Federal budget 2020: Calls for income tax cuts to be brought forward
Income tax cuts should be dramatically brought forward to benefit Australian households now — and the government can afford it, a top economist has argued. HOW MUCH WOULD YOU BENEFIT?
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Income tax cuts should be dramatically brought forward to benefit Australian households now — and the government can afford it, a top economist has argued.
Treasurer Josh Frydenberg has long signalled there will be some move to bring income tax cuts slated to come into effect in 2022-23 forward, but Westpac’s chief economist Bill Evans has urged the government to go one step further by backdating the measure to July 1 2020.
Mr Evans said this year’s budget would be “like no other,” forecasting a massive $240 billion deficit. For that reason he has argued the second round of income tax cuts should actually be backdated, while Stage 3 — not due until 2024 — should come into effect next year.
“Such a move would be a strong statement from the government that it is serious with its efforts to boost demand through tax cuts,” he said in a note to Westpac clients yesterday. “Our forecasts highlight that such policies can be easily accommodated and the cost of servicing the total debt, even under this more aggressive profile, will be contained as a proportion of GDP due to the collapse in interest rates.”
Stage two is currently due to come into effect from 2022, and would cut taxes for people earning more than $90,000 a year, as well as raising the threshold on the lowest tax rate.
The third stage is scheduled to kick in from 2024, and would result in everyone earning less than $200,000 a year paying no more than 30 cents for every dollar.
This would mean a person on $60,000 would save $1080 a year in stage two and $1455 per year in stage three.
While someone on $120,000 a year would save $2565 in stage two and $4440 per year once the final phase is implemented.
Mr Frydenberg has been careful to leave the door open to bringing forward the tax cuts in the past few months, insisting Australians will find what the plan is on budget night.
“We are looking at that issue and the timing of those tax cuts because we do want to boost aggregate demand, boost consumption, put more money in people’s pockets, and that’s one way to do it,” he said in July.
Prime Minister Scott Morrison said stage one of the tax cuts, which came into effect in 2018-19, had already helped boost “aggregate demand” — the total demand for goods and services in Australia.
Originally published as Federal budget 2020: Calls for income tax cuts to be brought forward