Senior WA Liberal Mathias Cormann has endured an embarrassing interview in which he was unable to say how much taxpayers earning over $180,000 will receive under the Coalition’s tax cut plans.
The progressive think-tank The Australia Institute claims the top 10 per cent of taxpayers will be handed $77 billion in tax cuts by 2029-30 under the Coalition’s tax plans.
The tax cuts will accumulate quickly from 2022-23 when stages 2 and 3 of the Government’s income tax package – which will cost the Federal Budget $230 billion in forgone revenue – will start being implemented.
Mr Cormann appeared on Sky News on Sunday to talk about the Government’s tax plan.
He was asked about the Government’s claim that a Shorten Labor Government would burden the economy with $387 billion in taxes by 2029-30 if it won the election.
Sky News host David Speers said $230 billion of that disputed $387 billion figure could be explained by Labor’s decision to not agree to stages 2 and 3 of the Coalition’s income tax cut pacakge.
Labor has said it is opposed to the final two stages of the Coalition’s tax cuts because they will disproportionately benefit Australia’s highest-income earners and put a greater tax burden on middle income households.
Speers asked Mr Cormann if he knew how much of that $230 billion would go to Australia’s highest income earners under the Coalition’s plan.
But Mr Cormann couldn’t answer the question.
“The 20 per cent top income earners will continue to pay 60 per cent of all income tax revenue generated in Australia once our plan is fully legislated,” Mr Cormann said.
Speers said that wasn’t the question, but Mr Cormann repeated his answer.
So Speers tried again: “What tax cut are you giving them in dollar terms?”
Eventually, Mr Cormann said he would have to come back to him.
“Well, in dollar terms I’m happy to provide you with further detail and I’m looking forward to Bill Shorten providing further detail to the Australian people,” Mr Cormann said.
Economists from The Australia Institute say $77 billion in tax cuts would go to the top 10 per cent of taxpayers under the Coalition’s plan by 2029-30, equating to roughly 34 per cent of the $230 billion cost of the final two stages of the Government’s proposed income tax cuts.
They calculated the benefit of the Coalition’s tax cuts using a model of the income tax system that breaks all taxpayers down into 100 groups, from the lowest income earners to the highest.
The model inflated incomes over time by nominal GDP and it found that, by 2024-25 when the Coalition’s tax cuts will be fully implemented, individuals earning more than $180,000 a year will make up the top 10 per cent of taxpayers.
Speers put the $77 billion figure to Mr Cormann on Sunday, but it was rejected.
“I don’t accept that figure,” Mr Cormann said.
“The truth is, under Labor’s policy settings from 2022-23 onwards, anyone earning more than $45,000 will end up paying more tax, and that gap continues to increase from 2024-25 onwards.
“The most important point here is this – under our tax system, under our plan, the top 20 per cent of Australian income earners will continue to pay 60 per cent of all income tax revenue generated in Australia as they are now,” he said.
The Australia Institute’s Matt Grudnoff told The West Australian he worked with the Coalition’s own figure of $230 billion to make his calculations.
“If the Government didn’t calculate that $230 billion properly, or they’ve fiddled with it in some way, then that would change my figures,” Mr Grudnoff said.
Modelling last week from one of Australia’s most respected economic modellers – the Australian National University’s Centre for Research & Methods – found the Coalition’s tax cuts would increase income inequality slightly and make Australia’s tax system “moderately less progressive” compared to Labor’s tax cut plans.