Federal Budget: Scott Morrison’s proposed tax cuts miss the mark

WHEN Scott Morrison calls $80,000 the “average wage”, the pronouncement hides a murkier truth beneath the surface.

Budget papers being printed in Canberra. Picture Kym Smith

TREASURER Scott Morrison has warned his first Budget won’t be filled with sweeteners, and it looks like he’s sticking to his word.

Even the few offers of relief for taxpayers buried in the pages of the document to be released tomorrow will only affect a few Australians.

The Federal Budget is expected to deliver tax cuts for Australians earning more than $80,000, which is around what the “average” fulltime taxpayer earns.

The only problem is, the cuts will affect only a handful of taxpayers, with three in four earning below the amount the cuts are expected to kick in.

The measure is designed to tackle bracket creep, with wage inflation estimated to push 300,000 middle income earners into the second highest tax bracket where they’ll be taxed 37 cents in every dollar they earn over $80,000.

But the offer of tax relief for high wage earners has been met with raised eyebrows by the estimated 75 per cent of Australians earning below what Mr Morrison has declared the “average wage”.

Treasurer Scott Morrison is planning to deliver a ‘sensible’ budget. Picture: Kym Smith

IS $80,000 REALLY AVERAGE?

When Scott Morrison calls $80,000 the “average wage”, the pronouncement hides a murkier truth beneath the surface.

When most Australians hear the phrase “average wage”, they think of exactly that, the average. They don’t think 75 per cent of earners are taking home less than the so-called average.

A total of $80,000 is the average wage (November 2015) for fulltime workers, which make up 68 per cent of the work force. For all income earners, the average wage is $59,000, according to the Australian Bureau of Statistics.

There is also the argument that the “average” is an inaccurate representation of what Australians in the middle are taking home because the “average” is buoyed by those at the very top who take home seven-figure salaries. The median measures the actual middle and the last median wage calculation for all earners, reported by the ABS (for 2013), put this closer to $50,000 while the median for fulltime workers was $59,000.

The last ABS household income and wealth report (for 2013-14) put the median household income at $80,704.

In addition, whenever the government talks about how those $80,000-a-year earners have been pushed into the second highest tax bracket, it’s accompanied with the indictment that they’re paying 37 cents on the dollar.

What is usually lacking is the clarification that they’re paying 37 cents on every dollar they earn over $80,000. By pushing the threshold to $85,000, those earning between $80,000 and $85,000 will get tax relief of $225 at the most.

Predictably, Opposition Leader Bill Shorten has also slammed the offer of modest tax cuts, saying Australians wouldn’t be bought by a few dollars in cuts.

“For the last three years, every day, the Liberal Government has been pick-pocketing voters and now at the very last minute they are offering a few dollars in hope that all will be forgiven,” he told media in Melbourne on Sunday.

The Treasurer has described his proposed income tax measures as “sensible” changes, in line with what he promises will be a disciplined Budget rather than a cash splash ahead of the looming federal election.

“You have to spend wisely, you have to spend carefully, you have to spend in a very targeted way, and you don’t spend more than you save,” he said.

While missing out on tax cuts, low and middle income earners will be better off later in life with the government promising to top up superannuation accounts of the low paid, according to the Australian Financial Review.

The Budget will be handed down on Tuesday. Picture: Kym Smith

WHAT WE KNOW WILL BE IN THE BUDGET

Other measures will include extra funding for schools, while overly generous superannuation tax concessions enjoyed by the rich will be reined in and multinational tax dodgers will be further targeted.

There will be a $5 billion kitty for major building projects across the country in the Budget. NSW will get $2.2 billion and Victoria $2.4 billion for road and rail projects, The Australian reports.

WA will gain $750 million, there will be some money for South Australia and Queensland will receive funding for the Ipswich Motorway.

A $150 million security package will fund heavily armed security guards for police buildings to fend off terrorist attacks, the Daily Telegraph has been told, and Melbourne will be treated to an $857 million windfall for its Metro rail project according to the Herald Sun.

Prime Minister Malcolm Turnbull said the budget would outline his government’s economic plans.

“This is submitting a new agenda, this is not Tony Abbott’s plan, this is the plan of the Turnbull Government,” he told Sky News.

“Scott’s Budget will be more than a usual Budget. It will be our economic plan. It will be a plan for jobs and growth.”

Malcolm Turnbull is owning his government’s Budget. Pictured with Education Minister Simon Birmingham.