Labor opposes tax cuts for wealthy but won't rule out passing them in budget package

Labor has signalled it remains opposed to tax cuts for high-income earners if the Morrison government brings its stage three changes forward in Tuesday’s budget.

But the shadow treasurer, Jim Chalmers, on Sunday left open the prospect of voting for the proposal if the government rolled up the budget tax cuts as a package. He said Labor needed to see the measures in detail before taking a position.

The Morrison government has been telegraphing for a month it will bring forward tax cuts legislated to take effect from 2022 – and possibly the stage three changes due to start in July 2024.

The stage three proposal reduces the tax rate for those earning between $45,000 and $200,000 to 30 cents in the dollar. On Sunday, Chalmers told ABC TV that Labor remained opposed to that change.

“Stage three is the least affordable, it’s the least responsible, it’s the least fair and it is the least likely to get a good return in the economy because higher income earners are less likely to spend in the economy,” he said.

Labor opposed stage three when the government presented it in 2019 but did not vote against it because it was brought to parliament in an omnibus bill.

The government is expected to pursue that strategy again, but there is an appetite in Labor to oppose the tax cuts for very high-income earners if there is an opportunity to do that without denying relief to low- and medium-income earners.

Tuesday’s budget will contain tax cuts, more concessions for business (including an overhaul of research and development concessions), a big infrastructure spend and labour market programs to help people into employment as income support through jobkeeper and jobseeker tapers.

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Guardian Australia has also confirmed the budget will include new spending on aged care services, likely a boost to homecare packages. Tuesday night’s package will be an interim spend ahead of a larger funding and reform package next year in response to the aged care royal commission.

Last week, the aged care royal commission found the Morrison government’s attempt to prepare the aged care sector for Covid-19 was “insufficient” in some respects.

On Sunday, the Victorian premier, Daniel Andrews, said Victoria was pursuing a $1.75bn infrastructure package with the commonwealth, describing that level of investment as “the bare minimum”.

In a round of pre-budget interviews last Friday, the treasurer, Josh Frydenberg, confirmed the unemployment rate would likely now not hit 10% as previously forecast.

Unemployment would creep higher than the current rate of 6.8% but the forecast would be adjusted below 10%. He also confirmed that overseas migration and population growth were negative and that would put a drag on economic growth.

The government on Sunday confirmed that businesses prepared to take on new apprentices from Monday would be eligible for a 50% wage subsidy. The measure is capped at 100,000 subsidies, and will be available to businesses of all sizes.

Chalmers welcomed that initiative but said it would not reverse the loss of apprentices and trainees evidenced during the Coalition’s period in government, and it would not fix the problem of income support through jobkeeper being withdrawn prematurely.

“We are concerned that the existing wage subsidy which was introduced too slowly and too narrowly is now being withdrawn too quickly and too bluntly,” he said.

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Frydenberg told the Nine Network the government would cut income taxes in the budget because “we believe people should keep more of what they earn”.

“We also believe more people having more money in their pockets right now will help economic activity across the economy,” the treasurer said. “More spending will mean more jobs”.

Asked how cutting income tax for very high earners was fair, or would promote consumption to kickstart economic growth at a time when the household saving ratio is at a record high, Frydenberg said: “Our tax system is fair and has been a progressive tax system and will remain progressive tax system”.

“The top 5% of taxpayers pay about a third of the total tax bill. If you’re on $200,000 you pay ten times as much tax as someone who is on $45,000”.

“Our tax plan will continue to remain progressive. As part of a broader tax reform where we’re creating one big tax bracket between $45,000 and $200,000, 94% of taxpayers will pay no more than 30 cents in the dollar”.

The treasurer said job creation was the focus of the budget, not deficit reduction. He said debt “can be paid back by growing the economy”.

“There is no economic recovery without a jobs recovery. We’re focussed on getting more people into jobs”.

Separately the health minister, Greg Hunt, said Tuesday night’s budget would also include amended listings on the Pharmaceutical Benefits Scheme that would help Australians battling liver cancer, myopia and Parkinson’s disease.

The government will expand the listings of Tecentriq and Avastin for use in combination to treat patients with advanced unresectable hepatocellular carcinoma, which is the most common form of liver cancer.

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