Albanese attacks ambition with broken Stage 3 tax cut promise
Anthony Albanese is not to be trusted
Anthony Albanese has broken his election promise on the Stage 3 tax cuts. This should surprise no one as he already broke his promise on superannuation tax.
These broken promises add up. This is a problem: Even if you dislike the Stage 3 tax cuts, can you trust Anthony Albanese to implement policies that you do like? Will Anthony Albanese say one thing to get elected, and do another when he gets your vote?
He has claimed that the backflip was triggered by the ‘emergency’ that is inflation. This, of course, is clear nonsense: inflation had been an ongoing problem since he was elected. In that time he wasted a year and $450 million on a referendum that 60% of Australians rejected and that failed in every state. The broken promise is made worse by the gaslighting over why it was broken.
The Stage 3 tax cuts were part of a broader tax package, which, as the name suggests, included two prior stages. It is disingenuous to paint them as a sop to the wealthy when there were two other stages specifically targeted at lower income earners.
The Stage 3 tax cuts would have modestly benefited ‘high income’ earners. By slightly raising the threshold at which the top tax rate applies, and eliminating the 37% tax bracket, people could save a maximum of $9,000. The maximum benefit of 9k would apply to those who did, and still would, pay the most tax.
The rationale for the tax change was severalfold. Australia’s tax rates are extremely high compared to the Federal tax rates in the United States. The maximum rate in the US is 37%, which applies to people earning more than 609k. It is dramatically lower than in Australia. This is even more stark when we consider Hong Kong and Singapore, both of which offer attractive opportunities for Australian graduates.
Australia’s income tax brackets are also not indexed. That is, the thresholds do not increase with inflation. Therefore, as wages go up somewhat in line with, but below, inflation they pay ever more money.
To put this in perspective, suppose inflation is 5%. Suppose your wage increases 4%, you are already behind. The cost of everything you buy has increased by more than your income. This is the situation many Australians are in. However, it is even worse than this. Because, you must also reduce that wage increase by your marginal tax rate. Therefore, someone might only obtain 53% of that income increase. This significantly reduces peoples’ disposable income.
Indeed, Australia’s thresholds have not been changed 2008-2009. If the thresholds had been indexed, the threshold would be around 270k. Therefore, the Stage 3 tax cuts do not even give back bracket creep. They only give back a very small portion of it. This same problem applies across all income levels.
This is a problem. First, it lowers productivity. Why spend another hour at work, or work harder for your company, when you only keep around half your time. If you do an hour of overtime, you only reap the rewards of 30 minutes. This discourages people from going above and beyond.
This is basic economics: Utility theory says that if you people more and they will be willing to exert more effort. In so doing, it helps productivity because it encourages people to upskill and devote more of their valuable time to a job where they presumably become increasingly competent. By contrast, when you disincentivize hard work, companies face labor pressures, needing to hire more people to perform work that could have been done by a smaller number of ambitious individuals.
Second, it creates brain drain. People will simply leave to Hong Kong, Singapore, or the US in many cases. They are unlikely to leave for a small gain. But, the people who run large companies; and thus, generate employment and innovation will. This is a problem because of the collateral effects.
Third, it is inherently ‘unfair’ to seize ever more of a person’s income simply because they have worked hard, been ambitious, or succeeded. Labor is playing the politics of envy. But, behind many successful people, there are large sacrifices. Consider the hours that junior doctors put in while being paid minimum wage only to be able to recoup that much later. Similarly with lawyers. Behind large incomes are years of extremely hard work and sacrifice.
Labor is hoping that people will vote to seize other peoples’ money. But, people must understand that once they do so, it normalizes such practices. If you are at all ambitious for yourself or your children or your family, then voting for such a seizure is tantamount to throwing them under the bus.
Labor’s broken election promise is politically expedient. They will spin this as helping low income earners while harming wealthy people. But, the reality of this is that Labor is playing the politics of envy. They are moving to seize other peoples’ money. They already did this with the superannuation tax grab. It is a clear attack on ambition and success and a clear vote for mediocrity. This broken election promise shows that Anthony Albanese and the ALP are not to be trusted.