Labor is taking a six-to-one gamble that money in the pocket is more important than a broken promise
Labor is taking a six-to-one gamble that money in the pocket is more important than a broken promise
While a lot of the political commentary is fixated on Labor's broken promise, will its backflip make the tax system better? On that, there's a lot less argument.
ANU economist Ben Phillips ran the government's proposed stage 3 tweaks through his PolicyMod simulator to weigh up the winners and losers.
He finds about 6.2 million households will benefit from the Albanese government's changes, while just 1.1 million households will lose out compared to the tax laws passed under the Coalition.
The government's gamble is that nearly six-to-one winners to losers presents pretty good odds for the widespread financial benefits to outweigh the cost of a broken promise.
I actually think Labor has played this really cleverly. By changing Stage 3 in the way that they have, they maybe aren't getting something quite as good as they would have if they'd been in charge of the tax system since 2018, but they're massively improving it over what the LNP originally legislated. But—and here's where I think the genius is—they can easily play it off to voters as not reneging on a promise. They didn't revoke stage 3, they just tweaked it to be a little better. Genius politicking.
9Agreed. To most people, they've improved the cuts so that more people will get a cut. I would've got like $400, now I'm getting $1,400 off. I don't see a problem in the government going "yeah you did want it, but it was pretty shit tbh so we made it better for you."
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Or perhaps that the middle-suburban voters who abandoned the conservatives at the last election and whom Labor needs to stick with them don’t think of themselves as temporarily embarrassed millionaires who aren’t looking forward to paying more tax when they do get rich.
7I thought it was wealthy voters that left and went to independents as they couldn't stomach the social policies.
3The Teals picking up LNP seats attracted a disproportionate share of media attention, but the bulk of Labor’s landslide was middle-suburban seats who stayed with the Tories since the Howard years largely out of inertia deciding that enough was enough.
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wft. Has the ABC turned into a Murdoch rag or something?
4This is the best summary I could come up with:
The government's gamble is that nearly six-to-one winners to losers presents pretty good odds for the widespread financial benefits to outweigh the cost of a broken promise.
"The heavy weighting of the original package towards those on the highest incomes is difficult to justify in the current economic climate and, with the cost of living disproportionately impacting those low- and middle-income taxpayers, this will provide some much needed extra cash in the pockets of hard working families to pay mortgages, food and fuel bills," noted its director of tax communications, Mark Chapman.
Aside from returning some of the extra revenue generated by bracket creep, one of the arguments for the stage 3 tax cuts in the first place was that they'd boost incentives to work, and therefore productivity and economic growth.
Tax economist Steven Hamilton from George Washington University was scathing of a key element of the original plan, and full of praise for Labor's decision to roll it back.
Phillips notes that these same workers often face higher financial barriers to taking on extra work than their more heavily taxed high-income counterparts, due to the lose of welfare benefits as they earn more.
Perhaps the best person to sum up the Reserve Bank's likely view on these tax changes, given she was one of its most senior officials until October 2023, is Westpac's new chief economist Luci Ellis.
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