95% of Stage 3 Tax Cuts go to high income earners
New Australia Institute analysis of stage three of the government’s income tax plan show high-income earners will get 95% of the benefit, while three-quarters of taxpayers get no benefit at all.
Today the Senate has rejected stage 3 of the government’s income tax plan, which removes the 37 per cent tax bracket completely, resulting in people earning $200,000 facing the same marginal tax rate as someone on $41,000. If passed, stage 3 is not due to come into effect until July 2024.
How much of the $144 billion income tax cuts
will you get?
In 2018-19 the cuts will cost $360 million.
By 2028 they will cost a whopping $24 billion a year.
The Australia Institute analysis of stage three of the government’s income tax plan show high-income earners will get 95% of the benefit, while three-quarters of taxpayers get no benefit at all.
Today the Senate has rejected stage 3 of the government’s income tax plan, which removes the 37 per cent tax bracket completely, resulting in people earning $200,000 facing the same marginal tax rate as someone on $41,000. If passed, stage 3 is not due to come into effect until July 2024.
Key Findings:
-
New analysis shows 94.9% of the benefit of stage 3 income tax cuts go exclusively to top 20%, while 75% of taxpayers get no benefit at all.
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The top 10% of income earners receive 68.6% and the next 10% receive 26.2% of the benefit.
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The total cost of Stage 3 to the Budget when implemented in 2024-25 is $6.3 billion, and $42 billion over the first five years of implementation.
“There is no compelling case for stage 3 of the income tax plan to be passed,” said Matt Grudnoff, Senior Economist at The Australia Institute.
“The Senate has rightly chosen to reject stage 3 that goes to the very top-end of taxpayers. Stage 3 represents over $6 billion per year going to just the top 25% of taxpayers.
“The progressive nature of Australia’s income tax system has been an important feature for decades.
“Flattening income tax reduces the tax take from high income earners, which ultimately means either less government services or high taxes on middle and low income earners.”
Workers earning more than $87,000 will benefit immediately – about $135 a year on average – when the 32.5 per cent tax threshold is lifted to $90,000 from July 1.
Substantially less the the price hikes of electricity, LPG or health insurance
This is the first step in eliminating the 37 per cent bracket altogether. Eventually – by 2028 – 90 per cent of workers will only pay 32.5¢ for every dollar earned between $40,000 and $200,000.
How generous it will be for you depends on how much you make each year. As a rule, the more tax you pay the larger the cut you will receive.
To sweeten up the flat tax system for workers on lower incomes, the government has introduced a low-medium tax offset [LMTO] or “lamingtons” as economists have come to call them.
What do low-medium income earners get?
From July next year, Australians earning between $50,000 and $125,333 will get up to $530 cash-back when they lodge their tax return. Or equivalent to one Big Mac meal a week. Maybe
This will last until July 2022, when workers earning up to $66,667 will get $645 back each year, enough to partially cover the increases of gas and electricity.
The majority of workers will also benefit from the upper threshold for the 19 per cent marginal tax rate rising from $37,000 to $41,000 from July 1, 2022, when the 32.5 per cent marginal tax rate also increases from $90,000 to $120,000.
However the mates rates will kick-in with middle to high income earners benefit the most in dollar terms, with workers earning up to $120,000 taking home $2025: a return flight to Europe.
Biggest winners
The biggest winners from the tax cut are wealthy electorates in Sydney and Melbourne.
the top 10 electorates all come from these cities.
The average household in any of the top 10 electorates would get at least 50% more than the average Australian household.
Prime Minister Malcolm Turnbull’s seat of Wentworth will get the largest benefit from the tax cuts. The average increase in disposable income for households in Wentworth is almost twice that of the average household , and more than two and half that of the average household in the lowest -rank electorate
Liberal electorates dominate with seven of the top 10 being Liberal electorates and three being Labor.
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