‘No benefit’: Tax cuts for the rich slammed

 

The government claims controversial tax cuts included in Tuesday's Budget will save the Aussie economy - but critics say it will do little more than reward the rich.

In his 2020-21 budget speech, Treasurer Josh Frydenberg confirmed that more than 11 million taxpayers will get a tax cut backdated to July 1 this year, claiming the policy would generate "billions" of economic activity, create 50,000 new jobs and help small business stay afloat.

The hotly-anticipated budget measure will provide tax relief of up to $2745 for singles and up to $5490 for dual income families compared with 2017-18 as Stage Two of the government's legislated tax cuts are brought forward by two years.

The 19 per cent threshold will also be lifted from $37,000 to $45,000, and the 32.5 per cent threshold from $90,000 to $120,000.

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Critics say supporting those out of work or on lower incomes would do more for the economy than rewarding the wealthy. Picture: Glenn Hampson
Critics say supporting those out of work or on lower incomes would do more for the economy than rewarding the wealthy. Picture: Glenn Hampson

"In last year's Budget we promised the Australian people tax relief so that they could keep more of what they earn. We delivered," Mr Frydenberg said on Tuesday night.

"Putting more money into the pockets of hard working Australians strengthened our economy to respond to this economic crisis. Tonight we go further again."

But the tax cuts have dominated headlines for days now - and generated massive backlash from critics who claim wealthier Australians will benefit while those who are genuinely in need will miss out.

THE BACKLASH

Australian Council of Social Service CEO Dr Cassandra Goldie has been one of the most vocal critics of the plan.

ACOSS has long argued for the government to permanently raise the JobSeeker rate, which is due to revert back to its pre-coronavirus level of just $40 a day in 2021.

Dr Goldie voiced the tax cuts could fail to boost the wider economy, and that raising JobSeeker would have been far more beneficial for vulnerable Aussies and Australia's finances alike.

"People without paid work will see no benefit from the income tax cuts brought forward in (the) budget, which mainly go to people who are lucky enough to have jobs, with the largest amounts going to people on higher incomes," Dr Goldie said after the Budget was announced.

"The country's leading economists have been telling the Government that an adequate JobSeeker rate is far more effective than income tax cuts in generating the economic stimulus we need to rebuild out of recession.

"While people on higher incomes can choose to save, people on low incomes are living week-to-week and have no choice but to spend in the real economy on the basics, boosting business recovery."

The topic also sparked debate on Q&A on Monday night, with Deloitte Access Economics economist Nicki Hutley announcing she was "not in favour" of tax cuts and health expert and former head of Australia's Finance Department Jane Halton questioning their effectiveness.

"We know people on lower incomes, if you put money in their pocket, they will spend it. We know that if you put money in the pocket of people on higher incomes, they're more inclined to save it," she said.

'MAKES SENSE'

But The Tax Institute's tax policy and technical director Andrew Mills told news.com.au while a lot of the criticism focused on the idea of high income earners being rewarded, it was actually designed to benefit middle income earners in the $90,000 to $125,000 income bracket the most.

"These are nurses, teachers, police and public servants - people who are around 10 years into their career who are in their early 30s with a mortgage who are starting to raise a family," he said.

"They are going to get a tax cut and they have been described by some as wealthy, but I consider them to be ordinary, everyday Australians."

Mr Mills said while people who earned above that threshold would still benefit from the tax cuts, the reward would be smaller, as the cut was capped at a flat rate for those earning more than $125,000 and no longer increased according to income.

"The idea is that this money is going into the pockets of a lot of people in that middle income bracket who will actually spend it - they will need it to pay their mortgages and child care and many may be on reduced hours and not earning as much," he said.

"For me it makes sense - it was designed to get more money circulating in the economy and I think it will do that."

RELATED: What the Budget means for you

Treasurer Josh Frydenberg said the tax cuts would generate “billions” of economic activity, create 50,000 new jobs and help small business stay afloat. Picture: NCA NewsWire/Martin Ollman
Treasurer Josh Frydenberg said the tax cuts would generate “billions” of economic activity, create 50,000 new jobs and help small business stay afloat. Picture: NCA NewsWire/Martin Ollman

Mr Mills pointed out that the tax cuts were not a surprise as they had already been legislated and were supported by Labor.

And he said there were other measures which had specifically targeted lower income earners and those on benefits.

However, Professor Geoff Kingston from Macquarie Business School's Department of Economics told news.com.au there was one key risk associated with the new Budget.

"This budget proposes bold spending rises and tax cuts. Fingers crossed that it all works out as intended," he said.

"The risk is that our tax base may not recover over the next few years to the extent needed to avert further downward pressure on our national credit rating.

"Already, in May this year, Standard and Poors has announced that our credit rating has been downgraded to 'negative outlook'."

 

 

Originally published as 'No benefit': Tax cuts for the rich slammed



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