Appropriation Bill 2018-19
House of Representatives, 21 May 2018
Back in 2005, prior to the global financial crisis, the member for Wentworth, as a backbencher, commissioned a paper on tax reform entitled Taxation Reform in Australia: Some Alternatives and Indicative Costings. The paper advocated for lower tax rates and a simplified system—in particular, a flatter tax structure.
Thirteen years later, after the GFC, the now Prime Minister is finally trying to bring his wishes for a flatter income tax structure to fruition. The paper also noted that arguments for taxing capital gains at the same rate as income are compelling ones. To simplify the argument back in 2005: if you try to tax higher income earners too much, they will be pushed into tax minimisation strategies such as negative gearing and taking full advantage of the capital gains tax discount. Such discounts should be removed, the paper advocated.
So it appears that Prime Minister Turnbull should really be supporting Labor's proposed changes in those areas. Instead, this budget looks after big business at the expense of people who work and struggle. Australians earning as much as $200,000 will be subject to the same tax rate as those earning as little as $41,000 under the tax plan put forward by Scott Morrison to flatten Australia's taxation system, previously known as a progressive taxation system.
Budget tax cuts through to 2024 and 2025 will be less progressive than in our current system and will only help the rich get richer. The promise of income tax cuts worth $140 billion would, as the member for Wentworth's 2005 paper noted, bring the vast majority of working Australians into the same tax bracket, meaning that high-income earners would contribute a much smaller proportion of overall tax revenue than they currently do. In two elections time, the government proposes a shift towards this flat tax system, where the current 37 per cent tax bracket would be axed and workers on incomes between $41,000 and $200,000 would be taxed at the same marginal rate—quite a boon if you are a high-income earner.
In the electorate of Burt, the average income earner is on around $60,000 a year. How on earth is it fair for a construction worker on $60,000 a year to pay the same tax rate as a CEO or a lawyer who is earning $200,000 a year? How can it be fair that, under this tax experiment being put forward by the government, the lawyer or accountant, earning more than three times as much as a construction worker, gets a tax cut that is more than three times as big? In fact, The West Australiannewspaper crunched the numbers on Mr Turnbull's unfair tax plan and found that those living in the leafy western suburbs of Perth would pocket an income tax cut of, on average, 11½ times the size of the cut that workers in the suburbs of Gosnells and Armadale, in my electorate, will be receiving. How is 60 per cent of the tax cuts ending up in the pockets of the top 20 per cent of households fair?
The Liberals say they want to deliver tax relief for low- and middle-income Australians. But their income tax plan is holding people hostage for tax cuts. If they really cared about low- to middle-income earners, they would split their proposals so that those that come into effect from 1 July could be supported but those that will only provide a benefit for high-income earners could be avoided. Instead, it seems that this government only cares about the top end of town.
It's interesting, though, to note that the International Monetary Fund says that taxing the super-rich will help reduce inequality without having an adverse impact on growth. The head of the IMF's fiscal affairs unit said that the average top income rate for the rich country members of the OECD—that includes Australia—had fallen by nearly 30 per cent since 1981. If that had occurred for ordinary income earners in Australia, they'd now pay no tax at all. He said there was scope for a more progressive system to tax the rich at higher rates in an effort to redistribute income to those who are less well off.
Meanwhile, this government's budget seeks to do exactly the opposite. The government has not only failed the fairness test set by Labor and, more importantly, by the community; it's also failed the fiscal responsibility test that it set for itself. Net debt for this coming year is double what it was when the Liberals came to office, while gross debt will remain well above half a trillion dollars for each year for the next decade. Both types of debt are growing faster under this government than under the previous government, and the previous government had to contend with the GFC.
Labor's approach to the budget for this nation is fairer for middle Australia and the most vulnerable people in our community, and it's more responsible when it comes to budget repair. Labor would deliver lower taxes for 10 million working Australians. Labor's plan will see those earning up to $125,000 a year still paying less tax than they would under the Liberals. Indeed, under Labor's plan, four million working Australians would receive nearly double the tax cut that they would under this Liberal government.
But the unfairness of the budget doesn't stop at its approach to income tax. This budget raises questions about how committed this Liberal government is to helping Western Australia with its financial woes, with the Turnbull government, over the term of this budget, halving its infrastructure spend for Western Australia. The budget papers also reveal that the only money that the Prime Minister and the Treasurer will provide Western Australia to help with its low allocation of GST is $189 million in this current financial year. There is no extra money to be provided in the budget year or in any of the forward estimates after that. Under the Liberal budget, WA is set to receive only the equivalent of a 50c GST share.
Even the infrastructure funding for Western Australia that the Prime Minister came to announce pre budget is a hoax. It was stated that Western Australia would be receiving an infrastructure spend of $3.2 billion. But then, once we saw the budget delivered and we got into the detail of the budget papers, it shows not only that actually there is no new infrastructure money in this budget but also that, over the period of the budget, the infrastructure spend is only down at $1.2 billion.
This compares to Labor's commitment of a $1.6 billion WA fair share fund, which will provide Western Australia with the equivalent of 70c in the dollar GST. Maybe it's this contrast that explains why the government is hiding the recently delivered Productivity Commission report on GST distribution—and only the Liberals are hiding from the people of Western Australia. Not only are they hiding this Productivity Commission report but they're running away from the by-elections to be held in Perth and Fremantle.
Now, everyone can see that this government is about mates rates on tax, helping those who earn the most, handing $80 billion to the biggest businesses and the banks, as well as its ongoing protection racket for the banks, trying to avoid a royal commission and then, as we've seen in the budget, defunding ASIC and defunding the Commonwealth Director of Public Prosecutions. It's no wonder that this Liberal government is cutting and running.
Only Labor is committed to delivering a fair go for Western Australia by delivering the infrastructure, health and education funding that WA needs, as well as providing actually budgeted GST assistance. Only Labor is committed to delivering lower taxes that are fair for millions of working Australians. Labor's approach to the budget is fairer for middle Australia and for the most vulnerable in our community and more responsible when it comes to budget repair. We will deliver extra funding for public hospitals. We'll deliver 20 new MRI machines for regional centres and outer suburbs. We'll abolish Mr Turnbull's cap on university places, and we'll abolish up-front fees for 100,000 TAFE places, to help Australians build their skills. Bear that in contrast to the $270 million cut in funding for TAFE under this government's budget. Labor can deliver on these commitments because, unlike this government, we won't be giving away $80 billion in tax cuts to big business and the banks.
Under a Shorten Labor government, we will achieve a budget coming back into balance in the same year as the government. We'll deliver a bigger cumulative budget surplus over the forward estimates, as well as substantially bigger surpluses over the 10-year medium term, and we'll put the majority of the savings raised from our revenue measures over the medium term towards budget repair and paying down debt. A Shorten Labor government will also be guided by clear fiscal principles, including repairing the budget in a fair way that doesn't ask the most vulnerable Australians to carry the heaviest burden. We will more than offset new spending with our savings and revenue improvements. This is in stark contrast to the approach of this government. We will be able to bank changes in receipts and payments from changes in the economy, and this will be seen in a positive bottom line for our budget—something this government has never seen—because Labor has made the tough calls, tough calls that this government has decided to try and pay us out on, on things like negative gearing, capital gains tax, looking at how income is split through trusts and, of course, the dividend imputation refund. By closing these loopholes, we will be able to make sure that we're able to provide the essential services that all Australians need.
Our plan is fairer and more responsible because it makes sure that those that are most vulnerable in our community are looked after, and it makes sure that we get budget repair done in a fair way. We're able to do that because we've made the big calls and we've got them right. We will of course support supply, but once again we see in this budget the stark contrast between Labor's fair approach and this government's mean, arrogant, out-of-touch, wrong priorities. Let's hope that this budget is their last.