May 8, 2018

Media Release: 8 May 2018

Turnbull Government budget will increase inequality in Australia

Under the guise of simplifying the tax system, Treasurer Scott Morrison tonight announced the most radical attack on Australia’s progressive income tax scales in living memory.

A gradual lift in the tax thresholds between now and 2024 will, rightly, address bracket creep and keep our tax rates broadly in line with inflation.

The killer blow comes in 2024, when the government proposes to completely abolish the 37 per cent tax bracket.

Combined with earlier increases in the tax thresholds, this will result in an almost flat income tax system in Australia, in which the vast majority of Australians will pay the same 32.5 per cent rate of tax on their incomes between $41,000 and $200,000 per year.

This means that someone earning just $45,000 a year will pay the same marginal tax rate as someone earning four times as much.

While this is trumpeted by the treasurer as a necessary simplification of our tax system, and a boon to middle-income earners, it is actually an ideological attack on the very concept of progressivity that underpins our tax and transfer system.

People earning $200,000 are amongst the richest Australians, while those on $41,000 are doing it tough. Slugging them the same rate of income tax is just not fair.

The plan announced tonight will see Australians earning under $37,000 a year gaining $200 in an end-of-year refund, while those earning $200,000 will eventually bank an additional $5,000.

Australians cherish our progressive taxation system. The 8th Annual Per Capita Tax Survey shows that a significant majority of Australians believe that high income earners should pay more tax, and the government should spend more on health, education and social security.

Our tightly targeted tax and transfer system, underpinned by a long-standing commitment to progressive taxation, is the envy of the world. It has held back the tide of rampant inequality that is swamping the developed world since the GFC, and prevented the development of a permanent underclass of working poor that has devastated the USA and hollowed out its middle class.

The treasurer tonight declared the end of progressive taxation in Australia. It’s a recipe for growing inequality.

For comment, please contact Emma Dawson, Executive Director: infdo@percapita.org.au