From the AFR today:
The highest-paid Australians are set to receive two income tax cuts in next week’s federal budget, setting the scene for a intense battle with Labor, which believes scarce revenue should be skewed towards boosting services and helping people on lower incomes.
As well as honouring a promise to next year abolish the so-called temporary deficit levy, a 2 percentage point tax increase imposed on earnings over $180,000, the government will raise the $80,001 income tax threshold margin above which each dollar earned is currently taxed at 37¢.
The threshold increase, which is likely to be modest, is designed to counter the effect of bracket creep, in which workers move into higher tax brackets as wages grow.
To help fund the bracket creep tax cut, the Australian Public Service could be hit with another efficiency dividend, sources said.
Let’s quickly run through how we got here:
- first we tried GST reform which collapsed;
- then came a narrative about bracket creep and the need for income tax cuts which collapsed;
- then came negative gearing reform which collapsed;
- then came the company tax cut which appears to have also quietly collapsed, and
- now we’re back to bracket creep and income tax cuts.
The Government’s strategy appears, again, to be based purely upon addressing the Opposition not the country, given Shorten has committed to retaining the deficit levy and is not, so far, promising any tax cuts. We can conclude this easily enough by the absence of any policy process. Where’s the consistent underpinning values expressed through policy given this will hit the deficit? Where’s the research arguing for the need to address bracket creep? Where’s the steady and long term message preparing the electorate for change?
For the Coalition, this is simply about sharpening a single sound bite: Labor is high taxing, we are not. That’s it. That’s the extent of the governing. It has Tony Abbott written all over it.
