Grattan Institute report shows high-end tax cuts unfair, risky and expensive

With a Grattan Institute report out today showing the Government’s proposed high-end (Stage 3) tax cuts would make our tax system less progressive than at any time since the 1950s, ACOSS is calling on Parliamentarians to stand up for a fair and sustainable tax system.

The Grattan Institute report shows the Stage 3 tax cuts (scheduled for 2024) would:

• Cost $18 billion once implemented in 2024. This is more than Commonwealth funding for pharmaceutical benefits, universities, public schools, or unemployment payments.

• Provide 60% of the benefits to the top 20% of taxpayers.

• Be locked in five years in advance, which “carries plenty of downside risk in Australia’s current highly uncertain economic environment”.

ACOSS Principal Adviser, Dr Peter Davidson, said;

“The first stage of the tax cuts package – which offers a tax cut of $1,080 this year to most full-time workers – will help a slowing economy, but the high-end ‘Stage 3’ tax cuts scheduled for 2024 are too expensive, too risky, too unfair, and too late.

“The Government is asking the Parliament to lock in $18 billion of high-end tax cuts five years in advance, without knowing what the economy or the Budget will look like at the time.

“These high-end tax cuts will put funding for essential services at great risk.”

The Grattan Institute report reveals that to pay for the Stage 3 tax cuts the government is banking on an unprecedented squeeze in funding of public services and payments – with lower growth in public spending than any government has achieved over the last 40 years.

The Government expects real growth in Commonwealth expenditure to slow to 1.3% a year, barely keeping up with growth in the population. Health funding is projected to grow at just 0.7% a year.

“Already there are huge gaps in our essential services that are leaving people to struggle with out-of-pocket costs and huge delays,” Dr Davidson said.

“We have a housing affordability crisis, an ageing population, entrenched poverty among people who are unemployed, and eye-watering childcare costs. We need to ensure we have the public revenue we need to face these challenges as a community.

“It’s about priorities. Do we want to give $11,000 a year in tax cuts to people earning $200,000 or do we want to fix the gaps in our services and ensure we can fund them into the future?

“We’re calling on the Government, and the Parliament, to pass this year’s tax cuts but not the high-end tax cuts scheduled for later,” Dr Davidson said.

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