cuts are puny, Labour will support this bill. The first reason we will vote for this bill is that if we do not support the tax cuts taxpayers will not get anything. The second reason we will vote for this bill is that we agree with its proposal to increase the low-income tax threshold. The third reason we will vote for this bill is that it is important to adjust the tax scales on a regular basis to make sure taxpayers who moved into higher tax brackets as their incomes increase get at least some relief from higher tax rates. However, we do think it is important that governments retain some discretion in this process. Simply to lock in automatic indexation of tax thresholds would be to lock in what is, in any case, an unsatisfactory structure. That said, the increase of the tax thresholds that is part of this bill is overdue. So we support the bill, although we are critical of the mismanagement and misguided priorities that mean the tax cuts are so small. Given the tax cuts are so small, it is no surprise that the big political hit the government seems to have expected from the budget has not come to pass. The voters have seen through the Liberal government's deceptions and reached their own conclusions.

I want to address one of the deceptions in particular: the Treasurer's claim in parliament last month that these were not the smallest tax cuts in history because, according to him, Labor's tax cuts of 1993, the so-called l-a-w law tax cuts, were not delivered. This is a line that has been run in the Senate by Senator Hill, the Leader of the Government, and Senator Minchin, amongst others. This claim is simply not true. What was passed and delivered to taxpayers under the l-a-w law tax cuts was twice the size of the tax cut delivered by this bill—100 per cent bigger. The first half of those 1993 tax cuts constituted 5.1 per cent of personal income tax at that time, compared with the tax cuts in this bill of 2.5 per cent. Not only that, the first half of the l-a-w law tax cuts were delivered earlier than promised. The second instalment of tax cuts Labor pledged to deliver as superannuation contributions for working Australians. That was good policy; unfortunately, it was cancelled. Who cancelled it? None other than the Treasurer, Mr Costello. He is so excited about the puny tax cuts delivered by this bill. The second instalment of the l-a-w law tax cuts, which was supposed to be delivered in the form of superannuation—higher savings for long-term retirement incomes, so vital to the future of this nation—was cancelled by the Howard government in 1997. I make the point that that was cancelled in 1997, not 1996. That was one year after Mr Costello's first budget. This is typical of the regular pattern of distortions and deceptions practised by the Treasurer.

While I am on this issue of superannuation, it should be noted that in this year's budget the most rapidly increasing area of taxation is not the GST, not income tax but actually tax on superannuation. When the Liberal government took office in 1996, tax collected from superannuation contributions and fund earnings tax amounted to about $1.6 billion. This financial year it will be approximately $5 billion. That is $5 billion in tax being ripped out of the future retirement income earnings of Australians. We will hear more of this next week from the minister opposite, Senator Coonan, but the government is proposing a tax cut on superannuation. Who is going to get it? High-income earners. It will be an exclusive tax cut for those earning more than $90,500 surchargeable tax income. We will say more on that next week.

Another of the deceptions is the argument that Labor cannot simultaneously promise tax cuts and new spending measures whilst retaining a budget surplus. The government likes to think it has painted the Labor opposition into a corner by delivering such tiny surpluses that there is little money left for new initiatives, but that belief rests on a false assumption: that every dollar the government spends is money well spent. Of course that is not the case and Labor will not be afraid to find savings by reallocating some of the government's wasteful spending for better purposes. On the assumption that the Liberal government's economic projections hold true, Labor will maintain budget surpluses in coming years, but we will also find the money to set better priorities in critical areas such as Medicare and education. We have provided full costings for all of our promises.

The opposition leader, Mr Crean, in his budget reply speech outlined in detail the savings we would make to pay for the rescue of Medicare. All the numbers used are the government's numbers, straight out of the budget papers. Over the four years to 2006-07 we have isolated $909 million in savings from redirecting specified parts of the government's Medicare package, $700 million from opposing the reduction in the superannuation surcharge, $780 million from not proceeding with the government's expensive changes to public sector superannuation and $495 million for not proceeding at this stage with the proposed changes to business tax. That is a total of $2.884 billion—almost $3 billion of savings. We will achieve further savings by getting rid of the baby bonus, which the government has said will ultimately cost more than $500 million a year but which is a demonstrated failure.

It is not as difficult as you might think to find savings to pay for Labor priorities. If it were not for this Liberal government's mismanagement, there would be more money to pay for other priorities and the tax cuts would be greater. Labor welcomes the tax cuts provided by this bill. We condemn the government for the misguided priorities indicated by the small size of the tax cuts and for the other signs of waste, mismanagement and mistaken priorities that are revealed in the budget. As I said earlier, this bill could best be summarised with two themes. The first is that it is a `sandwich and milkshake' tax cut. I have to acknowledge the kind assistance of Liberal Minister Vanstone for exposing the true benefit of this `sandwich and milkshake' tax cut.

Senator Hogg —Where can you get a sandwich and a milkshake for that price?

Senator SHERRY —I don't know. Perhaps she was wrong—maybe it will only buy a sandwich.

Senator Hogg —Where?

Senator SHERRY —I don't know. The other theme, which I want to close on, is that this is the highest taxing government in Australian history. What is even more significant is that this highest taxing government is lowering the quality of services, education and health, with more and more being forced onto the individual to pay.

I want to make a couple of remarks about the second reading amendment circulated by Senator Murray. Labor will not be supporting the second reading amendment. Our primary concern is subclause (d), which says that future tax cuts should be directed at significant relief for low-income Australians. Whilst we do not disagree with a priority of tax cuts for low-income Australians, it is not just low-income Australians who are hurting under this government. It is also middle-income Australians. I do not know how Senator Murray defines low-income Australians—perhaps those on less than $30,000 a year—but I think that average earnings are now approximately $46,000, which is getting up to middle-income territory. It is low- and middle-income earners who need relief in a variety of forms. Therefore, we do not agree that tax cuts in the next budget should be directed solely to low-income earners.

To be perfectly frank, if an average income is $46,000, I do not know how a person on a middle income with a non-working spouse and a couple of children can cope, particularly when you look at the cost of housing, the extra medical and education responsibilities that this government is transferring to them and the additional pressures that are continually being added to their budget expenditure by this Liberal-National Party government. I will conclude my remarks there.