A Freedom of Information (FOI) request lodged by Fairfax Media has revealed Treasury modelling showing that the measures introduced in the May Budget would be highly inequitable and punish lower income workers. From The Brisbane Times:
The Treasury analysis reveals the spending cuts cost an average of $842 a year for lower income households, while the average high income family lost just $71. Middle income families were down $477.
Partly offsetting the skewing of spending cuts towards low earners was the temporary deficit repair levy for those earning above $180,000 a year.
The Treasury modelling says the average high income family would pay an extra $446 a year in tax; middle income families an extra $15; and low income families only $2 a year more.
The combined effect is that an average low income family loses $844 per year in disposable income (earnings after tax and government payments) due to the budget. Middle income earners forgo $492; while a high income family is down by $517.
The table underpinning the findings is presented below:
Meanwhile, Treasurer Joe Hockey has hit out at Fairfax’s findings “because it failed to acknowledge the greater amounts of tax middle and higher income families pay”.
Arguably, the main reason why the Budget has failed to resonate with the electorate is because most view it as being fundamentally unfair. While there are certainly strong arguments for long-term Budget repair, the Coalition should have instead targeted Australia’s world-beating and poorly targeted tax concessions, which tend to favour higher income earners and wealthy retirees, as well as championing fundamental tax reform that broadens the base and shifts the tax burden away from labour and onto more efficient and equitable sources (e.g. land, resources and consumption).
As noted by my cousin, Peter van Onselen, today: “a more efficient tax system can offer social liberals opportunities to fund targeted spending every bit it as much as it offers economic liberals the chance to bring down the costs of doing business, helping to stimulate economic growth”.
The Coalition’s platform should shift from the presumption that Australians pay too much tax – of which the majority of Australians disagree – to ensuring that the tax system is functioning as efficiently and equitably as possible.
