Labor has decided to sacrifice further tax cuts for more than 1.5 million workers in favour of promising bigger budget surpluses than the Coalition, in a fresh bid to win a crucial pre-election contest over economic management.
The Sydney Morning Herald and The Age can reveal Labor has completed its internal deliberations over whether to propose a last-minute tax reform package for Australians earning between $90,000 and $120,000, and has opted to instead funnel the billions of dollars the cuts would have cost into improving the budget bottom line.
Labor believes the decision will allow it to "burn" the Coalition over the key question of budget responsibility, but it leaves the opposition vulnerable to claims it is not doing enough to help average full-time workers in Sydney and Melbourne with the rising cost of living.
Both Labor and the Coalition are offering the same tax relief to people earning less than $120,000 over the next three years, but Mr Shorten has been silent on whether the party would unveil its own tax reform package for middle income earners that squared up against the government's medium-term offering.
Labor opposes the second phase of the government's tax plan, which is scheduled to begin in 2022 and would lower the tax rate from 37¢ to 32.5¢ in the dollar for the 1.6 million Australians earning between $90,000 and $120,000.
Based on current policy settings, someone earning $120,000 a year would pay $2430 less tax under the Coalition after 2022, according to the National Centre for Social And Economic Modelling.
Labor leader Bill Shorten on the campaign trail in Perth on Wednesday. CREDIT:ALEX ELLINGHAUSEN
Someone earning $90,000 a year will pay $1094 less in income tax under the Coalition in that year compared to Labor.
While the typical Australian (median) full-time worker earns $78,268 a year, those on higher incomes pull the average earnings of a full-time worker up to $90,300 a year.
Labor had been considering whether to offer those voters additional relief, but will instead use the cash from policy changes to negative gearing, capital gains tax, franking credits and superannuation to boost the budget surplus over the forward estimates and fund its other election commitments.
Prime Minister Scott Morrison is campaigning heavily on the government's forecast for a $7.1 billion surplus in the 2019-20 financial year, as well as his promise to deliver tax cuts for middle and high income earners in 2022-23 and 2024-25.
The tax cuts will cost the budget almost $50 billion a year by the end of next decade.
Campaigning in Perth on Wednesday, Mr Shorten ridiculed the government's tax proposals and argued they were unaffordable.
"This government's going with proposed tax cuts which mean that you have to vote in at least two elections. We think that this government is making up these tax cuts," he said.
"I'm not going to make a promise about tax cuts which are a mirage, which this government hasn't explained how they pay for them."
Mr Shorten said Labor had to balance tax relief with budget repair.
"What we also need to do is give relief to the low and middle-class taxpayers, and that's what we're doing in our first term, but we also need to improve our financial bottom line as a nation."
Phases two and three of the government's tax agenda – which Labor opposes – will cost the budget $143 billion between 2022 and 2029.
Mr Morrison said Labor would have to repeal tax cuts that were made law last year.
"We have a plan to lower taxes today and into the future as well," he said while campaigning in Tasmania.
Australian Council of Trade Unions president Michele O'Neil described people in Sydney and Melbourne on $90,000 to $120,000 as "middle" as opposed to "high" earners.
"We think the priority in terms of tax should be those on the very lowest pay and there should be a progressive system," she said.
"The answer to wage stagnation for that tax bracket [$90,000 to $120,000] is wage increases – not tax cuts. What we want to see is a system that delivers wage increases for those workers.
"If you are in Sydney and Melbourne what would be better for you than a tax cut would be a wage increase because that compounds over time."
By Shane Wright
The Sydney Morning Herald
17 April 2019